Tuesday, January 7, 2014


Almost 25 years ago Investment manager Jim Rogers and a friend toured the world on a pair of BMW motorcycles.

His trip took him through pre-economic-boom China, which was about a decade into its economic reforms. At the time he predicted great things for the economy based on evidence of huge infrastructure investments in their roads, railways and ports, the inherent commercial acumen of the Chinese and the huge population, whose capacity was being boosted by a drive universal education, that by the first half of this century it would be the world's largest economy.

Economists have set 2027 as the date for this rise to preeminence.

"The little known story -- or largely forgotten story, is that China's economic boom started in the rural areas with the liberalization of agricultural production...

This averted a famine and got the mandarins in Beijing thinking, reexamining their communist orthodoxy.

Last week the International Monetary Fund (IMF) projected that the economy would grow by 6.25 percent this year up from 5.75 percent last fiscal year.

The growth is going to be driven by public investments in infrastructure, but concerns remain that this growth is not evenly distributed with some regions lagging behind, the rural areas in general, hence a need for increases in agricultural productivity.

Clearly our planners have worked out how to grow the economy year in, year out what they need to exercise their minds on is how to facilitate the distribution of the benefits of this growth.

Given that the Ugandan economy is small at about $20b or half the size of Kenya's, it would be asking too much to expect elevated welfare standards for the general population.

To improve the general standards of living it is imperative that the economy continues to grow and for more people to benefit every shilling aimed at service delivery must count. As it stands now not only are we spending less than global standards on health, education and other public goods but we are also stealing these funds.

Corruption not only denies tens of thousands of children quality education and health services and therefore a chance of social advancement but distorts the business environment, with corrupt officials inflating real estate prices and outcompeting business rivals thanks to their "free money," further compromising the social climbing mechanism that a level economic playing field allows.

"The truth is to the extent that there are wealth and income inequalities in an economy, is the extent to which the government is not doing its job, even in liberal economies. Either the government is not facilitating economic growth or if it is, it is failing to ensure that the benefits are more equitably shared...

The free market generates wealth and the government distributes it.

Handing out cash at street corners does not constitute distribution of the national cake. The government through taxation of incomes generated by the private sector then finances public goods like security, national strategy formulation and execution, infrastructure and social services, which crease business productivity and leading to more taxes -- the virtuous cycle of development.

The Chinese clear in their resolve have shown what can be done in less than a generation, but also going by Rogers' account, sometimes when nations are in the process of development it's hard to appreciate the progress being made -- in effect failing to see the forest for the trees.

In Uganda we clearly have one part of the equation -- economic growth, of the development under control. Without killing the goose that lays the golden egg we need to spread this growth more equitably around society. 

Boosting agricultural productivity is important but putting a lid on corruption is critical.

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