In the coming year let us conduct our affairs like a well run company.
In some parts of the world to tell the future you may tea leaves or animal entrails, to have an insight into a company’s future we read their financial statements.
The financial statements – the profit & loss, the balance sheet and the cash flow statements are like an x-ray into the business allowing even an outsider a better than good idea of a company’s fortunes.
For the experts, bear with me – and I stand to be corrected.
The profit & loss (P&L) tells us whether a company has a healthy relationship between its revenue and costs. A healthy relationship would be profitable with revenues coming in higher than costs and unhealthy one vice versa.
The balance sheet – a statement of assets and liabilities, is where the durability of the company can be found. A business with more assets than liabilities can be said to be healthy and have a future while a company with liabilities more than its assets, has no future or a bleak one at best. I am speaking in general terms of course.
They say profit is an opinion but cash is reality and that is where the cashflow statement comes in. The cashflow statement gives an account of how the money is entering and exiting the company. You can be profitable all you want but if you are not collecting what’s due to you while paying your dues it’s a matter of time before you will be out on the street.
Without knowing the aforementioned many of us focus more on the P&L part of our finances. We want to earn more so we can spend more, essentially improve the standard of our living. Interestingly the more we earn the more spend. It is the rare person or country that will have expenditure holding steady or growing slower than earnings.
The best companies retain part of their profits or invest in new plant and machinery to increase production and marketshare.
Unlike most individuals the best companies focus on their balance sheet, because as said earlier it’s the balance sheet that ensures longevity. If a company suffers a bad year it can either dip into retained earnings or sell off assets to tide themselves over. When an individual loses his or her job many are reduced to abject poverty, because they did not save or build their asset base.
Another lesson we can learn from the best companies is that they are adept at converting liabilities into assets. These assets then throw off higher incomes allowing them to retain more earnings and invest in more assets, a veritable virtuous cycle of prosperity.
We on the other hand take out loans to finance consumption. Essentially we eat the money with no new income created. We therefore find our unchanged income constrained in paying off new debts, which prevents us from saving or buying new assets, therefore no new or lower income – the vicious cycle of poverty.
Investors while valuing companies look at income but more importantly they look at the balance sheet to see whether existing income is sustainable or can be raised. Using the same measure on ourselves it’s all very nice that we are pulling in multi-million shilling incomes but does our balance sheet indicate sustainability of this situation?
One more thing about the balance sheet, the quality of an asset is determined by how much income it is earning. It is all very nice to have tracts of landing in the village but if they are not making money chances are they are costing money and cease to be an asset.
Unrealised income is all very nice, for example that you bought land for sh1m two years ago and the same land is now sh5m today, but this does not put bread on the table. So the best companies are always seeking to “sweat” their assets, make sure they are producing and if not liquidate.
So in the New Year the bottom line is not the bottom line. In our personal lives we should focus on the balance sheet: It is not how much we earn that counts but how much we keep.
Have a prosperous New Year!
Monday, January 3, 2011
Monday, December 20, 2010
HIGH INCOME IS NOT WEALTH
Last week the finance ministry released a report on Uganda’s progress on the Millennium Development Goals (MDGs).
On the whole the progress in areas like increased primary school enrollment, access to clean water, gender equality and women’s empowerment and reduction in child mortality compared to ten years ago.
Among the findings of that report was the fact that proportion of Ugandans living on less than a dollar a day has plunged to 23% from 36% over the last five years. What this means is that as a country we have reached the target rate of poverty set out by the UN in 2000. The target date for achievement of these was 2015.
As I have argued before I think the dollar a day measure of poverty is cow manure. As far as I am concerned one-dollar-day is an easy target and personally do not doubt that we have attained these target. I think it’s a scandal that we can even have people living on less than a dollar a day or even $10 for that mater.
It is not hard to see why we struggle to meet this basic of targets.
During a conference last week the National Development Plan was criticized for its lack of clearly defined strategy for transforming the country’s economy – put bluntly our planners are involved in wishful thinking.
Also there seems to be a lack of understanding of what will make for sustainable poverty eradication. We are focusing on income from jobs or trade rather than on encouraging building income generating assets. The difference between the two is worlds a part.
Of course for political purposes raising incomes is the easier target – and hence the UN’s one dollar a day standard.
Back to first principles there are four levels of financial health. At the bottom rung is poverty, at this level one can not provide the basic necessities of life on their own income and is forced to rely on handouts to bridge their financial deficits. The next level is one of financial freedom where a regular income ensures that one can provide for self, in this category is most salaried workers, most of whom are a salary away from poverty.
