1. On My Becoming an Advocate of Free Markets and Limited Government

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JAMES C.W. AHIAKPOR

ON MY BECOMING AN ADVOCATE OF FREE MARKETS AND LIMITED GOVERNMENT

MY INITIAL INCLINATION TOWARD Walter Block’s kind invitation to write the story of how I became a “Libertarian” was to decline it. I didn’t think I qualified to take on the label. But Walter explained that he defines “libertarianism very widely, synonymously with market advocate, limited government philosophy, free enterpriser, laissez-faire capitalist, Adam Smith fan, etc.,” all of which indeed fit me. So here is my story.

The saying that “a conservative is a socialist mugged by reality,” or something to that effect, pretty much explains my journey toward my present views on the beneficence of market freedom, limited government spending, taxation, privatization and deregulation. I grew up in Ghana, West Africa, during the socialist experiments of the first Prime Minister and President, Kwame Nkrumah, to transform the country from a basically agricultural and mining economy into an industrialized one. The process included nationalizing some private manufacturing enterprises, both foreign and locally owned, establishing a myriad of new state-owned enterprises, including a steel mill, boat building, and farms. To fund the effort, the government raised taxes significantly, besides borrowing heavily from the country’s central bank and abroad. The state also took over the control of several primary, middle, and secondary (high) schools previously run by religious organizations such as the Roman Catholic, Presbyterian, and Methodist churches. The resistance the government’s actions generated within the country led to the arrest and imprisonment of hordes of people without trial under a Preventive Detention Act (1958), the establishment of a one-party state, and the emergence of a culture of silence, as reporting on friends and neighbors who voiced opposition to the government became lucrative. Of course, some individuals used the opportunity to settle personal scores. Many had hoped that Ghana’s political independence in 1957 would set a model for the transformation of African states, south of the Sahara. The expectation was that the country could be turned into a modern functioning democracy and would enjoy economic development. Instead there was quick disappointment. The country became both a political and economic disaster by 1965. Many other African countries also have followed the same path to political and economic ruin.

Ghana’s awful experiment ended with a coup d’état in February 1966. Anyone who made the connection between Nkrumah’s avowedly socialist means of transforming the country and the loss of civil liberties, the rise of political sycophancy, bribery and corruption as means of getting ahead, and economic debacle, would be disinclined toward that extent of state intervention as I was then. But I had not yet been fully persuaded of the benefits of free markets and limited government as I would later be. Reading F.A. Hayek’s The Road to Serfdom twenty years later (1986) helped to place all of the connections in clearer perspective for me.

At the conclusion of my undergraduate studies at the University of Ghana, Legon in 1971, I proudly called myself a Fabian socialist. The Marxian economics course, which was part of the core of the B.Sc. (Economics) degree, meant very little to me, given the failed Ghanaian socialist experiment. I had been impressed by some of my teachers that J.M. Keynes had fashioned under Fabian socialism an enlightened way of managing an economy. In those days the competing approaches to economic development was between controls over the “excesses of the free market” and “completely free markets.” The notion of government failure hadn’t gained currency. I took the side of controls in my first graduate conference paper, bad-mouthing arguments for free markets by Harry Johnson, quoted in Gerald Meier’s Leading Issues in Economic Development. Graduate school gave me little guidance on the choice between free markets and controls, as it involved the usual diet of economic theory, mathematics for economists, statistics, and econometrics.

However, my interest in economic policy at the time led to my writing commentaries in a quasi-academic magazine, The Legon Observer, published at the university. I criticized government policies as they caused more grief to the population than relief. My criticisms included the support of import substitution industries and a massive devaluation that pegged the official rate above the black market rate in December 1971. My last article during the 1970s was “The Sugar Problem,” published in 1972. In it I argued that the new military government’s threat to close down any shops in front of which people had formed lines to buy packets of sugar at the government’s dictated price, would hurt more than help the problem of a sugar shortage. The fact was that buying two packets of sugar, which the government’s quota allowed, and selling these on the black market would more than pay the official daily minimum wage. I argued that the government would help ordinary people by either abolishing the controlled price or at least raising it to reflect the price of sugar on the world market or in neighboring countries. Of course, the government paid no heed, and sugar soon disappeared from the shops. Other subsequent interventionist policies of the military government, including restrictions on imports, controls over fares charged by private transport operators, pegging gasoline prices, and higher taxes on cocoa and other export products drove the economy into further ruin. The lesson of the harm from such interferences in the market process was there to be learned by anyone who could make the right connection between cause and effect. Thus, by the time I left Ghana in 1976 for further studies in Canada as part of a faculty development program at the University of Ghana, Legon (I had been employed as a Research Fellow/Lecturer there since 1974), all I needed was the theoretical foundation fully to become a consistent advocate of free markets and limited government.

I spent my first year in Canada at the University of British Columbia, Vancouver, where, once again, the courses in economic theory, mathematics, applied statistics, and econometrics gave me little insight into free market economic philosophy. After taking an MA at UBC, I continued at the University of Toronto where an excellent graduate course in the history of economic thought given by Sam Hollander in the 1978/79 academic year opened my eyes clearly to Adam Smith’s liberal philosophy and economics. I learned the pervasiveness of self-love (Theory of Moral Sentiments) or self-interest (Wealth of Nations) in all types of human action, and the prudence of a minimal state in the promotion of economic development. The research paper I wrote for the course was on David Ricardo’s monetary analysis, which further reinforced Smith’s wisdom of the minimal state and the futility of attempting to promote economic growth through excessive money (cash) creation rather than encouraging private savings and investment. (I published a note and one article from that paper in the History of Political Economy, 1982 and 1985, respectively.)

