As readers may have noticed I have especially since 2011 focused orally in my broadcast on radio munansi and in writing on providing information to reorient NRM’s failed politics and economics. On economic matters, I have drawn on economic successful experiences including of South Korea, Singapore, Vietnam, Japan and Germany. Now I focus on the economic success story of China since 1978 under the leadership of Deng Xiaoping and since his passing. The struggle between radicals led by Moo’s widow – Jiang Qing or the ‘gang of four’ and the moderates led by Deng ended in the defeat of the radicals.
Deng was a veteran party leader who had distanced himself from Mao’s failed economic policies. He was accused of being a capitalist, purged and humiliated several times. With the radicals out of the way Deng sold his new and transformative program to the party. He de-emphasized Marxism ideology and class struggle and focused on economic growth with modernization. He de-emphasized central planning and ended collectivized agriculture. He encouraged private business, competition and production for profit. Regarding public enterprises he demanded they become profitable and accountable for their commissions and omissions. Like in the case of West Germany’s social market economy, China’s economy was a mixture of public and market economy. As noted already collectivized farming was ended and individual farming encouraged. Western technology and management and private financial flows welcomed. Industrial production focused on consumer products such as bicycles and motor cycles.
Significant effort was devoted to the countryside where farmers produced for household consumption and sold surplus in the domestic and external markets. Small and medium enterprises that create most jobs and contribute significantly to economic growth flourished. Ipso facto, Gross Domestic Product hardly above three percent during Mao’s period rose to ten percent on average for decades. Public works reduced temporary unemployment. Although public enterprises constitute a major share of the economy, the growing private sector especially in the coastal areas represents the most dynamic part of the economy. These measures that were continued after Deng’s passing have lifted Chinese economy to second place in the World.
Deng’s focus on a mixed economy and countryside and not strictly following the advice of Washington Consensus helped to transform the Chinese economy and society but this has been achieved at the expense of environmental pollution a deficit the authorities have recognized and are addressing.
As Uganda prepares for a transitional government, potential leaders and their advisers need to look at experiences of successful economies that I have summarized and posted on this page as well as on www.kashambuzi.com and see what can be extracted and developed into a Uganda specific development blue print. In doing so it is also advisable to get familiar with the National Recovery Plan written by UDU and available at www.udugandans.org.
After the war Germany was divided and occupied by the United States, United Kingdom, France and the Soviet Union. The Western allies (USA, UK and France) increasingly turned over their occupied zones to German officials. They arranged for the German Assembly to write a federal constitution approved in May 1949. In September of the same year the three western zones were combined to form the Federal Republic of Germany. In May 1955 the Republic was declared completely independent.
The new German Parliament elected 73 year old Konrad Adenauer as federal chancellor. Adenauer had many qualities. He had experience, having begun his career in pre-1914 imperial era. He had a strong-willed personality and an ambition to regain for Germany a position of dignity and international respect.
The constitution guarantees proportional representation, meaning that each party is apportioned seats equivalent to the share of the popular vote. However, to receive seats in the legislature a party has to win at least 5 percent of the national vote. The Christian Democratic Union and the Social Democratic party have dominated German politics. The Free Democrats, a small liberal centrist party, has played a lesser role through coalitions with one or the other of the major parties when necessary.
The Christian Democratic Union governed uninterruptedly for 20 years. To gain power the Social Democrats, heirs to the Social Democratic party founded in the 1870s was reorganized. It abandoned its Marxist ideology and broadened its appeal to the middle class and young voters. In 1965 it joined the Christian Democrats and Free Democrats to form a “grand coalition” (the kind of coalition I have been advocating for Uganda of all political parties in a transitional government), with Willy Brandt a Social Democrat becoming foreign minister. In 1969 the Social Democrats in coalition with Free Democrats won elections and Willy Brandt became Chancellor. The new coalition ended the 20 year rule of Christian Democrats (the Democratic Alliance recently founded in Uganda could end 30 years of NRM rule).
The politics of proportional representation, political coalitions and a social market economy combining government, business and labor sectors as well as capitalist and social elements created enabling political and economic conditions that “Within a decade after the disastrous military defeat that had left a shattered and occupied country, West Germany was a major economic and political power.… Inflammatory issues faded, material progress seemed triumphant over ideology, and democracy seemed assured”.
What lessons can Uganda learn from this German experience as the country sits at a crossroads looking for the right path?
Some events including the student revolution of April 1960, the military coup of May 1961, strong state intervention in the economy together with the United States support through aid and access to US markets helped to raise and sustain rapid economic growth.
The students revolted against the Syngman Rhee for electoral irregularities and corruption. Government use of force against the student revolution earned them the support of the public forcing Rhee to step down. The bloodless military coup of General Park replaced the short-lived government of Chang Myun.
The military government was committed to rapid economic growth because it was essential for economic survival and dignity. It was also believed to be a national security issue considering that North Korea was more advanced economically. The military government was also unhappy about continued dependence on outside support. Furthermore, in a country where the military class was subordinated to the literary class for centuries, rapid economic growth was seen as a tool for legitimizing the military regime. Other explanations for high growth have stressed the role of the market mechanism while others have underlined a heavy dose of government intervention in the economy.
On balance it appears that government intervention was vital. The Korean economy grew at an average rate of 9 percent from 1963 to 1990. The government pushed its growth maximization policy in large part by disciplining elements including business and the working classes that deviated from the course set out in the development plans. Land reforms of the 1950s stripped the landlords of their political power and organized labor unions and other popular movements were suppressed and the middle-class did not exist when General Park assumed power.