Financial security, is where an individual may or may not have a regular income but his income from his accumulated assets adequately provides for his daily expenses. It is at this level that one can honestly talk of pulling out of poverty.
To be rich is an extension of being financial secure, but this time ones assets are throwing off more income than you or your family can consume.
Seen in this light you want to ask yourself whether you are out of poverty or not. And understandably this standard would be hard to attain, hence its unpopularity politically.
Let us assume as a country we aim at financial freedom for all by 2050, what it would take to attain that.
It goes without saying we have to sustain the current level of macro economic stability, especially keeping inflation rates down.
In addition we have to significantly lower the cost of doing business.
Improve our transport networks – getting the train up and running for goodness sake, eliminate power shortages, improve health services, restructure our education to provide market relevant man power and eliminate onerous licensing processes among other things.
The idea would be that not only would businessmen have a better chance of making successes of their enterprises – selling more and employing more, but the cost savings would be passed on to the consumer who would then have wider options for his money.
We would also restructure our financial sector creating incentives for more savings, liberalise the pension sector and support venture capitalists whose job it is to back start ups.
And eventually as a nation we need to be more committed to promoting entrepreneurship and financial literacy.
To take our businesses to the next level they need to be more structured and therefore our businessmen need education and mentoring. The days of hit and miss businessmen are gone as the economy becomes more formalized.
At the very personal level widespread financial literacy – the ability for instance to distinguish between income and wealth, is critical. For a long time now our salary and other income earners have been blundering through life, thinking that because they have a regular paycheck they have arrived only to be reduced to destitution at retirement.
Lets raise our sights beyond a dollar a day after all achieving arbitrary and meaningless benchmarks is not what we are here for.
On the whole the progress in areas like increased primary school enrollment, access to clean water, gender equality and women’s empowerment and reduction in child mortality compared to ten years ago.
Among the findings of that report was the fact that proportion of Ugandans living on less than a dollar a day has plunged to 23% from 36% over the last five years. What this means is that as a country we have reached the target rate of poverty set out by the UN in 2000. The target date for achievement of these was 2015.
As I have argued before I think the dollar a day measure of poverty is cow manure. As far as I am concerned one-dollar-day is an easy target and personally do not doubt that we have attained these target. I think it’s a scandal that we can even have people living on less than a dollar a day or even $10 for that mater.
It is not hard to see why we struggle to meet this basic of targets.
During a conference last week the National Development Plan was criticized for its lack of clearly defined strategy for transforming the country’s economy – put bluntly our planners are involved in wishful thinking.
Also there seems to be a lack of understanding of what will make for sustainable poverty eradication. We are focusing on income from jobs or trade rather than on encouraging building income generating assets. The difference between the two is worlds a part.
Of course for political purposes raising incomes is the easier target – and hence the UN’s one dollar a day standard.
Back to first principles there are four levels of financial health. At the bottom rung is poverty, at this level one can not provide the basic necessities of life on their own income and is forced to rely on handouts to bridge their financial deficits. The next level is one of financial freedom where a regular income ensures that one can provide for self, in this category is most salaried workers, most of whom are a salary away from poverty.
Financial security, is where an individual may or may not have a regular income but his income from his accumulated assets adequately provides for his daily expenses. It is at this level that one can honestly talk of pulling out of poverty.
To be rich is an extension of being financial secure, but this time ones assets are throwing off more income than you or your family can consume.
Seen in this light you want to ask yourself whether you are out of poverty or not. And understandably this standard would be hard to attain, hence its unpopularity politically.
Let us assume as a country we aim at financial freedom for all by 2050, what it would take to attain that.
It goes without saying we have to sustain the current level of macro economic stability, especially keeping inflation rates down.
In addition we have to significantly lower the cost of doing business.
Improve our transport networks – getting the train up and running for goodness sake, eliminate power shortages, improve health services, restructure our education to provide market relevant man power and eliminate onerous licensing processes among other things.
The idea would be that not only would businessmen have a better chance of making successes of their enterprises – selling more and employing more, but the cost savings would be passed on to the consumer who would then have wider options for his money.
We would also restructure our financial sector creating incentives for more savings, liberalise the pension sector and support venture capitalists whose job it is to back start ups.
And eventually as a nation we need to be more committed to promoting entrepreneurship and financial literacy.
To take our businesses to the next level they need to be more structured and therefore our businessmen need education and mentoring. The days of hit and miss businessmen are gone as the economy becomes more formalized.
