San José State University
Department of Economics
Thayer Watkins
Silicon Valley
& Tornado Alley

Political and Economic History of Ghana

The history of Ghana is one of sadness and tragedy, of unnecessary tragedy. The post-independence history is that not uncommon case of a charismatic leader feeding the populace on a fantasy that it takes decades to recover from. In Argentina it was Juan Peron. In Ghana it was Kwame Nkrumah.

Before going into the details of the Nkrumah era it is helpful to get some perspective on the nature of the fantasy that has entrapped so many countries. A major legacy and burden of tribal and feudalistic societies is the notion that leaders have the power to solve problems and bring justice. The village chieftain takes resources from the villagers and to the powerless villagers the chieftain seems like a potential foundation of wealth and luxury. To those who aspire to be chieftain it seems that if only they could achieve that status they could not only have a pleasant living but could do good for the villagers. In the American idiom they could be fairy godmothers, solving all problems with the waive of a magic wand. So the possibility of becoming a fairy godmother is a powerful motivation for those who seek leadership. On the other hand, for the powerless who have no hope of becoming a leader the notion of there being fairy godmothers who can solve all problems is likewise a powerful influence. But of course there are no fairy godmothers and can be no fairy godmothers. The resources that the village chieftain dispenses come only from the productive efforts of the people themselves. If the people neglect their own productive efforts in seeking benefits from the chieftain then soon even the chieftain has no resources.

The romance of Third World leaders with socialism is just an attempt to create the status of the village chieftain on a larger scale. Socialism's main function ideologically is to provide a rationale for having all power concentrated in the hands of the central government. The charismatic leader of Cote d'Ivoire (Ivory Coast), Felix Houphouet Boigny, remarked, "Don't make the mistake of thinking that socialism will feed the people." Boigny was associated with socialist and communist political parties early in his career but he had the good sense not to be deluded by the rhetoric and established sound economic policies in Cote d'Ivoire that led to economic success, The Ivory Coast Miracle.

In contrast, Kwame Nkrumah took a much more promising economy and basically destroyed it. The only thing that can be said in his defense is that he pursued policies that the British had initiated. He took bad policies and drove them to their logical conclusions. The social democratic policies that nearly destroyed the British economy did destroy the Ghanaian economy. However, Kwame Nkrumah did not get all of his bad policies from the British. He created many of the worst elements on his own, such as the one-party state.

Before going into the details, here is what happened under Nkrumah. What is now Ghana developed a prosperous industry of growing cacao (cocoa). It started in the 1870's with the importation of cacao growing by native farmers. Cacao is native to Mexico and it took some foresight to recognize that cacao could be successfully grown in West Africa. Polly Hill in her study emphasizes that the development of the cacao industry was the result of the efforts of individual native farmers. By the 20th century the British government took note of the industry and decided to take control. The rationale was the following. Since the amount of cacao that was put on the market at any time was the result of uncoordinated decisions of small-scale farmers the price fluctuated substantially. A government marketing board could buy the cacao from the farmers and carefully control when it was marketed and thus maintain a steady price. This may have been true but the government did not intend to act as middleman in cacao marketing for free. The price paid by the marketing board to the farmers was substantially less than the price it received for the cacao on international markets. In effect, this price differential was a tax on the cacao industry. Substantial funds accrued to the government. At the time of independence the funds accumulated as a result of this tax on the cacao industry had a value of hundreds of millions of dollars.

In the long run this taxation of the cacao industry had a number of undesirable side effects. The low price paid by the government compared to the international price made it worthwhile to smuggle cacao out of the country. Second the market power of government marketing board enabled it raise the price above levels that would have prevailed in its absence. This higher price encouraged other countries such as Brazil to develop a cacao industry. This ultimately drove the price of cacao down. The end result is that the Ghanaian cacao industry lost market share and faced a substantcomodaially lower price. But these events came years after Kwame Nkrumah came to power.

When Kwame Nkrumah came to power he had large reserves of funds and a cacao industry that was generating more funds. He decided to undertake a program of industrialization on a massive scale. It was to be a Big Push industrialization; i.e., a pervasive industrialization in a broad front of industries. Not only would his industrialization replace the imports but it would produce products that Ghana was too poor to have imported.

Multi-year plans were drawn up and investments undertaken. For example, a shoe industry was to be created. This required a leather industry and a leather industry required adequate levels of production in the cattle industry. The only problem is that the economic planning got muddled up with political decision-making. The leather production plants were located at great distance from the cattle industry of the north. The shoe production plants were not located where the supplies of leather were available.

One of the most outrageous economic blunders of Nkrumah's industrialization plan was the building of a plant to can mangoes. The plant had the capacity to process 7,000 tons of mangoes a year but after it was built at a cost 80 percent over the original budget it was found that there were hardly any wild mango trees near the plant and it would take seven years to grow bearing mango trees.

Soon the whole effort was bogged down in blunders and mistakes and the economy was collapsing. Corruption was rampant. For example, some purchasing agents were paying the cacao farmers for their production with phony checks and keeping the real payments for themselves. Finally the Big Push became the Big Putsch when a group of military officers deposed Nkrumah while he was, appropriately enough, headed to a state visit to North Viet Nam.

