THE MUSEVENI ECONOMIC LEGACY

Last week I was involved in an online conversation about the economic achievements of President Yoweri Museveni’s administration. The conversation was prompted by the impending 80^th birthday of the President, which happened on the weekend.

It is a subject that should and will be discussed well into the future.

A brief recap of history is important.

When the National Resistance Movement (NRM) came to power in 1986 they found an economy in shambles, brought to its knees by the years of instability and economic contraction of the 1970s and 1980s.

"To resuscitate the economy, the NRM fought to bring inflation under control, privatized government parastatals to get them back into production and liberalised the economy to unlock individual initiative, which, up to that point, was discouraged by insecurity and suppressed by government monopolies. The government also worked to rehabilitate infrastructure and provide other public goods like security, health and education....

No less a figure than Singapore’s founding father Lee Kuan Yew in 1988, dismissed Uganda’s case as hopeless and did not think its fourtunes would be restored in a 100 years.

Since that January day in 1986 the economy has been on an unbroken growth streak, production has not only been restored but expanded, macroeconomic stability has been achieved and the economy is diversified away from an overreliance on coffee.

The economy still has a long way to go. The widening wealth disparity has to be addressed urgently, before it threatens national stability, by fighting corruption and increasing the productivity of the rural areas.

There is not enough space in this column to address all the achievements of the last four decades but off the top my head two initiatives were key in turning the economy around.

The first was ensuring security. This is critical to allow for investment by local and foreign businessmen. It would make no sense to invest in a home or enterprise if you are not sure that you will be alive next year or even the next day. The Kampala urban sprawl is evidence of this. 

In 1986 Kampala stopped at Kibuye roundabout in the south, Wandegeya in the north, Lugogo in the east and just before Natete in the west. As people have grown confident in the future of the house they have invested in homes and businesses that has grown Kampala more than tenfold from its 600,000 population in 1986.

The second was the liberalization of the economy. In those days there were government companies in everything from supermarkets to petrol stations, from housing estates to fishing boats. And all these were virtual monopolies in their sectors, ineffective, inefficient and draining the lifeblood from tax payer.

By privatizing these and opening the market to competition, government not only turned on the production taps but also harnessed the market to create sustainable growth.

Professor John Kay in his seminal book “The truth about markets” explained that the market is really a series of experiments by businessmen every minute, every day, every time. The experiments that work grow and those that don’t are dropped by the way side. Out of this chaos, creative destruction, which mirrors the evolutionary process, is born growth and wealth. No central authority anywhere in the world can replicate these multitude of experiments with any success, which is why governments all over the world fail at business.

People who pander for central control of the economy are often a small clique, who have failed in the market, but are connected to government and see government involvement as a way to get back in the game. It is to their benefit and not to the benefit of everyday man.

"Forced by necessity more than conviction the NRM liberalized the economy and in so doing unlocked the individual initiatives of local and foreign businessmen and the economy has been better for the experience...

Currently we are at a cross road.

While the market is the most effective mechanism for growing wealth it is probably the worst for distributing that wealth. Distribution of wealth is government’s role by taxing economic activity and using revenues to finance public goods. If the economy is growing as Uganda’s is but inequalities continue to persist and growth it is an indictment on government’s competence or lack of in the distribution of the wealth that is created.

Government distribution of wealth does not mean standing at the corner and dishing out money. Distribution often entails giving the population the means to take advantage of the economic opportunities that come with economic growth by keeping them safe, educating them, providing health services, access to markets through developing infrastructure, both hard and soft and for the most marginalized, a leg up by providing social security.

Museveni’s legacy will be cemented by the equitable distribution of the economic gains of the last 40 years.

As it is now the biggest beneficiaries are people living in urban areas, who are educated and can leverage this to get employment or compete in the market as businessmen. Given the system that the NRM uprooted that gave access to a few – there were barely 5000 students in University in 1986, often to the detriment of the majority, the beneficiaries continue to be a few.

"Going into the next four decades the economy must continue to grow, there can be no development without growth, but there has to be a more systematic and consistent effort to ensure this growth is shared out more equitably...

Happy birthday Mzee!