At the very personal level widespread financial literacy – the ability for instance to distinguish between income and wealth, is critical. For a long time now our salary and other income earners have been blundering through life, thinking that because they have a regular paycheck they have arrived only to be reduced to destitution at retirement.
Lets raise our sights beyond a dollar a day after all achieving arbitrary and meaningless benchmarks is not what we are here for.
Monday, December 6, 2010
LET’S DO A PILGRIMAGE TO ISRAEL
The harnessing of the private sector while itself becoming a super efficient state is something we badly need to learn.
And now I add Israel to the list of must visit countries for the men and women of the Planning ministry.
“Start-Up Nation: The story of Israel’s Economic Miracle” is a book that tries to deconstruct the economic success of the Jewish state. To appreciate the miracle of Israel understand that this is a country, were it a square would not be as wide as the distance from Kampala to Masaka. Mostly desert, it was described by Mark Twain as a “desolate country … a silent mournful expanse.”
It has a population of seven million people most of whom are at least second generation immigrants.
Since independence in 1948 Israel has lifted itself from a besieged backwater to a high tech hub, while growing its economy fifty fold and this despite fighting three wars and being in a state of perpetual tension, “Totally unmatched in the economic history of the world,” according to Israeli political scientist Gidi Grinstein.
At the bottom of small Middle Eastern country’s success is the entrepreneurial spirit of its people.
It has more start up companies per capita than any place else in the world. The amount of venture capital investment per person – another indicator of entrepreneurship, is nearly thrice that of the US and more than thirty times that of the European Union.
Innovation that often comes with start ups, is the only proven way of economies to stay ahead and provide for the increasing demands of not only a growing population but of rising demands that come with a higher standard of living.
This boom in entrepreneurial activity flies in the face of the perception of Israel, as not only being at the heart of an unstable region but that Israel’s very existence is not assured by its belligerent neighbours.
A complicated subject. The roots of this national spirit of entrepreneurship and innovation, authors Dan Senor and Saul Singer find in some rather unlikely places. The fact that Israel – like the US, is a nation of immigrants who by definition are risk takers is key and has some useful lessons for immigration policy makers. When added to the crucial role played the Israel Defence Forces (IDF) in fostering an informal approach to authority, a unique attitude to failure and serves as a demanding culling selection process of the country’s best talent, the country has come as close as one can get to formalizing the process of entrepreneurship.
The development of the military and avionics industry – an unintended consequence of an arms embargo, nurtured a cadre of high tech engineers and laid the foundation for the huge concentration of the high tech industries in Israel today.
A booming venture capital industry, initially promoted by the government, means local entrepreneurs have access not only to funds but to the mentorship needed to grow business and make them competitive on the international scene.
Everything was not planned at the inception of the Jewish state by wise man Ben Guiron, but forced into a corner by real existential questions, Israel like few other countries in the world has literary taken the lemon of its circumstance and turned it into lemon juice.
Which makes me wonder, what would have happened if the early Zionists had taken up Britain’s offer to settling in Karamoja?
Tuesday, November 23, 2010
TO BATTLE CORRUPTION, PAY UP
THE Inspector General of Government, Raphael Baku, this week released the annual report on corruption in Uganda.
I have not read the entire report but there was nothing to raise any eyebrows.
Infact, it was rather understated in cementing the perception that corruption is alive and kicking. On 94.8 fm’s Talk of the Nation this week, the issue of teacher absenteeism came up.
I heard how dedication to the vocation was lacking and teachers these days do not appreciate the huge responsibility they bear. The suggestion was that they don’t make teachers like they used to.
And then again on Press Chat on the same 94.8 fm, Richard Baguma narrated a heartbreaking but hilarious story of how in his earlier days as a public servant he went to the bank to check whether his salary had made his account.
Earlier this year I saw a list of salaries for various levels of civil servants and at first thought the civil service pay was not so bad after all, until someone pointed out the figures published referred to annual salaries.
I believe that corruption is thriving because we do not pay our public servants enough. They may be other reasons but they are all secondary.
Abraham Maslow’s hierarchy of needs is a useful framework from which to analyse human motivation. Basically, his theory suggests that human motivation is dictated by the pressing needs of a person.
At the bottom of the hierarchy are the basic physiological needs of food, water and breathing, climbing up to safety needs – family, health and housing, and on to belonging needs to esteem needs – achievement, respect, confidence to the ultimate, the self actualised person where issues of morality, creativity and lack of prejudice reside.
