Liberty and Entrepreneurship in Ghana

by David E. Shellenberger on October 23, 2015

It was a pleasure to make a presentation via Skype to the Bastiat Institute of Liberty and Entrepreneurship’s Youth Entrepreneurship Seminar in Tema, Ghana on August 30th, 2015. This article, adapted from the presentation, includes expanded and updated information. The principles discussed apply to all countries.

The people of Ghana need economic freedom and entrepreneurship to flourish. I will discuss the following:

  • Anarchism and economic freedom
  • Why entrepreneurs need economic freedom to thrive
  • Ranking of Ghana and ideas for making improvements
  • How entrepreneurs can undermine government barriers to economic opportunity
  • How entrepreneurs can be champions of liberty

Anarchism

In the “The Gift of Truth,” I encourage people who recognize the immoral nature of the state to share the truth with others. As I wrote, “The state is a fraud, a criminal enterprise. It is a creature of coercion, not consent, and it lives on plunder.” Awareness of the ideas of anarchism will, at the least, encourage skepticism of the state.

The actions of the state betray its criminal origin and continued criminal nature:

  • It steals, calling this taxation;
  • It coerces, calling this lawmaking;
  • It kidnaps people and puts them in steel cages, calling this policing; and
  • It engages in mass murder, calling this war.

Anarchy means “no ruler.” Free of rulers, people make decisions for themselves.

One does not have to be an anarchist, however, to appreciate the need to enhance economic freedom. This freedom is the foundation for better lives.

Economic freedom, combined with a culture of capitalism, leads to prosperity, greater individual opportunity, better health, cultural evolution and enrichment, and improved stewardship of the environment. It also promotes civil liberties, political freedom, and peace.

Entrepreneurs Need Economic Freedom to Thrive

Economic freedom is essential for entrepreneurs, and entrepreneurs are essential for a healthy economy.

Government is the foe, not the friend, of entrepreneurship. It inhibits the creation and operation of businesses by imposing fees, licensing, regulation, and taxation; restricting immigration; burdening foreign trade and investment; and encouraging corruption.

Economic freedom means that individuals are free to work, invest, and conduct business as they choose. In this environment, entrepreneurs can take the risks of starting and growing businesses.

Ranking of Ghana

The World Bank’s 2015 report on the ease of doing business ranks Ghana at 112th in the world, out of 189 economies. The organization explains, “A high ease of doing business ranking means the regulatory environment is more conducive to the starting and operation of a local firm.”

The 2015 Heritage Index of Economic Freedom ranks Ghana as the 71st freest jurisdiction out of 178 countries and territories ranked. The Fraser Institute’s “Economic Freedom of the World: 2015 Annual Report” (PDF) ranks Ghana as the 98th freest jurisdiction out of 157 ranked.

Finally, Transparency International ranks Ghana 61st out of 175 jurisdictions in its 2014 Corruption Perceptions Index. The index “ranks countries/territories based on how corrupt a country’s public sector is perceived to be.”

There are many opportunities for improving economic freedom in Ghana. I will discuss these examples: strengthening property rights, reducing corruption, achieving sound money, freeing the electric power market, and cutting spending.

Strengthen Property Rights

The Heritage Index report notes, “Land titles are hard to obtain, and the process is lengthy, compromising the ability of individuals and firms to invest in their property.”

What can be done to improve the process of recognizing property rights? Private action may be the answer.

Consider the method discussed in “An Innovative Approach to Land Registration in the Developing World: Using Technology to Bypass the Bureaucracy.” The authors explain,

An effective process of creating new formal rights can occur when smallholders take the initiative to collect and certify land claims, demanding that their property be officially removed from the public domain and they be granted private rights.

….

Such documentation of land claims is not costly or complex and is thus accessible even to the poorest communities around the globe.

Alejandro Chafuen, president of Atlas Network, discussed the success of a program of this nature in India in “Liberating India and Its Poor, One Dollar and One Property at a Time.” He wrote,

All these families who have received titles for their lands will no longer face the daily harassment from bureaucracies. Secure titles also opens the doors for approval and assistance for other improvements such as digging wells and leveling land. This would go a long way toward improving their productivity and income.

Reduce Corruption

As noted above, Transparency International ranks Ghana fairly poor in the perception of corruption. The Heritage Index ranks Ghana as barely above average, as reflected in this graph.

Last month, undercover journalist Anas Aremeyaw Anas released his documentary on judicial corruption, “Ghana In the Eyes of God — Epic of Injustice.” Based on the film, Ghana’s Judicial Council has suspended twenty-two lower court judges and magistrates and seven High Court judges.

How can Ghana cut corruption? The World Bank accepts the common definition of corruption as “the abuse of public office for private gain.”

To reduce the opportunities for abuse, we have to reduce the scope of government. Every activity of the state creates the risk of abuse. Hence, cutting or eliminating any role of the state reduces the potential for corruption.

To limit corruption, limit government; to end corruption, end government.

Achieve Sound Money

Ghanaian hip-hop artist Sarkodie recorded a song last year entitled “Inflation,” discussed here. This year he recorded a follow-up piece, “The Masses — Inflation Part II” (English lyrics here). The fact that inflation is a subject of popular culture tells us that there is a problem with sound money.

