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 80th 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!
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