The theory says that if you do not fulfill the needs at one level it is difficult to rise to the next level and even if you do, chances are you will always regress to the lower level to resolve the needs unattended to at that level. It is impossible to belabor this point.
The lowly paid civil servant lives in Nakasero, Bugolobi and Ntinda, is building in Namugongo and Buwate and is unstintingly loyal racking up five, ten, 15 years in the civil service.
This would be an illusion if they were conjuring this lifestyle out of their payslips.
In arguing against corruption, some sanctimonious people argue that if you signed up to work for that pay you should honour your contract or get out.
But of course government planners, being civil servants, know all this.
The argument that there are no resources to improve civil service pay, fly in the face of the fact we are willing to shell out sh500b-plus to host CHOGM, a four-day event, which has had little residual benefit to the majority of the population.
The high profile figures we see getting billion shilling kick backs are the tip of the iceberg. The incessant gnawing away at public resources by lesser cadres pilfering a few thousand shillings from the office imprest, soliciting a bribe here and there to conveniently look away when the law is being broken, is where the real havoc is being wrecked.
There are the rare, blameless individual, but we can not organise society on the strength of a few outliers.
This in no way justifies corruption. If we are serious about fighting corruption let’s pay our civil workers the minimum to survive through the month and then, the fight against corruption will truly have begun.
I have not read the entire report but there was nothing to raise any eyebrows.
Infact, it was rather understated in cementing the perception that corruption is alive and kicking. On 94.8 fm’s Talk of the Nation this week, the issue of teacher absenteeism came up.
I heard how dedication to the vocation was lacking and teachers these days do not appreciate the huge responsibility they bear. The suggestion was that they don’t make teachers like they used to.
And then again on Press Chat on the same 94.8 fm, Richard Baguma narrated a heartbreaking but hilarious story of how in his earlier days as a public servant he went to the bank to check whether his salary had made his account.
"The teller took one look at his account balance and, writing it down on a slip of paper, said his salary had not made the bank yet. It had, but it was so little as not to register with the lady behind the counter....
Earlier this year I saw a list of salaries for various levels of civil servants and at first thought the civil service pay was not so bad after all, until someone pointed out the figures published referred to annual salaries.
I believe that corruption is thriving because we do not pay our public servants enough. They may be other reasons but they are all secondary.
Abraham Maslow’s hierarchy of needs is a useful framework from which to analyse human motivation. Basically, his theory suggests that human motivation is dictated by the pressing needs of a person.
At the bottom of the hierarchy are the basic physiological needs of food, water and breathing, climbing up to safety needs – family, health and housing, and on to belonging needs to esteem needs – achievement, respect, confidence to the ultimate, the self actualised person where issues of morality, creativity and lack of prejudice reside.
The theory says that if you do not fulfill the needs at one level it is difficult to rise to the next level and even if you do, chances are you will always regress to the lower level to resolve the needs unattended to at that level. It is impossible to belabor this point.
"As long as the Government continues to pretend to pay, people will continue to pretend to work while devising other means to meet their basic needs. It is blindingly obvious....
The lowly paid civil servant lives in Nakasero, Bugolobi and Ntinda, is building in Namugongo and Buwate and is unstintingly loyal racking up five, ten, 15 years in the civil service.
This would be an illusion if they were conjuring this lifestyle out of their payslips.
In arguing against corruption, some sanctimonious people argue that if you signed up to work for that pay you should honour your contract or get out.
And I suggest to them that if the Government is unwilling to up the pay and yet wants to plug the leakages maybe they should hire monks, who are sworn to poverty and celibacy....
But of course government planners, being civil servants, know all this.
The argument that there are no resources to improve civil service pay, fly in the face of the fact we are willing to shell out sh500b-plus to host CHOGM, a four-day event, which has had little residual benefit to the majority of the population.
The high profile figures we see getting billion shilling kick backs are the tip of the iceberg. The incessant gnawing away at public resources by lesser cadres pilfering a few thousand shillings from the office imprest, soliciting a bribe here and there to conveniently look away when the law is being broken, is where the real havoc is being wrecked.
There are the rare, blameless individual, but we can not organise society on the strength of a few outliers.
This in no way justifies corruption. If we are serious about fighting corruption let’s pay our civil workers the minimum to survive through the month and then, the fight against corruption will truly have begun.
Monday, November 15, 2010
THE MYTH OF OUR POVERTY
The World Bank last week released a report which showed that remittances from Ugandans abroad may come in at about $ 773m (sh2 trillion) this year. This is up from $694m last year.