While doing the research and writing my doctoral dissertation on the role of multinationals in manufacturing industry development in the less developed countries in 1979–81, I took time off to study more of Adam Smith’s Wealth of Nations. Public debate over the significant economic slump in the U.S. at the time, Jimmy Carter’s non-market approaches to solving the problems, the refreshing arguments of Ronald Reagan in contrast, and columns by Milton Friedman all helped to firm up the theoretical underpinnings I needed to take a stand for free markets and limited government. Friedman’s Capitalism and Freedom, Dollars and Deficits, and Free to Choose (Friedman and Friedman) were most helpful in updating and applying the Smithian principles to current issues for me. Friends and some colleagues began asking if I had sold my mind to the capitalist West. The typical African student was not known for espousing free market policies, let alone defending multinationals, and siding with Republicans. I would answer that, if I had sold my mind, I had missed receiving the check in payment.

My dissertation was designed mainly to test a variety of hypotheses on the activities of multinational corporations in the less developed countries. I completed it in 1981. In it, I absolved these companies of the usual charges, including their exploiting people in the Third World and ruining their prospects for economic development. I did so both on the basis of empirical evidence and theory. My conclusions were the exact opposite of my supervisor’s philosophical disposition. He later told me that he disavowed me as representing his views to people who got to know that he was my supervisor. Another member of my dissertation committee told me that he would have liked to fail me on the basis of my free market conclusions, but he respected the econometric work upon which I had based them. (Some of the results have been published in the Journal of Development Economics, 1986, Economic Development and Cultural Change, 1989, and Multinationals and Economic Development: An Integration of Competing Theories, 1990.)

As part of my doctoral research I also studied works by Kwame Nkrumah in which he explained his motivations for adopting his socialist approach to economic development in Ghana, books on the politics of Ghana during the 1940s, ’50s, and ’60s, and other public documents on the country’s economy. These further enlightened me on how many erroneous interventionist policies tend to be founded on good intentions. The study also provided me a firm background for presenting papers at meetings of the Canadian Association of African Studies, many of whose members were either Marxists or socialists with an interest in African societies. I was engaged in perhaps a vain effort of trying to persuade them against their erroneous beliefs. I was then teaching economics at Saint Mary’s University in Halifax, Nova Scotia (1981–91). I caused much grief to participants in my sessions, many of whom wondered how I could have lost my way into their midst. (Some of these papers have been published in International Organization, 1985; Canadian Journal of African Studies, 1988, and Journal of Modern African Studies, 1991.) I also gave papers on economic development at the Canadian Economics Association meetings as well as the Western Economic Association International meetings, trying to counter the Keynesian and interventionist leanings of development economists.

It was at one of such presentations that I first met Walter Block in Anaheim, California, in July 1985. In my paper titled, “On the Irrelevance of Neoclassical Economics to LDCs: A Clarification of Some Definitions,” I disputed the claims of such development economists as Gunnar Myrdal, Dudley Seers, Paul Streeten, and Michael Todaro that the policies of free trade and non-intervention in domestic markets were inapplicable to the less developed countries. These authors base their contention, among other things, on the fact that neoclassical economics assumes rational choice of individuals and employs the notion of competitive markets. I defended the rationality of individuals in the Third World and explained that competition means rivalrous behavior, which can be seen in these countries, and dismissed the relevance of “perfect competition.” My discussant was quite dismissive of my arguments. I recall Walter coming up to me at the conclusion of the session to congratulate me on my presentation. He got a copy of my paper and asked if we could have a drink together.

During our conversation, Walter quickly diagnosed me as an Austrian. I explained to him that I didn’t know much about Austrian economics besides having taught their positive and negative imputation approaches to evaluating factor inputs in my history of economic thought class. He recommended that I participate in an Advanced Austrian Seminar, which I did in the summer of 1986 in Milwaukee, Wisconsin. I was a bit of a trouble-maker at some of the sessions. I have since come to learn more and write about Austrian economics: (Journal of the History of Economic Thought, 1997 and Independent Review, 1999). But I still take my inspiration from Adam Smith and David Ricardo. My research and publications continue to emphasize the benefits of free markets and limited government in the classical tradition in the pursuit of economic development. The latest of these is Classical Macroeconomics: Some Modern Variations and Distortions (Routledge, 2003). I believe it has helped my productivity in free market research and writing to have joined the economics faculty at Hayward since September 1991. This came about when I met Shyam Kamath at a Liberty Fund Colloquium on Liberty and Moral Development held in Indianapolis, Indiana, in November–December 1990. He spoke excitedly of the free market atmosphere in the economics department at Hayward and the opportunities for interacting with others in the San Francisco Bay Area. I was then utilizing a two-year leave of absence from Saint Mary’s University. I put in my application, and the rest, as the saying goes, is history. Having free-market thinkers such as Shyam, Chuck Baird, Greg Christainsen, and Steve Shmanske as colleagues with whom to share views easily beats being the lone voice in a department literally tucked away in Halifax, Nova Scotia, Canada.

James C.W. Ahiakpor is professor of economics at California State University, East Bay.