I happened upon “Chaos Theory” not in a classroom –Thank God!
But in the pages of Michael Crichton’s “Jurassic Park”. It is basically that
small changes can lead to large unintended consequences. That a butterfly
flapping its wings in Japan can cause a storm across the world in New York.
This was the week to examine the chaos theory as it applies
to Uganda’s economy specifically.
Former Democratic Party Chairman Boniface Byanyima passed on
last week and at a vigil for the pioneering politician, President Yoweri
Museveni revealed that Byanyima worried that Museveni was tending towards
communism and tried to dissuade him.
It was fashionable for any young political firebrand of the
time to flirt with communism, the theory that all property should be publicly
owned and everyone paid according to their ability and needs.
"It is doubtful whether Museveni, if he had hang on to his communist credentials would still be in power today or whether the economy would have been resuscitated after 1986....
On the other hand his knowledge of dialectical materialism,
which is the Marxist theory that provides that changes in political and historical
events come as result of a struggle between social forces based on material
needs may have helped his analysis of the situation and ditched any past
romance with communism.
In 1986 the country’s coffers were empty after almost two
decades of misrule. However there was an urgent need to get the economy ticking
again if only to sustain the regime in power. The critics of capitalism or the
free market economy are numerous, but there has been no other system in human
history able to create economic growth at the rate at which it has happened
since the Second World War.
By adopting a series of IMF and World Bank prescriptions –
privatisation of state enterprises, liberalisation of markets and emphasis on a
stable macro-economic environment two things were achieved. First, that the aid
taps started flowing helping rehabilitate the infrastructure and give
confidence to private investors to follow suit. Secondly by breaking up the
state monopolies and opening up the economic space, private initiative long suppressed
by inefficient government entities, was unleashed.
But also communism was crumbling at the time, whereas the
collapse of the Berlin Wall was still three years away the signs were already
evident in the USSR and behind the iron curtain in Eastern Europe. The USSR
could scarcely bankroll the communist experiment when bread lines were forming
at home.
The economy only recovered to its 1970 levels just before
2000.
Prior to that butterflies flapping wings had brought forth
the Euro in January 1999; in Afghanistan had led to attack on the Twin Towers
in New York on 9th September 2001; which accelerated the dotcom
bubble burst and which led to the global financial crisis in 2008.
These event far from our shores have led to a build-up of the
military industrial complex and a more inward looking population in the donor
nations, leading to a turning off, or at least, reduced aid.
Increased revenue collections – thanks to our commitment to
macroeconomic stability, meant that as the aid taps run dry we could at least
tread water as we re-calibrate how development will be achieved in the brave new
world.
Also the rise of China, which in the late 1970s begun to
look for other ways to catch the mouse beyond a dogmatic adherence to
communism, meant that there more alternatives for aid and foreign direct
investment.
And the last week the IMF said they had downgrade their
growth forecasts for Uganda this year to 3.5 percent from five percent on
account of the poor harvests and less than planned roll out of key infrastructure
investments. They added though that they see growth returning to the six
percent level within the next two years.
We are at cross roads. Our emphasis on infrastructure
development while long overdue are now happening and the benefits will begin to
show themselves shortly.
Urgently we need to improve the environment for businesses
to thrive and create the much needed jobs for the hundreds of thousands of new
entrants to the job market annually.
"I sense a tendency to think the government will create the jobs, which goes against hundreds of years of economic history and good development sense...
Governments do not create jobs and by extension wealth, the
civil service should not be the biggest employer in an economy. But rather
governments should create the environment that allows businesses to create the
jobs.
Let us not look to exceptions to the rule to justify our
planned economic adventurism, stick to the time tested road -- maintain macroeconomic stability and
remove the barriers to business, and it
is almost a mathematical certainty that we will pull out of our current
economic malaise.
That and the hope that the right butterflies have already
flapped their wings.