To put this in perspective. Uganda’s national budget stands at just under sh8 trillion, that means Ugandans abroad are remitting the equivalent of a quarter of the national budget to fund school fees, health expenses, building construction and general consumption.
Also this figure is about the same amount of money the government is expecting from foreign governments in loans and grants to balance the budget.
Two things to note, the World Bank acknowledges that this is understated as their statistics are derived from official records. So all the dollars that come stuffed in toys and clothes, through local couriers go largely unregistered.
A recent Central Bank survey on the issue showed that remittances through alternative means were about half the amount of those through the formal financial system.
And secondly, that this figure has been growing over the years, more than quadrupling from 1996’s $175m, shrugging off the recent global economic slowdown. At this rate Ugandans will double there remittances every seven years.
It is estimated that there are about 757,000 Ugandans living abroad, given this year’s statistics this suggests that on average each Ugandan abroad sends home just over $1,000 a year.
As indicated earlier, this money comes piecemeal and according to official statistics peaks in the last quarter of every year. This money goes largely towards consumption.
On the continent Nigeria is the top remittance receiver at $10b but elsewhere India, Israel and Phillipines are up there.
All indications point to the expectation that Kyeyo money will increase year on year as long as a stable macro-economic policy environment is maintained in this country.
Seeing as we shall be getting increasing amounts of these monies in coming years the question is how can we make maximum use of these funds beyond improving individual homesteads’ welfare?
For starters we need to aggregate this money. A few dollars here a few dollars there can’t make countrywide differences.
Ghana in 2008 launched the Golden Jubilee Savings Bond, which raised less than the intended target and most of it from Ghanaians at home. The funds from the bond were intended for infrastructural development. The Philipines is also planning there own bond issue.
Say that we were able to rope in a tenth of this year’s remittances about sh200b what could this money do if deployed in bursaries, low income housing or agricultural credit?
Somebody was telling me that following a geo-aerial survey to determine our natural resource potential, it was discovered we are seating on so much mineral deposits that were we to exploit it, it would mean relocating the whole population of Uganda.
I also learnt that of all the money in circulation about 60% of it is outside the formal financial system.
An increase in branch networks and proliferation of Savings & Credit Cooperatives (SACCOs) should go someway to mopping up all this excess liquidity.
Again you want as much money as you can in the financial system so it can be deployed to support trade and production.
Given also that about sh300b annually gets pilfered by our grubby fingered officials – except in 2007 when sh500b went on CHOGM alone, there is more than enough money available to relieve our donor dependency.
It may come as a surprise to you, but we are not a poor country. In fact it is a fallacy --. A misleading notion, an erroneous belief, a myth.
What we lack is the leadership to harness our local resources. It is much easier to go begging bowl in hand to donors than it is to set up the system to collect our little monies. But that is short term thinking which is hurting us now and will continue to hurt us over the long time if we do not snap out of it.
To put this in perspective. Uganda’s national budget stands at just under sh8 trillion, that means Ugandans abroad are remitting the equivalent of a quarter of the national budget to fund school fees, health expenses, building construction and general consumption.
Also this figure is about the same amount of money the government is expecting from foreign governments in loans and grants to balance the budget.
Two things to note, the World Bank acknowledges that this is understated as their statistics are derived from official records. So all the dollars that come stuffed in toys and clothes, through local couriers go largely unregistered.
A recent Central Bank survey on the issue showed that remittances through alternative means were about half the amount of those through the formal financial system.
And secondly, that this figure has been growing over the years, more than quadrupling from 1996’s $175m, shrugging off the recent global economic slowdown. At this rate Ugandans will double there remittances every seven years.
It is estimated that there are about 757,000 Ugandans living abroad, given this year’s statistics this suggests that on average each Ugandan abroad sends home just over $1,000 a year.
As indicated earlier, this money comes piecemeal and according to official statistics peaks in the last quarter of every year. This money goes largely towards consumption.
On the continent Nigeria is the top remittance receiver at $10b but elsewhere India, Israel and Phillipines are up there.
All indications point to the expectation that Kyeyo money will increase year on year as long as a stable macro-economic policy environment is maintained in this country.
Seeing as we shall be getting increasing amounts of these monies in coming years the question is how can we make maximum use of these funds beyond improving individual homesteads’ welfare?
For starters we need to aggregate this money. A few dollars here a few dollars there can’t make countrywide differences.
Ghana in 2008 launched the Golden Jubilee Savings Bond, which raised less than the intended target and most of it from Ghanaians at home. The funds from the bond were intended for infrastructural development. The Philipines is also planning there own bond issue.
