these policies were good economics or an ideal way to
develop the country. The policies were chosen because
they were good politics, enabling Busia to transfer
resources to politically powerful groups, for example in
urban areas, who needed to be kept contented. Price
controls squeezed agriculture, delivering cheap food to the
urban constituencies and generating revenues to finance
government spending. But these controls were
unsustainable. Ghana was soon suffering from a series of
balance-of-payment crises and foreign exchange
shortages. Faced with these dilemmas, on December 27,
1971, Busia signed an agreement with the International
Monetary Fund that included a massive devaluation of the
currency.
The IMF, the World Bank, and the entire international
community put pressure on Busia to implement the reforms
contained in the agreement. Though the international
institutions were blissfully unaware, Busia knew he was
taking a huge political gamble. The immediate
consequence of the currency’s devaluation was rioting and
discontent in Accra, Ghana’s capital, that mounted
uncontrollably until Busia was overthrown by the military, led
by Lieutenant Colonel Acheampong, who immediately
reversed the devaluation.
The ignorance hypothesis differs from the geography and
culture hypotheses in that it comes readily with a
suggestion about how to “solve” the problem of poverty: if
ignorance got us here, enlightened and informed rulers and
policymakers can get us out and we should be able to
“engineer” prosperity around the world by providing the
right advice and by convincing politicians of what is good
economics. Yet Busia’s experience underscores the fact
that the main obstacle to the adoption of policies that would
reduce market failures and encourage economic growth is
not the ignorance of politicians but the incentives and
constraints they face from the political and economic
institutions in their societies.
Although the ignorance hypothesis still rules supreme
among most economists and in Western policymaking
circles—which, almost to the exclusion of anything else,
focus on how to engineer prosperity—it is just another
hypothesis that doesn’t work. It explains neither the origins