Abstract

This study examines aid, state–business relations, and development in Ghanaand South Korea. In 1957, when Ghana achieved independence, Ghana and SouthKorea shared approximately similar levels of GDP per capita. However, while SouthKorea has successfully transformed itself from a major recipient to a donor country andenjoys advanced economic growth and a high standard of living, Ghana—despite vis-ible growth in recent decades—remains a low-income and aid-dependent country. Inthis study, focusing on policies that guide state–business relations and their impact oneconomic development, we examine the extent to which foreign aid played a role inshaping state–business relations and building (or failing to build) public–privatedevelopment partnerships in South Korea and Ghana. More specifically, we argue thatfundamentally in South Korea, through enabling national development policies, stateand business worked together to achieve economic development; for Ghana, the localbusiness sector was inadequately integrated as an economic development partner withthe state, which explains the less than outstanding performance of various state-leddevelopment projects in Ghana in much of the last 50 years. In addition, we argue thatin the case of South Korea, aid was used effectively to support and build local businessgroups, while in Ghana aid has largely failed to boost the private sector, a key factorexplaining the divergent paths of aid and development outcomes between the twocountries.

Keywords

State–business relations, Foreign aid, Development, Ghana, South Korea

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