Say that we were able to rope in a tenth of this year’s remittances about sh200b what could this money do if deployed in bursaries, low income housing or agricultural credit?
Somebody was telling me that following a geo-aerial survey to determine our natural resource potential, it was discovered we are seating on so much mineral deposits that were we to exploit it, it would mean relocating the whole population of Uganda.
I also learnt that of all the money in circulation about 60% of it is outside the formal financial system.
An increase in branch networks and proliferation of Savings & Credit Cooperatives (SACCOs) should go someway to mopping up all this excess liquidity.
Again you want as much money as you can in the financial system so it can be deployed to support trade and production.
Given also that about sh300b annually gets pilfered by our grubby fingered officials – except in 2007 when sh500b went on CHOGM alone, there is more than enough money available to relieve our donor dependency.
It may come as a surprise to you, but we are not a poor country. In fact it is a fallacy --. A misleading notion, an erroneous belief, a myth.
What we lack is the leadership to harness our local resources. It is much easier to go begging bowl in hand to donors than it is to set up the system to collect our little monies. But that is short term thinking which is hurting us now and will continue to hurt us over the long time if we do not snap out of it.
Saturday, November 6, 2010
THE RICH WILL GET RICHER
I am currently engrossed in the book “World on Fire: How Exporting Free Market Democracy Breeds Ethnic Hatred and Global Instability” by Amy Chua.
The idea that by spreading capitalism and democracy, the world will be a better place to live in does not hold up to scrutiny when viewed against the background of the last 20 years since the fall of communism as symbolised by the fall of the Berlin Wall.
In fact the opposite seems to be true with increased incidents of poverty, ethnic divisions sharpening and in many places there are determined efforts to roll back the free economy and fledgling attempts at democratic practice.
In reading the book I see interesting parallels with the developments of the last 24 years in Uganda – the rise of economically dominant ethnic minorities, widening income disparities and rising tribal tensions
Capitalism by harnessing individual initiative is undoubtedly the most efficient way of growing wealth, how in a true free market inevitably the rich get richer and the poor get poorer.
I think even Jesus Christ recognized this truth more than 2000 years ago counseling his disciples that those who have will have more added onto them and those who don’t will have even the little they have taken away from them.
But why is it so? Author Eric Beinhocker in his book “The Origin of Wealth” reports on a computer simulation that showed that starting off on a relatively wealthy note, in terms of access to resources, almost always means you will end up wealthier than your contemporaries who started off less wealthy. Basically that wealth begets wealth.
So are the poor doomed to remain poor?
Not the way Beinhocker sees it. After a long and arduous deconstruction he comes to the conclusion that knowledge is the origin of wealth. The greater the knowledge in a society the more it informs the physical and social technologies, how we work and organise ourselves respectively to achieve the society’s goals.
So western economies are richer because they have a long history for recorded research & development and are organized – politically, commercially, socially in such a way as
To take advantage of this accumulated knowledge.
Even on an individual basis we are not as rich as we want to be because there is something we do not know. I am always amused when in denigrating rich people, the average person point to their huge debts as the illusion on which their wealth is built. One can get rich by saving every coin they earn (something the rich man’s critic does not do anyway) but it will take a life time of subhuman subsistence, and isn’t the point to get wealthy to enjoy a better lifestyle? However the judicious use of debt can quicken the process. Now you know.
So the question for every government is how do you get everyone in a position to accumulate knowledge, raise incomes and get richer?
The simple answer is widespread education.
Learning about the Rhinelands, Canadian prairies and the Benelux region is largely useless information – even for those who travel regularly, but the greater role of education is to open our minds to receive more and more knowledge.
It is not by mistake that the richest countries have near universal education up to undergraduate level.
But in those same countries you have people like Bill Gates, Larry Ellison, Alan Sugar and Philip Green who have no degrees but are the richest men in the world. Would they have achieved so much in a poorer, low income country like our own? No chance. The organization of society can not yet allow the accumulation of such wealth here.
The adherence to rule of law especially as it relates to business, mean that wealth can easily generated there than here.
For instance this week the World Bank released a report measuring the ease of doing business globally in which Uganda slipped to 122 from 112 out of 183 countries surveyed. Singapore was at the top of the heap with the UK and US at fourth and fifth respectively.
The point is that in a free market economy the rich will get richer, as is their right, but the poor need not get any poorer. There is more than enough to go around for everyone.
The idea that by spreading capitalism and democracy, the world will be a better place to live in does not hold up to scrutiny when viewed against the background of the last 20 years since the fall of communism as symbolised by the fall of the Berlin Wall.
