Academic journal article The Journal of Social, Political, and Economic Studies

Politics versus Economics a Comparison of Ghana and South Korea

Academic journal article The Journal of Social, Political, and Economic Studies

Politics versus Economics a Comparison of Ghana and South Korea

Article excerpt

The ability of governments to promote development depends more upon cultural and political factors than economic ones. Political elasticity (PE) theory is used to analyze these factors. Ghana and South Korea are compared, underscoring the fact that economic activity is heavily affected by the political system. South Korea with its effective governmental machinery has been able to over-achieve economic expectations, whereas Ghana, with a weak and inefficient political system, has underachieved. While both Ghana and South Korea have suffered from corruption, Korean political reform is likely to be more successful. In Ghana, corruption takes the form of a political illness, rather than merely a political problem, and until this political illness can be addressed, any hope for significant economic progress in Ghana is unlikely, regardless of the policies the government may be persuaded to undertake.

Key Words: Ghana, South Korea, political elasticity theory, agricultural development, industrial development, corruption, foreign aid.

Introduction: The Weakness of Econommics

The editors (Krueger, De Long, and Taylor, pp. 3-5) of the Winter, 2000 issue of The Journal of Economic Perspectives point to the fact that, despite newer theoretical models, using better computers, mathematical and statistical approaches, and data, economists have failed to provide an unassailable foundation for long-term forecasts and anti-poverty policies. Economics, therefore, has never really become the "hard science" that it was expected to be. For example, one of the conclusions reached by way of economic theory - that the gap between poor and rich countries will ultimately diminish - appears sadly unrealistic.

Part of the problem, according to Professor Richard Thaler (2000, pp. 133-141), is the assumption of "human rationality." Since people do not behave in the "rational way" anticipated by economists, they undermine economic assumptions about "rational choice" and "rational behavior." Consequently, Thaler (2000, p. 140) advocates a closer linkage between economics and psychology: "As economists become more sophisticated, their ability to incorporate the findings of other disciplines, such as psychology, improves."

Perhaps because I am a political scientist, I would suggest that, while recognizing this psychological dimension and emphasizing it in my conclusion, the current weakness of economics has primarily to do with the failure of economists fully to understand politics and to incorporate it into their thinking. This is perhaps understandable inasmuch as many political scientists also fail to understand their own subject, treating it as a "behavioral science," thereby neglecting "political software" considerations (as here explained). In any case, what is as important as "the determination of rational choice" is "the implementation of rational choice;" and this inevitably brings us into "politics" in its classical meaning: "the relationship of leadership to followership for the purpose of governance."

Because economists seldom understand the power of politics, their analysis of economic problems and opportunities can be quite misleading. When political leaders are as firmly committed to economic development as they were (and still are) in Korea, they can cause the most rational recommendations stemming from comparative advantage, cost-benefit, and other forms of analysis to appear mistaken and even ridiculous. In other words, they can achieve economic progress while disregarding the prevailing economic advice. This consept has been advanced by Alice Amsden, who points out that in the Korean case "getting prices wrong" has been a contributing factor to its amazing industrialization success (see Lim, 1999, p. 3).

On the other hand, when political leaders are opposed to rational economic management, they pay lip service to economic advice, but actually block it. For example, according to a World Bank division chief responsible for Ghana, in 1990 the Country Strategy Paper "was endorsed by senior management one day but the next day it was back to business as usual" (Armstrong 1996, p. …

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