Of demographic distinction, rural populations in these economies are typically the agrarian type. With labour as the dominant factor of production aside traditional tools of hoe and cutlass, it is a firmly established tradition that many children are born to add hands to farm works. Undoubtedly, a farmer gives birth to an average of about 10 children; but ironically, production is barely above subsistence and no essential economic gains are made. For example, whiles an American farmer on the average produces to feed himself and about 20 others, his Ghanaian counterpart produces to feed himself and about 3 others (Lecture modules, Economy of Ghana). With many dependants to look after, it is clear that any attempt by government to tax their already starvation incomes will be chronic to their welfare and thus rejected.
The ever-increasing urban population also left much to be desired with regard to an additional tax tolerance or burden. Extended family practice, as it pertains in most of these economies especially Africa, create a situation where a single urban dweller is dependent on by most of his relatives. With the notion by rural folks that urban dwellers are 'five meters away from heaven.' They are basically leaned on for financial helps such as the paying of school fees, among others, in the mist of rising cost of living. With relatively about five dependants on a single worker in addition to his immediate family, the consequences are that this high financial burden will necessitate every calculated effort to resist any form of an additional tax burden being it beneficial or not.
This severe dependency burden has actually incapacitated these economies from implementing prudent macroeconomics policies to follow the "positive economics" trend as expected and advocated for by multinational institutions such as the Breton Wood institutions. As 45% of Ghana's population was below 15 years in 1984, with an ever-rising cost of living, food, education etc, it is becoming increasingly difficult for governments to raise revenue or cut its expenses without any effect on the citizenry.
For instance, as the marginal productivity of each university graduate student in Ghana continues to decline and graduate unemployment swells up. It is 'positive economics' that the heavy subsidization (negative taxing) of fees by the state be minimized, and the fees allowed to move towards their 'market price' for the system to ration. Despite persistence calls by the World Bank, for various governments to stop the extreme distortions in the system, they all did not adhere to these calls in any mean way; the truth is that the social milieu, in terms of the high dependency burden, will not permit government as "political beings" rather than "economic beings" to yield earnestly to these calls. Indeed, as mass poverty exist and the basic consumption needs of many remains unfulfilled, making the magnitude of poverty all too apparent (Martin Schnitzer, pg 277) many will be 'crowded out' of the educational system if these calls are implemented, eventually, resulting in lost of valuable human resources.
Be Sure to Continue to Page 3 of "The Tax Base and the Dependency Ratio in the Less Developed World ".