In fact the opposite seems to be true with increased incidents of poverty, ethnic divisions sharpening and in many places there are determined efforts to roll back the free economy and fledgling attempts at democratic practice.
In reading the book I see interesting parallels with the developments of the last 24 years in Uganda – the rise of economically dominant ethnic minorities, widening income disparities and rising tribal tensions
Capitalism by harnessing individual initiative is undoubtedly the most efficient way of growing wealth, how in a true free market inevitably the rich get richer and the poor get poorer.
I think even Jesus Christ recognized this truth more than 2000 years ago counseling his disciples that those who have will have more added onto them and those who don’t will have even the little they have taken away from them.
But why is it so? Author Eric Beinhocker in his book “The Origin of Wealth” reports on a computer simulation that showed that starting off on a relatively wealthy note, in terms of access to resources, almost always means you will end up wealthier than your contemporaries who started off less wealthy. Basically that wealth begets wealth.
So are the poor doomed to remain poor?
Not the way Beinhocker sees it. After a long and arduous deconstruction he comes to the conclusion that knowledge is the origin of wealth. The greater the knowledge in a society the more it informs the physical and social technologies, how we work and organise ourselves respectively to achieve the society’s goals.
So western economies are richer because they have a long history for recorded research & development and are organized – politically, commercially, socially in such a way as
To take advantage of this accumulated knowledge.
Even on an individual basis we are not as rich as we want to be because there is something we do not know. I am always amused when in denigrating rich people, the average person point to their huge debts as the illusion on which their wealth is built. One can get rich by saving every coin they earn (something the rich man’s critic does not do anyway) but it will take a life time of subhuman subsistence, and isn’t the point to get wealthy to enjoy a better lifestyle? However the judicious use of debt can quicken the process. Now you know.
So the question for every government is how do you get everyone in a position to accumulate knowledge, raise incomes and get richer?
The simple answer is widespread education.
Learning about the Rhinelands, Canadian prairies and the Benelux region is largely useless information – even for those who travel regularly, but the greater role of education is to open our minds to receive more and more knowledge.
It is not by mistake that the richest countries have near universal education up to undergraduate level.
But in those same countries you have people like Bill Gates, Larry Ellison, Alan Sugar and Philip Green who have no degrees but are the richest men in the world. Would they have achieved so much in a poorer, low income country like our own? No chance. The organization of society can not yet allow the accumulation of such wealth here.
The adherence to rule of law especially as it relates to business, mean that wealth can easily generated there than here.
For instance this week the World Bank released a report measuring the ease of doing business globally in which Uganda slipped to 122 from 112 out of 183 countries surveyed. Singapore was at the top of the heap with the UK and US at fourth and fifth respectively.
The point is that in a free market economy the rich will get richer, as is their right, but the poor need not get any poorer. There is more than enough to go around for everyone.
Saturday, October 30, 2010
IF I WAS A PRESIDENTIAL CANDIDATE
The presidential campaigns got off to a relatively calm note earlier this week – so calm in fact that Inspector General of Police Major General Kale Kaihura threw a party for his officers in charge of overseeing the campaign.
Meanwhile the candidates are putting the finishing touches to their manifestos and I hoping to add my two cents to their thinking processes.
As far as I am concerned there is only one issue in this country and every other issue derives from it – poverty.
As far as I am concerned poverty is the root of all our evils.
Was it a coincidence that this week that the Uganda Bureau of Statistics released results showing that poverty levels had fallen to 22% from 31% five years ago. Poverty here is defined as a situation under which a person lives on less than $1 a day.
The improvement in our figures has a lot to do with the people of northern Uganda returning to productive lives. Also considerable improvement was registered in eastern Uganda.
To begin with I would change the emphasis away from poverty eradication to wealth creation, because what you focus on expands.
First let us understand the various levels of economic health.
At the bottom of the ladder are the poor who consume more than they earn, then the financially independent, these can sustain themselves on their income but are often a pay check away from poverty, then the financially secure who in addition to a regular income have assets throwing off income that would sustain them without a job and then finally the rich who assets throw of so much income as to guarantee financial security for generations to come.
So the challenge of my presidency would be to get the poor jobs. Encourage a sound banking system in which the financially independent can save their money and low lending rates so they can borrow more to invest in productive assets. The financially secure and the rich would benefit from lowering the cost of doing business by reducing corruption, improved infrastructure and a better quality human resource, so they can see a better return for their investments.
