For those Ghanaian politicians and journalists, who harp on endlessly about private-sector led growth, and talk glibly about the "all-important service sector" creating jobs, but do precious little to make such things happen, I am posting a very interesting article culled from today's edition of the UK newspaper, The Telegraph.
It is an example of how even avowedly capitalist nations are using the power and influence of the nation-state to help small businesses.
The Ghanaian nation-state can actually empower private business in ways that our mostly-unimaginative politicians and journalists seldom think possible.
They must stop merely paying lip-service to the concept of private-sector led growth - and use the power of the Ghanaian nation-state in creative ways to spur it on. Please read on:
"Economic growth: a lesson from Germany and America
The Government must establish an industry bank charged with making investment decisions on commercial grounds, writes David Green.
By David Green
12:40PM GMT 14 Nov 2011
This week the Bank of England is to downgrade its growth estimate for next year, and last week we learned that the trade deficit got wider in September, dashing hopes for a rapid export-led recovery. The Coalition wants economic growth as much as anyone, but why isn’t it happening?
The Government has been hoping that controlling public sector spending, combined with some supply-side measures like deregulation and cutting company taxation, will lead to a private sector revival. But it has been making the unspoken assumption that there is spare capacity in the private sector, or at least capacity that can be rapidly deployed.
Unfortunately, the hollowing out of manufacturing in the last 30 years means that such capacity is no longer there. This reality was acknowledged by the Bank of England’s Monetary Policy Committee in April 2011, when it said it was "possible that UK firms in some industries lacked the plant or capacity to expand production rapidly in response to the past depreciation of sterling and it would take time for them to install it".
The Government’s expectations about the potential for private sector growth seem to have been forged in an earlier era when Britain had more manufacturing industry. It comprised 20 per cent of national output as recently as 1997, but by 2009 it was down to 11 per cent, which makes hopes for a rapid resurgence of growth led by the private sector over-optimistic.
The Coalition is planning a major statement about economic growth on November 29, including a new scheme to increase loans for small and medium-sized businesses. But official briefings suggest that, like its Plan For Growth last March, the latest thinking will fall a long way short of what’s needed. We need a national strategy to rebuild our productive infrastructure and create jobs. To achieve a revival of manufacturing the Government needs urgently to establish an industry bank charged with making investment decisions on commercial grounds.
Economists worried about the state "picking winners" should relax. Setting up an industry bank would be following the example of our main rivals in the free world: America and Germany. The ideal to aim for is a blend of America’s Small Business Administration and Germany’s state development bank, KfW. If it’s OK for capitalist America to subsidise business investment, it should be OK for us.
The underlying problem is that UK banks are not lending at a pace consistent with rapid recovery. Moreover, while they are under pressure to re-capitalise and simultaneously face the threat of major losses within the eurozone, they are not going to start investing in British industry at the necessary rate. The quickest solution would be to establish an industry bank and to finance it by allocating £10 billion from the £75 billion recently added to the money supply by the Bank of England.
Germany has found its highly decentralised development bank, KfW, crucial to ending its recession. When private bank lending fell during the recession, KfW lent record sums: €30bn in 2010 alone, creating 66,000 jobs.
America’s Small Business Administration (SBA) also increased funding during the recession. America defines any company with fewer than 500 employees as "small", which covers over 29 million small businesses in the US (99 per cent of companies), employing over half of the American workforce. Since the Second World War the SBA has supplied 20 million small businesses with financial help by supporting them when commercial banks would not. It does not makes loans direct, but guarantees private loans against default, a subsidy that vastly increases the availability of private finance. At present, the SBA has roughly 219,000 loans worth around $45 billion, making it the largest investor in US businesses.
The creation of real wealth depends on better productivity, which means using our brains to work out better ways of producing more for every hour worked. That’s where manufacturing fits in. Contrary to the arguments of some critics, we need to re-industrialise not because of a romantic attachment to "making things" but because manufacturing provides better opportunities for productivity gains than services. A hairdresser can only do so many haircuts per day, whereas in recent years mechanisation has multiplied many times over the number of cars that can be made for every worker employed. The nations that expanded their GDP rapidly in the post-war years, all based their strategy on manufacturing, including Germany, Japan, Taiwan, Korea and today China. They knew what they were doing. Services play a vital part in any economy, but they do not provide the same scope for rapid increases in productivity."
End of culled piece from the Telegraph.
David Green, who wrote the piece, is the co-author of A Strategy For Growth, published this week in the UK by Civitas. One hopes that the high commissioner of Ghana to the UK, will bulk- buy copies - and give them out to all the members of the Mills administration: as their Christmas presents.
How many of our politicians can see the opportunity to help empower small entrepreneurs in the transport sector to prosper - and at the same time turn that financial-basket-case, Kufuor & Co.'s Metro Mass Transit bus company, into a profitable entity, for example?
If the many young professional drivers in our country, who slave for others daily plying our nation's road network, were given the opportunity to own buses purchased by the Metro Transit bus company on a work -and-pay basis, would that not make the company a tidy profit on each bus it purchases, and also enable it turn its workshops into profitable business operations, regularly servicing those work-and-pay buses for their young owner-drivers for a fee?
One hopes our politicians will take up such simple and creative ideas - and provide hope for some of Ghana's younger generation by using the power of the Ghanaian nation-state in creative ways to empower them economically.
Above all, will such creative thinking not help cut down youth unemployment and enable them contribute positively to the nation-building task - which President Mills' "Better Ghana agenda" represents, too, I ask? No one need reinvent the wheel in this exercise - as there are many examples from elsewhere that can be adapted to our own particular circumstances. A word to the wise...
Tel (Powered by Tigo - the one mobile phone network in Ghana that actually works!): + 233 (0) 27 745 3109.
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