With opposition out of the way, the military government set to maximize economic growth by focusing on the manufacturing sector that was heavily subsidized and destined for export markets. The US government provided support to the Korean economic plans and encouraged investments in infrastructure, existing industries and human resources. Although there were some critics the government pursued an industrial strategy based on ‘industrial deepening’ as the only way to realize economic self-reliance.
These policies raised and sustained Korean economic growth that averaged 9 percent between 1963 and 1990. The GDP per capita reached $6250 in 1991. However, this laudable growth maximization neglected the social ills and environmental degradation. Ipso facto, it has been argued that “The world would be on a dangerous course if the entire South [developing countries] were to emulate Korea. … the proper model of development must be one of ‘growth with environmental care’ instead of ‘growth at the expense of the environment’ as in the case of the Korean model”(V. Bhaskar and Andrew Glyn 1995).
What we have seen in Korea as in Japan reported earlier is that the state played a vital role in economic growth including using subsidies and rejecting classical comparative advantage of producing raw materials or low technology products in exchange for manufactured products from developed countries. Another lesson from the Korean case is that economic growth must pay attention to social welfare and environmental protection issues. This fits in well with the post-2015 sustainable development agenda that has been designed to integrate the dimensions of economic growth, social inclusion and environmental protection.
The United Nations is currently engaged in negotiating a post-2015 development agenda to 2030 with the overarching goal of eradicating poverty in all its forms.
The Open Working Group (OWG) of the UN General Assembly spend 18 months developing Sustainable Development Goals (SDGs) that will form the core of the post- 2015 development agenda: other parts being the preamble or introduction, means of implementation and review and monitoring. At the end of the work of OWG many delegates felt this political SDGs document was flawed and should be revisited in one way or another. But the majority felt that though imperfect the SDG document represented a delicate political balance and should not be altered in any way. A similar observation was made about the UN Charter that was crafted by delegates from 50 states that met for two months in San Francisco, USA from April to June in 1945.
“The Charter they negotiated is a flawed document. Any competent international lawyer could remove its inconsistencies, close its loopholes and the like in an afternoon, but that is not the point. The Charter is a political document that gives legal expression to the realities of 1945 and the hopes for a better future. It is full of holes, but …, it is a document enabling governments with the will to act to do so if they can command widespread support. In short, it enables but does not prevent where there is a willing spirit and general support. Rather like the Bible or Shakespeare, you can usually find justification in the Charter for whatever you wish to do or wish to prevent, but such contradictions are both its strength and its weakness”(Paul Taylor and A. J. R. Groom 2000). Should the SDGs with 17 goals and 169 targets be similarly treated?
Japan’s economy recovered quickly after the devastations of WWII. During the war Japan’s lost 40 percent of its industrial capacity and was subsequently occupied by the United States that made important political and economic changes. The economic system was liberalized. Economic recovery received priority in part in an attempt to contain the expansion of communism in Asia. The security and economic umbrella provided to Japan by the US accelerated economic growth.
Additionally Japan’s political and economic leaders were determined to join the club of industrialized countries. Ipso facto they rejected the comparative advantage of engaging in the production of low wage and instead embraced capital-intensive and high-tech production. The government largely through the Ministry of Trade and Industry (MITI) and Ministry of Finance played a significant role in directing the economy. This involved setting priorities and protecting infant or ailing industries through subsidies, guiding investments and managing the foreign trade process.
The government mobilized resources for industrial growth. Industrial protection was accompanied by strict protection of domestic markets for finished products. Japan products also benefited from relatively open access to foreign markets.
“More important were efforts [by government] at organizing industries to achieve lower costs, defining national priorities in technological development, and developing national plans to share the risks associated with corporate decisions”(Thomas D. Lairson and David Skidmore 1997). A large pool of trained and retained human power also helped in this Japanese rapid economic growth. How much of this is currently being done in developing countries including Uganda?
“Critics [of foreign aid have] increasingly questioned the purpose, philosophy and methods of those who dispensed and received development assistance. Some charge that aid is a tool for serving the political and economic interests of donor countries. Moreover, aid props repressive Third World governments, worsens inequality, and destroys the environment. Others attack aid as a needless and costly subsidy that sustains bloated Third World bureaucracies and discourages recipient governments from carrying out needed policy reforms or supporting private sector growth. Both left and right condemn the inefficiency and corruption that too often plague foreign aid”(Thomas D. Lairson and David Skidmore 1997). What are your thoughts?
Many commentators have equated globalization with the Washington Consensus which implies eleven key commitments:
1. International financial market liberalization;
2. Domestic capital market liberalization;
3. Trade liberalization (particularly in developing countries);
4. Labor market ‘flexibility’;
5. Secure individual property rights over physical and financial assets;
6. Weak property rights over human assets (particularly skills);
7. Reduction in size and role of the public sector, including privatization of publicly-owned productive assets, and an end to managed trade and industrial policies;
8. System of taxation that is not only less progressive but also shifts taxes from capital to labor, and subsidies from labor to capital;
9. Independent central banks (as part of a more general move towards the ‘technocratization ‘ of economic policy making);
10. ‘Social safety net’ type of approach to social protection, i.e., more targeting, selectivity and conditionality;
11. Privatization and liberalization of social policy.
Source: ILO: Economic security for a better world 2004)