World markets and the politics of African open economies: Domestic policy responses to external volatility in Ghana, 1937--1984

A widely held perspective on economic globalization holds that world market forces “crowd out” the state in open economies, leaving governments little scope for meaningful policy choice. In this dissertation I offer a very different view: that exposure to world market volatility poses major policy dilemmas for governments and raises the importance of domestic political institutions. The main aim of the dissertation is to explain why African open economies have weathered periods of global economic turbulence particularly poorly. I argue that these difficulties reflect unfavorable domestic policymaking environments—characterized by vulnerability to trade—induced social tensions and weak institutions of macroeconomic restraint and political representation. Trade-induced social tensions exacerbate temptations for governments to choose policies “opportunistically” devised to placate politically pivotal groups in the short term. Meanwhile, weak institutions of restraint and representation fail to improve the alignment of these political incentives with the requirements of longer-term economic success. Governments are therefore prone to policy choices that compound and prolong the adverse effects of external volatility. The dissertation combines statistical analysis of cross-national data on post-1975 growth trajectories with case studies of policymaking in Ghana between the 1930s and 1980s. The statistical analysis shows that governments' susceptibility to “trade-induced opportunism” is a major cause of the disappointing performance of African open economies since the mid-1970s. The Ghanaian country study documents how external volatility has affected policymaking in a typical African open economy, drawing heavily on primary historical sources. It compares colonial governments' responses to the global shocks of the 1930s and 1940s with postcolonial governments' responses to the shocks of the 1970s and early 1980s. The dissertation highlights how world markets and domestic political institutions jointly shape trajectories of change in African open economies. These countries' future in an increasingly integrated global economy depends on establishing domestic political institutions to withstand the strains of world market volatility.