The instability of the international economy in the 1970s adversely affected most primary product exporters. Yet, cocoa, the main export of Ghana, did well on the world market so that the net effect was to improve the terms of trade. Cocoa functioned as the milch cow for sustaining political support, nurturing development plans and building private fortunes and, as a result, it was continuously discriminated against both directly and indirectly. A major source of growth in total factor productivity results from the reallocation of resources from low- to high-productivity sectors. In the case of Ghana, however, resources were diverted from higher productivity agriculture into industry, which was relatively inefficient. In the process, the potentially beneficial diffuse socioeconomic linkages from peasant farming were degraded into damaging point linkages that benefited a relatively small urban elite.
It took a combination of severe drought and sharply higher foreign debt service in 1982 to finally force change in the political state, in return for assistance from the IMF. Ghana moved hesitantly towards a consensual democracy. Yet, even though some significant strides were made towards economic recovery from the mid-eighties, Ghana was still recording negative genuine savings in 1994 so that its development was still not sustainable. More stringent policies are required to halt the rate of land and environmental degradation, especially in the mining areas, but the critical deficiency appears to lie in social capital. The rectification of this deficiency requires stronger links to tie rural areas into the political and economic decision-making process. It also calls for recognition of the role of the growing bureaucratic-service elite in the democratic process if the threat of violence and social disruption is to be avoided (Mikell 1989).
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