ABSTRACT
In this present age where economic growth in not enough to sustain a country and its inhabitants. There is the need to establish strategies that spur its economy into development, and impact its inhabitants positively in the process. The study relates state-directed capitalism to economic development, while taking lessons from East Asian Tiger countries (South Korea, Taiwan, Singapore and Hong Kong), and taking into consideration Ghana’s context and areas where state direction is needed to improve the economy. The methods used in the study include the use of books, internet sources, focus groups, interviews and questionnaires to fully understand the concept of state-capitalism and its relation to economic development.
Every country owes it to its citizens to ensure that the standard of living is above average and everyone from the elite to the grass root has their fair share of wealth accumulated from growth. The findings indicate that a combination of free market principles and government intervention make up for the inefficiencies of the market. This could be the key to changing a developing country into a developed one if only the proper institutions are established to ensure the political, economic and even social stability.
ACRONYMS
GNP- Gross National Product GDP- Gross Domestic Product HDI- Human Development Index
ISI- Import-Substitution Industrialization EP- Export Promotion
SME- Small and Medium Enterprises IMF- International Monetary Fund SAP- Structural Adjustment Program ERP- Economic Recovery Program KMT- Koumintang Regime
FDI- Foreign Direct Investment
GIMPA- Ghana Institute of Management and Public Administration IRS- Internal Revenue Service
INTRODUCTION
Capitalism, from a Marxist point of view, “is an economic system in which control of production and the allocation of real and financial resources are based on private ownership of the means of production.” (Screpanti, 1999) Capitalism has been used as a tool for growth and development. As countries have expanded and developed, however, the concept of capitalism has evolved to suit different levels of economic development. Even though the underlying concept of capitalism is based on private ownership, in many economies external regulatory bodies or institutions have been put in place to supervise its activities and evolution. Free market economies such as that of the United States of America (USA) where the market is defined by interactions between the buyer and seller are self-regulated, while State-controlled economies such as that of Cuba, delegate all regulatory responsibilities to the government. The mixed market system, more or less, employs the use of “state-controlled capitalism,” where both the government and market serve as regulatory bodies.
All countries, especially those that are impoverished, yearn for growth and Ghana’s no different. Inasmuch as growth may be necessary, it is not sufficient for development. The difference between a growing country and one that is not growing lies in its ability to produce and apply modern technology (Rostow, 1960) or its productive capacity (Economic Growth, 2012). Since 1950, only 12 countries have managed to grow at rates in excess of 7 percent for 25 years or more.1 Many more countries—
1 These countries include Taiwan, Singapore, South Korea, Japan, China, Botswana, Brazil, Malta, Hong Kong, Brazil, Thailand and Oman (Commission on Growth and Development, 2008)
in places as diverse as Latin America, Africa, and the Middle East—have managed high growth rates for shorter periods, only to see that growth falter. (Economic Growth Strategies For Developing Countries in An Era of Global Uncertainty, 2008) Economic development means more than just growth and is accompanied by changes in output in the population. Economic development is usually accompanied by changes in the structure of the economy as well as the improved material well-being of the poorer half of the population. (Nafziger, 2005) Economic development is also typically associated with even a decline in the agriculture’s share of GNP and the corresponding increase in the GNP share by industry and services. When it comes to the younger portion of the population, focusing mostly on children, growth involves stress on quantitative measures (height or GDP), while development draws attention to changes in capacities such as physical coordination and learning ability. (Nafziger, 2005)
Closely related to this is Amrtya Sen’s conception of development. In Sen’s view, development is a process of expanding the real freedoms people enjoy. This can be done by removing all major sources of “un- freedom” such as poverty, poor economic opportunities, systematic social deprivation, neglect of public facilities, intolerance or over-activity of repressive states. (Cooper, 2000) Sen further explains that using an economy’s industrialization as a measurement of real output on a per- capita basis is not sufficient to determine whether a country is “developed.” It transcends further into “increasing the capability of all human beings to achieve those things that they most value.” (Cooper, 2000) Income and financial stability, without a doubt, enhance the
capability of humans so there’s no denying that growth is also a necessary stage that every economy must reach even before development. It, however, does not ensure good health, education, longer life spans, the ability to influence political decisions that affect one’s life and even the liberty to change one’s lifestyle as and when it is seems appropriate. (Cooper, 2000) This research establishes a link between state-driven capitalism and attaining economic development.
BACKGROUND OF THE ASIAN TIGERS
The Asian tigers, namely Singapore, Taiwan, Hong Kong and South Korea, all used different routes to attain economic development. One common thread in their strategies to achieve development is government involvement in conducting affairs of the state and making sure wealth is efficiently allocated. The vital role that government played in the story of the Asian tigers, while flying in the face of “laissez faire” market capitalism, highlights the welfare-improving role of government in an environment with chronic market failure. Given the similarities between the tigers and Ghana some 60 years ago, and the divergent paths their respective economies have taken, it makes sense for Ghana to evaluate the strategies of the tigers to learn useful lessons for development instead of focusing solely on the advice of Western economists.
