Last week it was announced that Zimbabwe’s finance ministry was mulling the possibility of a gold standard to shore up its hopeless currency.
Zimbabwe dollar battered by hyperinflation and falling
export receipts has become so worthless that Zimbabweans have forsaken it for
the South African Rand, US dollar among other hard currencies to transact in
their daily lives.
A gold standard would hold the government to a discipline of only issuing as much currency as they have gold reserves (As was suggested in this column in 2008).
"This would have the immediate effect of putting the brakes on inflation and strengthening the currency, but would in the short term be very painful for the man of the street as cash would be in short supply and hard to come by...
How did it come to this? Zimbabwe used to be the breadbasket
of Southern Africa, an emerging economy with industries and a growing middle
class, better than adequate infrastructure – physical and social and generally
an African country on the move.
What happened? In a nutshell, bad politics.
Former president Robert Mugabe and his ZANU-PF under
pressure politically, resorted to populism, redistributing land arbitrarily to
their cronies and gutting the southern Africa nation’s productive sector with
one fell sweep.
It bought them an election but in the process setting the
promising economy back decades. According to some reports the country’s per
capita GDP has regressed to its 1980 levels, meaning they have fallen out of
the middle income status as a nation.
That’s just a number, but for the everyday Zimbabwean it
means shortages of essential commodities – Zimbabweans returning home stock up
on sugar, bread and cooking oil; it means fuel lines at the stations or walking
long distances to work, out of necessity because they cannot afford fuel or
transport; it means a real fear of hunger and starvation.
"Zimbabwe is an important case study for us, in the
developing world where politicians think they can tamper with the economy to
sustain themselves in power, without regard to the long term repercussions to
the general population...
Because the truth is, even in Zimbabwe the ruling class are
not suffering the hardship and shortages of the everyday man. They still ride
to work in fuel guzzling four-wheel drives, take their children to study abroad
and have their families treated overseas—Mugabe died thousands of kilometers
away in a Singapore hospital.
In Uganda we are no strangers to this downward economic
spiral. While it did not start with the expulsion of the Asians in 1972, this
clearly speeded it along by decimating our commercial class, a blow we have
barely recovered from now 50 years later.
To get the economy back on an even keel, we have had to do
some unpopular things like liberalise the economy, which while growing the
country’s wealth has concentrated it in a few hands. This last part thanks
largely to government inefficiencies and corruption.
While the Uganda macroeconomic stability and growth must
continue in Uganda, probably more importantly the economy has to be rejigged to
give every Ugandan a fair shake.
This does not mean government standing at every corner dishing
out shillings. As popular as that may be in the short term it only serves to
create dependency on government instead of self-reliance of the population.
The distribution would take the form of improving social service
as a way to improve our human capacity, widespread infrastructure to allow
access to market for our producers and improved safety of person of property,
through improved security and application of the law.
That it is why it is important to pay attention to
corruption whether in government or the opposition, because the perpetrators
will seek to protect the status quo even if and especially if, it does not advance
the living standards of the everyday man.
This is why given all that we have seen in recent weeks, with
opposition politicians just as, if not more, rapacious than the usual suspects, calls for government to own businesses should be avoided like the plague. In
fact we should look closely at the champions of these calls because more likely
than not they would be the main beneficiaries of the increased surface area for
corruption.
The point is this, just as in Zimbabwe, we need to recognize the productive sectors of our economies and rather than disrupt them, because we have no real control over them or because we want some quick political fix, enable them to be more productive through macroeconomic stability and an improved business environment.
Given our economic history, one would think I am preaching to
the converted, but the political drama since the beginning of the year suggest
that we are leaving the door open for some dangerous political maneuvering that
may very well send us back into an economic abyss most of us have no knowledge of.
Eight in ten Ugandans were born after 1990.
If Zimbabwe which had already attained middle income status in the 1980s, can be spiraling out of control, let us not think we are immune to the same, whatever the fat cats in government want us to believe.
