International Monetary Fund

The International Monetary Fund is presented as an international institution whose reform demands collided with the political constraints facing Ghana’s government. Its 1971 agreement with Kofi Busia included a major currency devaluation; the unrest that followed helped bring down Busia’s government, illustrating how policies promoted as economic remedies could become politically unsustainable.

The Ghana agreement and its political risk

After taking office in 1969, Ghanaian prime minister Kofi Busia maintained expansionary policies, price controls, and an overvalued exchange rate. Price controls kept food cheap for urban constituencies and generated revenues for government spending, but they squeezed agriculture and contributed to balance-of-payments crises and shortages of foreign exchange. On December 27, 1971, Busia signed an agreement with the International Monetary Fund that included a massive devaluation of Ghana’s currency.

The agreement placed Busia under pressure to carry out its reforms: the International Monetary Fund, the World Bank, and the broader international community urged implementation. Yet Busia understood that devaluation carried a serious domestic political risk. Rioting and discontent in Accra mounted after the currency was devalued, and the military, led by Lieutenant Colonel Acheampong, overthrew his government. Acheampong immediately reversed the devaluation.

Reform, incentives, and political constraints

The episode distinguishes pressure for reform from the political conditions needed to sustain it. Busia’s policies, like those of his predecessor Kwame Nkrumah, were not presented as a product of ignorance about economics. They served political purposes, including transferring resources to influential groups whose support the government needed. The International Monetary Fund and other external institutions pressed for reforms without understanding, the book argues, the scale of Busia’s political gamble.

The book uses the outcome to challenge the idea that poverty can be overcome simply by giving leaders better economic advice. The obstacles to reforms that might reduce market failures and encourage growth lie, in this account, in the incentives and constraints created by political and economic institutions. The devaluation’s reversal after Busia’s overthrow underscores the difference between advocating a policy and securing the political conditions for its adoption and survival.

A wider institutional argument

The Ghana case sits within a broader discussion of how economic policy reflects conflicts over power and distribution. The book contrasts Busia’s predicament with Kwame Nkrumah’s state-led industrial projects, arguing that policies that appear economically irrational may still help leaders maintain political support. The International Monetary Fund’s agreement therefore serves as a concrete example of why external prescriptions alone cannot explain, or readily change, a country’s development path.

More generally, the book argues that international economic reforms do not automatically produce inclusive markets when domestic political institutions preserve concentrated power. Its discussion of privatization in Mexico and Egypt, for example, describes reforms intended to open markets that instead benefited politically connected business elites. In this framework, the central question is not only what economic policy is recommended, but who can shape its implementation, who gains or loses from it, and whether the governing institutions make reform politically sustainable.