In the 1980s Uganda like many African economies, was in big
trouble.
Revenues were low, meaning the government could not provide
much needed social services and other public goods. This had the effect of
depressing private sector activity, killing any hope of tax collection.
Meanwhile even the little revenue government was collecting wasvanishing into the
black hole that was parastatal sector. The only thing that was thriving was the
black market in hard currency as exports had slowed to a dribble.
To sort out the mess the government needed to raise
production and then capture the taxes from this increased output. It was a
simple formula but not easy to execute.
Government needed to jump start the private sector by first
reining in inflation and rehabilitating the infrastructure. In addition
government needed to stem the public sector hemorrhage by reforming and
privatizing parastatals, as well as taking away their long held monopolies.
Twenty odd years later the private sector is more vibrant,
revenues are up to the point that government is financing two thirds of the
budget. However the benefits have not been enjoyed equitably across society, a
situation which still needs to be redressed without jeopardising economic
growth.
Understandably it was always going to be a politically
expensive operation but there really was no plan B.
What is going on in Europe – more specifically Portugal,
Italy, Greece, Spain mirrors our situation in the 1980s with the slight
variation that their debt load has reached unsustainable levels – the last I
saw Greece’s public debt was at 165% the size of the economy.
The proposed prescription to their predicament is much the
same as the one we painfully swallowed.
The electorates of southern Europe, it seems are not willing
to take the pain, protesting at every turn against the proposed austerity
measures, pushing the Eurozone to the point of disintegration.
A case of the doctor not willing to take his own medicine?
The stakes are much higher of course – after all who cares
if some poor African country falls off the face of the earth?
Europe will serve as a perfect test case for the saying what
is popular is not always right and what is right is not always popular.
The old world has got itself into this situation through
populism and to extricate themselves they are going to have to force through
some hard reforms.
It’s no time to be smug. The Euro zone crisis is affecting
us too, with lower demand for our exports, lower remittances from our relatives
abroad and the less aid.
Which might not entirely be a bad thing.
Living off the fat of the west slowed any progress towards developing
and mobilizing our own resources, cultivating internal and regional markets and
nurturing meaningful continental alliances.
They say that when the tide falls you will know who was
swimming naked. This crisis will show how far along our economy has grown by
how it reacts to the crisis. But more importantly it will focus planners’ minds
as they learn to live with lower handouts from the west.
And just as important, we are going to have to pay more
attention to the markets around us to sustain us for the next several years. As
it is now all our transport infrastructure is designed to extract from the
hinterland and evacuate through the ports – a
colonial hangover. Now we will have to build roads which reflect the new
appreciation of our own local and regional markets.
The long and short of it is this a crisis we should not let
go unexploited.
