Welfare economics, political economy, and policy reform in Ghana

Welfare economics develops the logic of how the gains of the gainers and the losses of the losers should be weighed against each other, in a specific ethical framework. Political economy develops the logic of how they will be weighed against each other, in the context of sociopolitical institutions. The author applies the disciplines of both welfare economics and political economy in this evaluation of policy reform in Ghana. When considerations from both disciplines are aligned, he explains, policy reform not only should be enacted but is also likely to be enacted. Often, though, there is no such alignment, so reforms that might improve social welfare do not succeed. Analysts, says the author, should consider past reforms from both perspectives, and should learn from history, in evaluating proposed reform -- so they can assess both the desirability and the feasibility of reform. Policy makers, on the other hand, should work toward organizing and mobilizing the gainers from reform that would advance social welfare, so that resistance to such reform by the losers can be overcome. In an example from history, the author explains that Britain's debate over the Corn Laws -- basically a device for protecting domestic production of grain from cheap imports -- dominated for more than a decade in the nineteenth century. It eventually split the Tory party. Britain's transformation from an agrarian nation to a manufacturing one spelled the decline of the power of the landed aristocracy and the ascendance of manufacturing. In the end, the Corn Laws were repealed because of the growing power of the urban masses and their employers, and the debate soon turned to protection against imports from fast-industrializing France and Germany. Such episodes from history help us understand the protection of rice in Japan today, for example, and the focus of this paper -- the past decade of reform in Ghana, and the decade that awaits. The author argues that the political economy of policy reform in Ghana is likely to prove tougher in the second decade than in the first, for three reasons: 1) the economic situation in the second decade isno longer one of absolute disaster, with only one way to go; 2) in the second decade, policy reform will have to coincide with the transition from military to constitutional rule; and 3) the nature of the reforms to be undertaken in the second decade is different from that of those undertaken in the first.