Of course all this will be anchored by continued stability in the country and a commitment to widespread financial literacy so people can graduate from one level to the next level of financial health.
I think the $1 a day definition of poverty is too low and easy to achieve what I am proposing is a more ambitious plan that will create a bigger middle class.
The middle class is the anchor on which more developed economies and democracies are built.
The middle class are the biggest guarantors of stability since they have a real stake in their respective countries, beyond the fuzzy, sentimental pitch about nationalism and patriotism politicians sell.
And because of this real interest in the country – in the way of investments, the middle class are loath to resolve issues through violence and are more likely to look for civil solutions to conflict, this attitude is the bed-rock on which all enduring democracies are built.
Hate them all you want but the colonial government built up a network of social services – education and health, which elevated our previously poor, rural leaders to their current levels of exaltation today. The colonial government could do this because there was little pilfering of tax payers money, schools and health facilities got constructed and manned, roads got built and maintained and things worked as they were supposed to.
Poverty is not a natural condition (whatever our religious leaders tell us), it is a failure of political leadership and mapped by geographical boundaries.
It is true what they say, the rich are different. Their interests go beyond transient racial, religious or ethnic boundaries. James Mulwana’s milk is not restricted to the Baganda or MTN does not do business with the people from Charles Mbire’s tribesmates or Sudhir Ruparaelia’s does not open his banking hall to only his Asian brethren.
We are teethering on the cusp of social unrest and political implosion because we do not have enough rich people among us.
So I can assure you as your president I will lead a determined push for a middle and rich class and relegate to the dustbin of history this patronizing $1-a-day rubbish.
Meanwhile the candidates are putting the finishing touches to their manifestos and I hoping to add my two cents to their thinking processes.
As far as I am concerned there is only one issue in this country and every other issue derives from it – poverty.
As far as I am concerned poverty is the root of all our evils.
Was it a coincidence that this week that the Uganda Bureau of Statistics released results showing that poverty levels had fallen to 22% from 31% five years ago. Poverty here is defined as a situation under which a person lives on less than $1 a day.
The improvement in our figures has a lot to do with the people of northern Uganda returning to productive lives. Also considerable improvement was registered in eastern Uganda.
To begin with I would change the emphasis away from poverty eradication to wealth creation, because what you focus on expands.
First let us understand the various levels of economic health.
At the bottom of the ladder are the poor who consume more than they earn, then the financially independent, these can sustain themselves on their income but are often a pay check away from poverty, then the financially secure who in addition to a regular income have assets throwing off income that would sustain them without a job and then finally the rich who assets throw of so much income as to guarantee financial security for generations to come.
So the challenge of my presidency would be to get the poor jobs. Encourage a sound banking system in which the financially independent can save their money and low lending rates so they can borrow more to invest in productive assets. The financially secure and the rich would benefit from lowering the cost of doing business by reducing corruption, improved infrastructure and a better quality human resource, so they can see a better return for their investments.
Of course all this will be anchored by continued stability in the country and a commitment to widespread financial literacy so people can graduate from one level to the next level of financial health.
I think the $1 a day definition of poverty is too low and easy to achieve what I am proposing is a more ambitious plan that will create a bigger middle class.
The middle class is the anchor on which more developed economies and democracies are built.
The middle class are the biggest guarantors of stability since they have a real stake in their respective countries, beyond the fuzzy, sentimental pitch about nationalism and patriotism politicians sell.
And because of this real interest in the country – in the way of investments, the middle class are loath to resolve issues through violence and are more likely to look for civil solutions to conflict, this attitude is the bed-rock on which all enduring democracies are built.
Hate them all you want but the colonial government built up a network of social services – education and health, which elevated our previously poor, rural leaders to their current levels of exaltation today. The colonial government could do this because there was little pilfering of tax payers money, schools and health facilities got constructed and manned, roads got built and maintained and things worked as they were supposed to.
Poverty is not a natural condition (whatever our religious leaders tell us), it is a failure of political leadership and mapped by geographical boundaries.
It is true what they say, the rich are different. Their interests go beyond transient racial, religious or ethnic boundaries. James Mulwana’s milk is not restricted to the Baganda or MTN does not do business with the people from Charles Mbire’s tribesmates or Sudhir Ruparaelia’s does not open his banking hall to only his Asian brethren.
We are teethering on the cusp of social unrest and political implosion because we do not have enough rich people among us.
So I can assure you as your president I will lead a determined push for a middle and rich class and relegate to the dustbin of history this patronizing $1-a-day rubbish.
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