Gold Coast, now Ghana had his independence in 1957 after a long struggle with our colonial masters, the British by Kwame Nkrumah and others who helped in diverse ways such as “the Big Six” and others. Colonized by the British, Ghana has gone through a lot of systems of governance; Monarchical, autocracy and now democracy. So is with economic systems which go with any form of governance system. Currently there are about four (4) economic systems in the world which are; socialist, capitalist, mixed economy (Socialist and Capitalist) and Islamic economic jurisprudence.
The Economic Systems
All these are economic systems and it is defines those who controls and owns the economic resources which forms the “means” in economics. Every economy is measured by the usage of its means and the nature of the “means” owners determines the kind of economic system the country runs. Socialist system of economy is a one that has its resources highly controlled by the central government.
E. g. USSR (Russia, Ukraine, Yugoslavia etc), the Capitalist economy is that whose resources is highly owned and controlled by private individuals or a body other than the government. E. g. USA, UK, part of Europe etc.
The Mixed economy is that which combines both the socialist and the capitalist economic systems to run the country’s economy. In that, the central government controls part of the economy whiles the other part is controlled by private participation.
Functions of the Economic Systems
There are multiple components to economic systems. Their interaction may be coherent or result in instability. Decision-making structures of an economy determine the use of economic inputs (the factors of production), distribution of output, the level of centralization in decision-making, and who makes these decisions.
Decisions might be carried out by industrial councils, by a government agency, or by private owners. Every economic system represents an attempt to solve three fundamental and interdependent problems: What goods and services shall be produced and in what quantities? How shall goods and services be produced? That is, by whom and with what resources and technologies? For whom shall goods and services be produced? That is, who is to enjoy the benefits of the goods and services and how is the total product to be distributed among individuals and groups in the society.
E. g. the current load management by the VRA and the ECG. Thus every economy is a system that allocates resources for exchange, production, distribution and consumption. The system is stabilized through a combination of threat and trust, which are the outcome of institutional arrangements. An economic system possesses the following institutions: Methods of control over the factors or means of production: this may include ownership of, or property rights to, the means of production and therefore may give rise to claims to the proceeds from production. The means of production may be owned privately, by the state, by those who use them or be held in common.
- A decision-making system: this determines who is eligible to make decisions over economic activities. Economic agents with decision-making powers can enter into binding contracts with one another. A coordination mechanism: this determines how information is obtained and used in decision-making. The two dominant forms of coordination are planning and markets; planning can be either de-centralized or centralized, and the two coordination mechanisms are not mutually exclusive and often co-exist.
- An incentive system: this induces and motivates economic agents to engage in productive activities. It can be based on either material reward (compensation or self-interest) or moral suasion (for instance, social prestige or through a democratic decision-making process that binds those involved). The incentive system may encourage specialization and the division of labour.
- Organizational form: there are two basic forms of organization: actors and regulators. Economic actors include households, work gangs and production teams, firms, joint-ventures and cartels. Economically regulative organizations are represented by the state and market authorities; the latter may private or public entities.
- A distribution system: this allocates the proceeds from productive activity, which is distributed as income among the economic organizations, individuals and groups within society, such as property owners, workers and non-workers, or the state (from taxes). A public choice mechanism for law-making, establishing rules, norms and standards and levying taxes. Usually this is the responsibility of the state but other means of collective decision-making are possible, such as workers’ councils.
The Ghana’s Economy
Ghana’s economy is purely a mixed type with the resources sharply divided between the public and private participation. The service sector is highly controlled by the government while the production sector is dominated by private and group participation. Decision making, which determines the direction of the economy and the type system, is done a lot of the times, through consultations with stakeholders of the economy. Example; when the power and water companies wanted to review utility tariffs to a certain percentage, there was a lot of consultations thereby; getting the rate we have now.
Ghana, before the independence was purely capitalist. After independence, the then government focused on turning the economy into a communist/socialist system. They invested so much in agriculture which was the only sector controlled by the government and also reached out to industrialize the economy. Currently, Ghana is well-endowed with natural resources and agriculture accounts for roughly one-quarter of GDP and employs more than half of the workforce, mainly small landholders. The services sector accounts for 50% of GDP. Gold and cocoa production and individual remittances are major sources of foreign exchange.
Oil production at Ghana’s offshore Jubilee field began in mid-December, 2010, and is expected to boost economic growth. Finally, I may agree with the statement but require more facts to completely justify its truth. Ghana is a mixed economy but capitalist oriented on the face assessment value of the various sectors. But can justify, if all percentages of public/private participation of the economic sectors are well defined. This will couple with the clear policy direction of the present governments which has state on record as being social democrats and has manifestoes seeking to provide a lot for the people.
Cite this essay
Ghana Economy System. (2018, Sep 01). Retrieved from https://studymoose.com/ghana-economy-system-essay