I read a particularly interesting document about how Mao Zedong and Deng Xiaoping managed the Ministry of Finance, when the latter became Vice Premier and Minister of Finance, in 1954.
Even at 50 years of age, Deng was already a remarkable performer who had gained international renown. He had been described by Mao, as “a very talented little man.” Deng was of course, just under 5ft tall.
After Nikita Khruschev had witnessed one of his own ministers reduced to cinders by Deng in a debate at a summit between the two countries, Khruschev told Mao: “Your little man has embarrassed our big man.” Mao laughed and said that the little man (Deng), was one of the most talented there was anywhere in the world, his only problem was that people feared him, for he was very strict. In Mao’s words: “Never underestimate our little man, he is exceptionally intelligent.”
A few things struck me about how to run a Finance Ministry well. I put them forward through statements and questions.
1. Do we have a tradition where the Minister of Finance (not the ministry, the minister!) sits systematically and regularly with the Finance Directors of all ministries in a summit and thinks through national strategic priorities? I ask, I do not conclude.
2. Deng was obviously an innovative fiscal conservative when it came to budgeting. He believed in controlling expenditure and bringing in as much revenue as possible, without overburdening people with taxation. Hear him: “There has been enormous waste in our finances. Chairman Mao said, ‘If we could save 10 percent on some projects, it would mean an immense amount.’ Ten percent of the state budget is equal to over 20,000 billion yuan. Therefore, we must strengthen financial supervision.”
3. To be able to realistically achieve this, Deng insisted that departments and ministries that achieved surpluses could keep them to reinvest in centrally approved projects and priorities. This major innovation introduced an incentive for a culture of thrift.
Deng was wary of overtaxing people. “If we ‘extort’ all the local reserve funds, we would have no money for situations such as the War to Resist U.S. Aggression and Aid Korea, serious famine, the building of a huge emergency project or the introduction of new technology. In that case, we would have to levy taxes and reduce subsidies for everybody, which would give rise to complaints everywhere. Another method would be to cut back necessary expenditures, reducing investment in national industrialization and socialist transformation. That would produce even more drastic effects, shaking the foundations of our society.”
His operating assumption was that China was a poor country and its productive forces were underdeveloped, therefore money should be invested behind essential priorities for the future. Ghanaian politicians love to say Ghana is not a poor country, what are we rich? A rich country with open defecation at circa 20%?
4. The part that struck me most was what he saw as the essentials required in the character and personal qualities of a good Finance Minister. I paraphrase here and therefore take ownership for any limitations that arise from my interpretation.
Deng believed:
a. The Finance Minister must manage both the part and the whole. That he or she must ensure all the parts (departments and ministries and local government), were fully aware of the reasoning behind choices made by the centre (the whole). But at the same time, that the whole understood the pressures faced by the parts too, and that they were in constant dialogue to establish the delicate balance needed for the good of the country.
b. He therefore believed that a good Finance Minister must maintain deep engagement with the people. That is, the masses, to understand firsthand lived experiences and realities throughout the country. Or else become an Ivory Tower crooner, disengaged and hanging in mid-air. And the Finance Minister must run a meritocracy.
c. In his view, while needing to be tough and firm, a Finance Minister above all, had to be fair. It was essential that a Finance Minister remains a unifier that is trusted by all, even when they disagree with specific decisions, to act only in the interest of the nation.
A Finance Minister must therefore never get involved in factional contests – between ethnic chauvinists, or politicians contesting for positions in the party or in government. If a Finance Minister ever lost that element of professional credibility for being fair, it remained only a matter of time and government itself would become dysfunctional. Wracked with major turf wars, what Deng called: “Localism, Departmentalism and ‘mountain strong-stronghold’ mentality.”
d. For this material reason too, a Finance Minister needs a reputation for radiant integrity and transparency, in order to be effective. Especially as part of the role is to raise funds and revenue. This, managing the productive forces to detonate high-quality, people-based growth, being the principal responsibility.
Some thought starters as we think about Ghana beyond 2024. Nothing new in there but what is your view on whether we do these? And if we do not, why we do not?
Yaw Nsarkoh,
23 November 2023.
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