By Isaac FRIMPONG (Ph. D.)
Over the past decades, Ghana’s economy has undergone significant changes, starting with the economic reforms in the 1980s and 1990s, being described as a Heavily Indebted Poor Country (HIPC) in early 2000, being affected by global financial crises in late 2000, currency devaluation, bank recapitalisation, and the recent domestic debt exchange programme.
Amidst all these events, some lessons have been learned and progress has been made. Although the level of progress can be debated, it is not the aim of this article.
This article challenges the common dichotomy that has been overly entrenched over the years and argues for a paradigm shift from formal and informal economy towards recognising standard and non-standard forms of employment as the true constituents of the Ghanaian economy.
One national economy
Breaking down the divide, the differences between the formal and informal economy have been ingrained in Ghanaian economic discourses since the introduction of the term “informal economy” in the 1970s by Keith Hart. This classification, however, oversimplifies the otherwise complex nature of the Ghanaian economy, which has the imprint of a colonial cash crop economic model.
The colonial economic model had few restrictions on the movement of labour and engagement in informal activities. This economic arrangement gave lower-income populations access to resources including trading in export crops, human capital, and income to pay for social services outside the reach of the traditional system, such as education, healthcare, and training.
Within the cash crop economies, the colonisers operated ‘indirect rule’ where the emphasis was on local leadership, self-help, and voluntary effort. Access to incomes was through direct participation in commodity markets rather than through wage labour, which set the stage for trading in other merchandise informally as the commodity markets became formalised, and this characterises cash crop economies like Ghana to this day.
Drawing parallels with the diversity observed in global economies, there is no need for such categorisations because the Ghanaian economy is unique and shaped by its peculiar resources, culture, laws, history, migration, urbanisation, and geography. Because in every economic system, certain actors operate on the fringes of accepted codes of conduct. Do we describe the activities of these actors as informal? Nowhere else, therefore, can the role of the non-standard form of employment that dominates an economy be better understood than in Ghana.
Better still, the Ghanaian society functions on what Arnold calls ‘the moral economy’, described by Hyden as ‘the economy of affection’. This phenomenon permeates the social and political lives of Ghanaians; and as Hyden argues, one can rightly speak of the presence of a fundamental social logic. This logic centres on direct, face-to-face reciprocity to get things done. This economy of affection runs on certain core principles: whom you know or who knows you is more important than what you know; sharing personal wealth is more rewarding than investing in economic ventures; and a helping hand today generates returns tomorrow (Hyden 1980).
This economy differs from capitalism (individualism) as well as socialism (collectivism). It relies on the handshake rather than the contract and on personal choice rather than official policy to allocate resources. It coexists with capitalism or socialism, often helping individuals to get around the rough edges of such systems. Exchanges within the economy of affection do not get officially registered. Hyden asserts that it is an invisible economy that diligent policymakers have no taste for and that economists find no real way of effectively incorporating it into their conventional forms of analysis. This is what we have and exactly how the Ghanaian economy functions.
The core argument is that there is no distinct separation between the formal and informal economies in Ghana. Instead, the economy can be better understood through the lens of employment, referred to as standard and non-standard forms.
Standard employment implies a relationship between employers and employees that entitles the latter to certain work-related benefits, such as holiday pay, insurance against sickness, and old age income.
On the other hand, non-standard employment lacks these benefits. Examples of this type of employment include street vendors, cart pushers, artisanal production workers, day labourers, contributing family workers, casual workers, mechanics, watch repairers, and many more.
Despite the lack of work-related benefits and precarious working conditions, their dominance (70 percent) of Ghana’s economy cannot be overemphasised. For instance, it plays a crucial role in bridging the gap between producers and consumers of food, particularly benefiting the economically disadvantaged. They provide care for the weak and sick in society, and above all, ensure a healthy environment.
This call echoes a broader appeal to shift focus towards standard and non-standard forms of employment.
This shift in perspective encourages a more inclusive approach that recognises the diverse contributions of all forms of employment to the Ghanaian economy. Fortunately, this is the reality, and the earlier policymakers acknowledged this, the better for Ghana in enhancing the huge entrepreneurial spirit among the populace and better targeting policies to improve their skills and productivity.
Conclusion
As Ghana navigates its economic landscape, this article advocates for a departure from the traditional “Formal-Informal economy” classification to embrace the concept of “standard and Non-Standard employment.”
Policymakers and practitioners should therefore develop more targeted strategies to address the unique challenges and harness the potential of all workers in Ghana. This paradigm shift holds the promise of fostering a more inclusive and comprehensive understanding of Ghana’s economic dynamics, ultimately paving the way for sustainable growth and development.
The writer is a Researcher and Consultant- Pensions, Social Policy, Labour Market, Ageing Studies. Email: [email protected]
