Thread by @Noahpinion

1/Let's talk about GHANA!

When most people talk about African industrialization, they mention Ethiopia or Rwanda. But Ghana has a good shot at being the first country in West Africa to industrialize!

bloomberg.com/opinion/articl…

2/Ghana is easily the most educated country in its region, and is still improving too! It has good literacy rates too.

3/Compared to its neighbors, and indeed to most countries in Africa, Ghana is rated as more free (map 1), more democratic (map 2), a better place to do business, and less corrupt.

4/Oh yeah, and it has lower child mortality too.

5/The country has logged an impressive run of growth in recent years, bringing it up from desperate poverty to lower-middle-income status.

6/Ghana was third in terms of GDP growth in Africa in 2019 (though statistical uncertainty means it was really a tie).

7.6% growth is fast.

qz.com/africa/1522126…

7/But now for the bad news.

Ghana specializes not in manufactured goods, but in commodities.

8/Ghana's growth has followed a pattern typical of resource-based economies in Africa, Latin America, and elsewhere.

People moved off the farms and into the cities, but there they mostly did services instead of manufacturing.

blogs.worldbank.org/africacan/ghan…

9/In the 90s and 00s, Ghana saw huge productivity increases, mostly due to urbanization, rising education, and more productive agriculture. But since then, productivity growth has slowed dramatically.

10/Now don't get me wrong: More productive agriculture is good! Urbanization is good!

But economists have found that the commodity-based urbanization strategy is not as good as a manufacturing-based one.

link.springer.com/article/10.100…

11/In particular, the jobs created in cities powered by the commodities industry tend not to be good jobs.

brookings.edu/wp-content/upl…

12/Commodity exports make a country's currency more expensive, meaning it's harder to export manufactured stuff. They also raise wages above competitive levels in the short term, which paradoxically in the long run holds wages down.

13/OK, but now for some good news!

Ghana's leaders know that the country needs to industrialize, and they are making big efforts to do that.

oxfordbusinessgroup.com/overview/capac…

14/The country is trying to position itself as a platform for manufacturing and exporting goods to the rest of West Africa (which is also growing, also based on commodities).

This is a smart smart move.

15/It is using Special Economic Zones and industrial parks, two favorite tools of industrial policy. Taking a page out of the China playbook.

16/And it is taking steps to diversify its industrial mix and encourage small manufacturing companies rather than just focusing on national champions.

This is good. With a developing country, you have to try various industries and see what works!!

17/And Ghana is also courting big foreign investors in manufacturing industries.

asia.nikkei.com/Business/Compa…

18/Here's more on that subject:

bloomberg.com/news/articles/…

19/And there are pockets of startling success! Ghana now has a domestic car company!

news.yahoo.com/toyota-bmw-kan…

20/But these efforts still have a long way to go, and they need refining.

For example, Ghana's Special Economic Zones tend to get used mostly for commodity industries. It should restrict the benefits to manufacturing only.

ideas.repec.org/a/mth/ber888/v…

21/And Ghana needs to keep improving infrastructure and specialized training in order to be attractive to manufacturers!

tandfonline.com/doi/full/10.10…

22/Ghana needs to leverage foreign investment, especially from the African diaspora. But it needs to make sure those dollars go into manufacturing, infrastructure, etc. instead of into real estate speculation or commodities.

bloomberg.com/news/articles/…

23/Ghana can use manufacturing-specific export subsidies to overcome the Resource Curse. These can also include wage subsidies for manufacturing workers.

It should also try to provide export-oriented factories with dedicated sources of electricity.

24/Ghana has done reasonably well with it's commodity-based growth model, but that model is now played out. It's time to take the next step: INDUSTRIALIZATION.

If any country in the region can do it, Ghana can!!

(end)

bloomberg.com/opinion/articl…