Inflation, as measured by the Consumer Price Index, has been running at over 17%. Using the rule of 72, at this rate, the value of the currency will fall in half in about four years.

Inflation, as Milton Friedman taught, is a monetary phenomenon. Ghana’s central bank is creating inflation through excessively growing the supply of money.

Central banks are creations of states. As economist Richard Ebeling explains, “central banking suffers from the same political and economic shortcomings as all other forms of central planning.”

The best response to the inflation and other harm done by central banks is to close them and return to the system of free banking. The free market, unlike government, will create sound money.

Free the Electric Power Market 

The problem of unreliable electric power in Ghana is so severe that it has led to a slang term describing the phenomenon, “dumsor,” meaning “switch off and on.” As with inflation, the problem has reached popular culture. Both Sarkodie and another Ghanaian musician, Andrew Tomi (“wOne”), released songs entitled “Dumsor” this year.

President Mahama has rationalized the problem and promised improvement, and the World Bank has provided subsidies. However, the state is the problem, not the solution. The government of Ghana dominates the electric power industry.

Government is the worst provider of any service, including electricity; the free market is the best. In a free market, there is scarcity, not shortages.

The way to solve the problem of the shortage of electricity in Ghana is to free the market. The government should sell its generation and distribution businesses and deregulate the industry.

Cut Government Spending

In 1993, then president of the Cato Institute Edward H. Crane explained the importance of being concerned with government spending:

I agree with Milton Friedman that the true level of taxation on the American people is the level of government spending. That is, the burden on those of us in the private sector is determined by the amount of resources extracted by the public sector. Whether the extractions come in the form of taxes, borrowing, or inflation is less important than the fact that resources are being removed from the private, productive, job-creating part of society.

Earlier this year, the International Monetary Fund agreed to lend the government of Ghana $918 million over three years. The IMF announced, “The reform program seeks to boost growth and help cut poverty by restoring macroeconomic stability through tighter fiscal discipline, strengthened public finances, and slowing inflation.”

The IMF’s rationalization of the loan is absurd. The way to boost growth and cut poverty is to enhance economic freedom. The way to improve Ghana’s fiscal position is to force the government to cut spending and stop borrowing; this means reducing the state’s size and scope. Finally, as discussed above, the way to end inflation is to end the central bank.

Entrepreneurs Can Undermine Government Barriers to Economic Opportunity

One way that entrepreneurs can overcome restrictions on freedom and contribute to the economy is by undermining government barriers. Consider these examples.

Transportation

In the United States and many other parts of the world, governments limit the number of taxis and set fares. The policies serve the taxi cartels, not the public. The result is shortages and poor service.

Uber, Lyft, and other companies have responded by creating rideshare applications for mobile phones. Naturally, governments have tried to block or otherwise interfere with the innovation, defending the entrenched interests – the taxi industry. However, as Matthew Feeney of the Cato Institute observes, “Uber and Lyft are popular for a reason: they provide a reliable and desired service at prices customers have indicated that they are willing to pay.”

Lodging

Municipal governments limit the development of hotels through permit requirements and zoning. Government-protected unions raise hotels’ labor costs. And governments often impose room taxes. These interventions and others make hotel stays expensive.

Airbnb created an online “community marketplace” for the renting of rooms, houses, and other properties. Lodging, like transportation, is part of the “sharing economy.”

Again, governments are responding by trying to protect the entrenched interests. And again, the marketplace is winning.

Dispute Resolution

Court proceedings are slow and expensive. Hence, business people often prefer private alternative dispute resolution (ADR). The commonly used forms of ADR are arbitration and mediation. Ghana’s 2010 Alternative Dispute Resolution Act is discussed here.

Education

I enjoyed presenting the concept of a free market in education via Skype at the Africa Youth Peace Call’s Liberty and Entrepreneurship Camp in Tamale, Ghana in July.

Government schools tend to do a poor job. They also indoctrinate students and teach them to conform. As I discuss in “Free the Education Market,” entrepreneurs have responded by creating low-cost, private, for-profit schools.

The examples suggest how entrepreneurs can find new opportunities to overcome government barriers. One approach is to focus on industries regulated by the government, and offer services that meet the same consumer needs but are not necessarily subject to the regulatory schemes. Another approach is to identify services the government is providing and deliver these or similar services in a better manner.

Entrepreneurs Can Be Not Only Business Heroes, but Also Champions of Liberty

Entrepreneurs change the world. They create better and cheaper goods and services, improving our lives. They create jobs. And they set examples of courage and creativity.

The world needs entrepreneurs who make an additional contribution — standing up for liberty. They can share their views through articles and speeches. They can join together in advocating change. And they can support organizations that promote freedom.

Entrepreneurs can go beyond being leaders of business. They can be leaders of ideas, helping shape a free, prosperous, and peaceful world.

Conclusion

Ghana can be a model for freedom and prosperity. Entrepreneurs can lead the change.

[Corrected World Bank ranking: November 3, 2015]

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