It has been three decades since economic reforms kicked off
with the currency reform of 1987.
Since then government has privatised its large portfolio of
companies and broke up the monopolies that these controlled.
For a near bankrupt economy this was just what the doctor
ordered.
The truth is government had no room to manoeuver other than
shed these haemorrhaging companies, release their assets to productive players
in a last ditch attempt to jump start the economy.
This is after the NRA straight out of the bush tried
everything from price controls, commodity rationing, barter trade and came up
against the reality that the only way to get the economy going was to fire up
production, which its derelict companies were unable to do.
So with a lot of reluctance, they turned to the market for
help.
"By privatising the companies and liberalising markets they improved the environment for doing business in Uganda...
Coffee farmers started getting paid in cash for their crop
instead of the chits they got from the government marketing boards that would
take months to be paid out, if ever. We stopped importing sugar, sodas, beers,
blue band and even bread because were now producing them locally. On shoulders of those initial reforms we have
seen improvements in everything from banking to telecommunications; from
education to health care (if you think our health services are bad now you
should have been around in 1987), in everyone of these instances it was the
private sector jumping where government was failing.
There have been mistakes of course. Neither the victors nor
the bureaucracy they found in place had a clue about what it takes for a market
driven economy to work optimally and their role in making this happen.
So they took advice from the donors who were driven by a
desire to return the country’s economy to a functioning state rather than
trigger transformation.
The trouble with the market is that left to its own devices, it is a terrible distributor of the value it creates, concentrating it with the
owners of capital, to the detriment of labour and the poor.
A competent and patriotic state not only restrains the
market players’ instincts for primitive accumulation but also facilitates them to
be innovative and produce for the larger population.
The colonial state for instance facilitated the extraction
of value for the benefit of the capitalists in Europe with little regard to the
welfare of indigenous populations. That is how at independence we had about 300
A-level students out of a population of seven million people, if you
extrapolate it today, with 40 million population we would have under 2,000
A-level students.
Without investing in people, governments cannot expect to
cause economic transformation.
So the inadequacies in government over the last three
decades means while we have had the longest continuous stretch of economic
growth since the creation of Uganda, this has not been spread equitably.
It’s not difficult to see why this is so.
For starters with seven in ten Ugandans deriving their
livelihood from the land, agriculture accounts for under 30 percent of GDP.
Agriculture’s share of GDP has fallen sharply from almost 80 percent in 1986 as
services and industry have grown as a proportion of the total economy.
In more developed economies agriculture accounts for an even
smaller percentage of the economy but so do the people who depend on it for
sustenance. Industry has sucked up the labour from the rural areas, which has
led to consolidation of farms and greater mechanisation.
Relatedly while most Ugandans rely on agriculture, output in
this sector has been anaemic, not keeping up with the growth in services and
industry.
As a result in the last three decades the biggest beneficiaries
of the economic growth have been urban dwellers, who have not only seen their
incomes but also their standard of living rising.
It has been claimed that Kampala for instance accounts for 60 percent of the nation’s GDP since most of the value addition, services and industry are located there. If we were to be conservative and say half of Uganda’s $25b GDP is generated in Kampala and parcel this amongst the city’s two million daytime population the per capita GDP of Kampala is about $6000 almost ten times more than the national figure of $600...
This obvious inequality is being seen as a market failure,
being held up as a red flag and reason for a greater state intervention in the
economy and even more scary, a return to era of the state enterprise.
First of all what do you expect from a pig than a grunt. The
market while being the most effective creator of wealth or growth is the worst
distributor of these, as mentioned earlier.
There is nowhere in the world where the market left alone
can result in an equitable society. It is the job of government to not only
facilitate the development of the market but to distribute its gains to the
people.
"If there are huge inequalities in a society, more so in a growing economy like Uganda’s, this is an indictment of government not on the market...
The market is doing fine, as evidenced by the continuous
growth over the years. So it is counterintuitive to give more and more control
of the economy to the same sector that has failed to facilitate equitable
development.
Actually we should be more afraid of greater state
intervention (read state enterprises) than the market. The market is the devil
we know and the means to leverage it for transformation and equitable
development are known and all around us.
There is a role for governments to play in facilitating
growth and development by underwriting the security of person and property,
infrastructure development and the provision of social services. In addition
they can underwrite research and development.
All this on the basis of a national strategies aimed at
exploiting our competitive advantages and creating new markets. They need not
start state enterprises to do that.
The argument that countries in Asia relied on state
enterprises to jumpstart their economies after the Second World War has its
loop holes.
The more successful Asian tigers – Japan, South Korea,
Singapore and Taiwan, relied on strategic support of the private sector to
drive their export led growth agendas.
And secondly if those same countries were to copy what the
western economies had done to develop, should they have tried their hand at
colonialism and slavery, because it had worked for western economies?