Kwame Nkrumah joking with Sirimavo Bandaranaike, the Prime Minister of Sri Lanka. Both leaders implemented policies which destroyed the economies of their countries.

The Geography of Ghana

Nkrumah's Big Push for Industrialization in Ghana

Although overall Nkrumah's Big Push was overall a disasterous fiasco there were some worthwhile elements of his program. These generally came in the early days before the Big Push per se was initiated. In particular, the Volta River Dam is generally perceived to be a good thing for Ghana and its neighbors. In part the Dam was more beneficial than anticipated because of the unexpected increase in petroleum prices in the 1970's. The harbor and port at Tema has also been a boon to Ghana.

Nkrumah at first focused on infrastructure projects and these tended to be small, worthwhile projects. For example, until 1957 the only way to cross the Volta River was by way of ferries such as the one shown here.

In 1957 the first bridge was built for crossing the Volta.

Later Nkrumah and his planners began to think in terms of grandiose programs of economic development. Parallel with these grandiose plans Nkrumah permitted (or even encouraged) a personality cult to develop such that a person could be punished for doubting that Nkrumah was immortal. Nkrumah used his political domination to create a one-party, totalitarian state. His political rivals were imprisoned or escaped into exile. Some of those he imprisoned died in prison.

Government officials took bribes and embezzled state funds. This included Nkrumah himself. He was found to have about $5 million in hidden bank accounts.

The rhetoric of his regime was socialism, but the officials who were spouting socialist slogans were acquiring expensive foreign cars. One official's wife was found to have ordered a gold-plated bed costing about five thousand dollars.

Some of the more notorious fiascoes of the Big Push

The Political Corruption of the Nkrumah Regime

The planning fiascoes and the financial corruption of the Nkrumah regime were probably less significant than the corruption of the politics of Ghana, the institution of a one-party totalitarian state and the ruthless persecution of anyone who was less than a devoted worshiper of Nkrumah and even some of those that were. Soon after independence Nkrumah began restricting political freedoms in Ghana. When regional/ethnic based parties in the northern territories and in Ashantiland presented a political challenge to Nkrumah's Convention Peoples Party (CPP) he used his party's overwhelming majority in the legislature to outlaw regional and ethnic based parties. When this action brought the disparate regional and ethnic parties together into a United Party he then had laws passed that effectively banned all opposition parties. When political activity continued he had the prominent opposition politicians arrested and imprisoned. People who had helped gain independence for Ghana, such as J.G. Danquah, died in prison. J.B. Danquah had invited Nkrumah back to Ghana and made him the general secretary of a political party.

Even Nkrumah's closest associates in the CPP were not immune from Nkrumah's political vengeance. Komla Gbedemah was founder of the CPP and an able administrator. He objected Nkrumah's lack of financial discipline and soon found himself dismissed from the government by Nkrumah in a radio broadcast at dawn in April of 1961.

The Dawn Broadcast of April 1961 was the culmination of Nkrumah's shift to a militant Marxist Socialism. He had chosen Tawia Adamafio as General Secretary of the CPP and Adamafio made unswerving loyalty to Nkrumah and Socialism his guiding principles. Sycophants such as Adamafio began to talk of the immortality of Nkrumah and publically attacked any one publically doubted that Nkrumah would live forever. The personality cult surrounding Nkrumah seemed thoroughly entrenched, but even the leftist such as Adamafio were not safe from State persecution in Ghana.

In August of 1962 someone tossed a grenade at Nkrumah. He was injured but recovered soon. But long after he recovered from the physical injuries he seemed psychologically affected. He had about 500 arrested and detained indefinitely. He had the legislature pass the Preventive Detention Act which permitted the government to detain anyone or any reason. He closed the borders of Ghana. And finally Nkrumah took it into his head that Adamafio and his cohorts were behind the attempted assassination. He had them tried for treason, but the court under the Chief Justices of Ghana found them not guilty. Nkrumah was outraged and had legislation passed which gave him the right to overturn any court verdicts. They were retried with new judges and found guilty and sentenced to death, but Nkrumah commuted the death sentences.

Visits from Soviet and Chinese Communist dignitaries became more frequent. But there was a more sinister side to these contacts.

In April of 1965 a terrorist tried to assassinate the president of Niger. Evidence came out that the terrorist had been trained in Ghana. Nkrumah denied this and asserted that it was all part of a neocolonialist plot. Felix Houphouet-Boigny challenged Nkrumah's denial and released evidence of guerrilla training camps in Ghana staffed by Chinese Communist instructors.

At a meeting of the foreign ministers of the Organization of African Unity Nkrumah in June of 1965 tried to, through his representative, to divert criticism but the representative from Niger made public the existence of seven guerrilla training camps operating in Ghana with Chinese and East German instructors.

In February of 1966 Nkrumah left Ghana to visit Hanoi in North Vietnam. He was at a stopover in Beijing on February 23rd when military officers took control of the government. Some people now say that Nkrumah was a visionary, but his was ultimately a hideous vision of absolute, ruthless control.


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