"The economic function of government is not merely to maintain a stable macro environment; its primary responsibility to its citizens is to foster their general welfare." (Rathin Roy, Adviser, UNDP and John Weeks: Professor of Economics, University of London in "Making fiscal policy work for the poor")

If you live in Ghana and have been following news in both the electronic and print media quite regularly, then it is likely you might have heard or read the statement, "Government has no business doing business". What this means can be subjected to various interpretations and contestations. However, a common strand that runs through the contexts within which it has been used is the question of whether it is prudent for government to create and manage business entities on its own. Now, there is no straight forward answer to this question. Whether or not government has "business" doing a particular "business" would vary from one situation to another.

Government can establish an enterprise, operate for a while and then transfer ownership to a private entity, as the situation may determine. Government may even decide to maintain a stake even after transfer (to maintain a direct influence as well as enjoy its investment returns). Public-Private Partnerships (PPPs), the current buzzword, may also be explored right from the start. PPPs range from service contracts to Build Operate Own Contracts (BOO). It is however important to note that the two extreme notions that government has no business doing business or that government has to create and manage all business are neither practical nor sustainable.

First of all, it is important to note that in the case of Ghana, the statement has often been used to argue for privatisation. When used, the intent has been to portray the ineptness or lack of efficiency of public corporations. It has also been used to represent the incapability of government to provide capital and attract technology for improving the way its establishments are run. Thirdly, the statement smacks of the lack of capacity for public corporations to respond in a timely manner, to the fast changing global economy. Again, perceptions towards the proficiency of Ghanaian Managers in the public sector have been challenged on this score. These arguments sound convincing, especially when weighted against the poor performance of hundreds of state-owned enterprises that have among other factors, led to their divestiture.

While these concerns cannot be overlooked, it is equally instructive to note that the private sector (or the market) has not always been efficient in allocating resources. Indeed the great depression of the 1930s, airline crisis after the September 11 terrorist attacks as well as the current financial crisis in the US prove that markets are not always able to revive themselves when things go wrong. To put it in the words of Joseph Stiglitz, the 2001 Nobel price laureate in Economics, "markets are not self-correcting in the relevant time frame" The question then is what should be the role of government?

Richard Musgrave, credited as the father of modern public finance, postulated that governments have three main roles: stabilisation of the economy, allocation of resources and distribution of goods and services. Similarly, Joseph Stiglitz argues that government has a role in providing infrastructure (In a recent report, the International Monetary Fund emphasised the role of government in providing infrastructure and how Chinese government is helping to achieve this in Africa), basic social services, developing technology, and even acting as an entrepreneur. For example, the US government laid the foundations of the Internet and modern biotechnology revolutions. During the nineteenth century, research at America's government-supported universities provided the basis for the country's agricultural revolution. Samsung and Hyundai like many other world class companies began as small and medium scale enterprises. However, with the support of the Korean government these firms have over the years transformed into multinational companies.

This is where I think we are missing it as a country. There appears to be a ubiquitous school of thought arguing against state involvement in enterprise. This is difficult to understand, especially when the countries from where such ideas are supposedly learnt do otherwise. Government ought to take interest in what is happening in the market - regulating players, facilitating the provision of credit, supporting the search for markets and distribution of goods and services, partnering the private sector to set up enterprises in areas and sectors that the private sector would not want to go in alone but are critical to needs of society and setting up mechanisms to rescue firms in trouble. These are but are few of examples of how active the government should be in any economy, besides maintaining macroeconomic stability.

I would end with a quote from a Daily Graphic editorial which appeared in its September 20th 2008 edition, "The Daily Graphic thinks that the time has come for governments to rethink the notion that the state should not be actively involved in the management of the economy . African governments should be bold to allow the state to play a key role in the development of the economy in strategic sectors like banking, education, health and agriculture."