ALAG, JERAMIE G. ELLAINE JOY G.

EUSEBIO, MBA
MBA 222 – Economics and National Development Professor

on State
Case Analysis 5: Institutions, Inequality, and Incomes - Ghana and Côte d’Ivoire

Introduction

Since independence, the economic histories of Ghana and Côte d'Ivoire have
diverged significantly. In 1983, Ghana's real GDP per person had declined by 40%,
the country's currency was worthless, and the country's third attempt at democratic
rule had resulted in its fourth military coup in 15 years. In contrast, Côte d'Ivoire saw
relatively uninterrupted growth, with real GDP per person more than doubling
between the 1960s and 1980. Since the mid-1980s, however, there has been a major
change in the course of events. Ghana has been slowly recovering since 1983,
whereas Côte d'Ivoire has experienced significant revenue declines, a first coup in
1999, and a fall into civil war and ethnic strife. Ghana has transitioned from one of
the least successful African nations to one of the most successful, exchanging places
with Côte d'Ivoire, whose economy has shifted from rapid growth to stagnation in a
country torn by a brutal civil war. This essay documents and explains this remarkable
turnaround of fortune.

Problem

Among the challenges of doing merge comparisons would be that Africa is the only
region where all of these factors have been deemed detrimental to the growth
prospects of countries. Due to the fact that the geographical characteristics of Ghana
and Côte d'Ivoire differ only little, we can initially rule them out as potential causes
for the huge discrepancies in growth patterns that will be described below. Only
institutions and policies remain as possibilities. We will focus on two institutions that
have both political and economic characteristics. The political administrations of the
two nations have pursued diverse routes. In the 1950s, under Nkrumah, Ghana
shifted from an open multi-party state to a one-party state, then reverted to a multi-
party democratic framework in the 1990s after civilian government was disrupted by
military dictatorships. In the case of Côte d'Ivoire, the transition from a long era of
one-party rule centered on Félix Houphouet-leadership Boigny to a plunge into civil
conflict and violence was precipitated by a long period of one-party dominance.
Ghana has its own central bank, while Côte d'Ivoire has not, despite both countries
being members of the Francophone Communauté financière africaine (CFA) regional
monetary union. While Sub-Saharan Africa scarcely grew over the past two decades,
China's GDP increased considerably, and South Asia shifted from being significantly
poorer than Africa to being significantly wealthier. The failure of African economies
to participate in the period of exceptional growth after 1980 explains both Ghana
and Côte d'Ivoire's long-term struggle to produce continuous improvements in their
people's level of life. Although neither country is unrepresentative of Africa, the
failure of both to engage in global growth is the most important fact that must be
explained in their economic histories at this moment. Up until now, we have only
examined Penn data that is internationally comparable. If we examine the constant
price series, which is a more accurate indicator of changes in national incomes, we
can observe that Ghana's real incomes practically halved from peak to trough
between 1970 and 1983. From 1980 to 1995, Côte d'Ivoire saw the same trend. The
tragedy in Côte d'Ivoire is commonly attributed to the contemporaneous global
economic downturn. However, at this time Ghana's economy increased rapidly,
therefore this cannot be the entire solution. The primary issue of the case study is
the economic potential of Ghana-like geographies in Ivory Coast. Specifically, the
focus of this study is on progressively weaning Ivory Coast off its former French
colonizer by establishing Ivory Coast as an autonomous and self-sufficient state
capable of formulating policies tailored to the needs of the state.

Conclusion

In several ways, Ghana and Côte d'Ivoire, the two countries on which this essay
focuses, illustrate the diversity of experiences in Africa since independence. It is not
accurate to portray Africa as a continent plagued by political instability, stuck in
poverty, and entrenched in stalemate. Côte d'Ivoire has been one of the most
successful emerging nations for more than two decades. Since its economic and
political breakdown in the early 1980s, Ghana's comeback has been extraordinary.
However, in the case of Côte d'Ivoire, success was not sustained, and in the case of
Ghana, the economy remains far behind those countries that were equally poor at
the time of independence but now have high incomes. Africans aspire to these
incomes, but with the exception of a few highly educated individuals, their
aspirations have been systematically frustrated. We have argued in this essay that
the policy failure underlying this dissatisfaction is shared by both nations. Heavy
agricultural sector taxation in both nations has resulted in increased revenues that
have not been utilized productively. The utilization of these funds to finance a large
public sector and a strong investment in education without an increase in jobs for
the newly educated is the root cause of Africans' profound discontent with their
governments. Civil conflict has been the result of these faulty policies in Côte
d'Ivoire. It will be difficult to extricate the nation from this situation. It will be far
more difficult to address the fundamental issues that plague both of these nations.

References:

World Bank. World Development Indicators, 2010. Washington, D.C.: World Bank,
2010

Todaro, M.P. &; Smith, S. (2012). Economic Development (11 th ed.). Pearson
Addison-Wesley. ISBN 13: 978-0-13-801388-2