Uganda is at a crossroads economically and politically. If we do not take the correct path, the country will under-develop rather than modernize. Three ideas namely comparative advantage, structural adjustment and the ballot box have been tried in Uganda. All three have failed to deliver the desired outcomes. We need to examine each one and recommend a way out.
Comparative advantage means that a country should produce the good (s) in which it has an advantage over others, trade with others and obtain what is not worth producing at home. When the British arrived in what later became Uganda, they found that the people were engaged in a wide range of economic activities according to their natural resources. Some were herders, fishers, crop cultivators, hunters and manufacturers of a wide range of products that included pottery, wooden, iron products and cloth from hides and skins and bark cloth. These producers exchanged (bartered) their goods in local and regional markets in Eastern and central Africa. Production and barter benefited equitably those involved. On balance, the terms of trade were favorable.
The British authorities decided that Uganda would abandon manufacturing which added value and created jobs and focus on the cultivation and export of cotton and later coffee, tea and tobacco which were not being grown at the time of colonization in exchange for manufactured products. This comparative advantage was created not as a result of comparing costs of producing agricultural versus manufactured goods. Because the British wanted raw materials for their cotton industries and markets for their manufactured products, they decided Uganda would produce cotton, sell it in raw form and import manufactured products. In short Uganda would cease to produce manufactured products and concentrate on agricultural commodities. By and large, raw materials particularly of an agricultural nature suffer from random fluctuating prices and volume, making it difficult to plan without knowing how much revenue will be generated. At the same time prices of manufactured products have risen overtime, turning Uganda’s terms of trade unfavorable.
Countries that have done well and transformed their economies emphasized manufacturing enterprises and rejected comparative advantage and free trade until they were ready to compete. United Kingdom blocked Indian textile imports into its market while its textile industry was still in an ‘infant’ stage. Regarding United States manufacturing industries, Alexander Hamilton, the first US Treasury Secretary successfully argued that “a backward country like the United States should protect its ‘industries in their infancy’ from foreign competition via tariffs and import bans, nurture them through subsidies and the prohibition of exports on key raw materials and develop financial and transport infrastructures” (Oscar Guardiola-Rivera 2010). Countries that had abandoned manufacturing in favor of service industries are now revising their policies to re-industrialize because the benefits of manufacturing have outweighed those derived from the service industry.
Post-independence governments in Uganda have recognized the importance of manufacturing in terms of raising value, creating employment and minimizing post-harvest losses. Yet they have not been able to go beyond rhetoric in large part because Uganda has lacked the will and capacity to negotiate better deals that allow room for manufacturing enterprises. This position needs to be changed as we have proposed in the National Recovery Plan (NRP) drawn up by United Democratic Ugandans (UDU), an umbrella organization of parties and groups at home and abroad demanding political and economic change.
The second idea that has failed is structural adjustment also known as the Washington Consensus. It was introduced in Uganda in 1981 under Obote II regime. It gathered speed after its launch in 1987 by Museveni government with support of the IMF and World Bank. The government after debates that culminated in the 1989 conference embarked on the most extreme version of structural adjustment (shock therapy) with all elements simultaneously implemented. These elements included retrenchment of public servants, removal of subsidies, opening Uganda to all sorts of imports, privatization of public enterprises, export diversification, currency devaluation and price liberalization and balanced budgets. It was hoped that these measures would remove imbalances within three to five years and pave the way for rapid, sustained economic growth and equitable distribution of benefits, reduce poverty and make everyone happy. Ugandans were warned that the initial period would be difficult and appealed for calm, belt tightening and sacrifice. Dissent or advice considered to contain elements of sabotage would not be tolerated. Security forces including a complex intelligence network received priority attention and disproportionate funding over development sectors particularly education, healthcare and food security.
NRM government embarked on shock therapy economic reforms when there was sufficient evidence from Chile and Ghana that the extreme version had created severe problems. Chile modified its reform program and replaced the entire team of “Chicago Boys” that had initiated it with a pragmatic team led by a graduate of Columbia and not Chicago University. The new team’s strategy that has performed well is based on public and private partnership.
Uganda embarked on structural adjustment from a weak foundation including virtual absence of data particularly in privatization of public enterprises made worse by recruiting young and inexperienced foreign and domestic experts while experienced Ugandans were advised to stay in the diaspora earning income some of it sent to relatives at home. Government position was not to delay implementation but to correct errors as they arose. Sadly, errors accumulated and were not addressed up to 2009 when the entire program was abandoned in failure particularly in social and environmental areas. The government has not come up with a viable alternative. The successor five year development plan is gathering dust presumably because there is no will and capacity to implement it and more significantly there is no money – the government is broke, corruption has taken its toll! The team in the ministry of finance and central bank that designed and implemented structural adjustment is not equipped after twenty five years doing the same job to adjust to the new paradigm of Keynesian economics based on public and private partnership. To them the market must continue to drive Uganda’s economy unregulated, a model that has lost much of its value.
Let us remember that when structural adjustment was launched the old team in finance and central bank was replaced by a new one and the ministries of finance and planning were merged. New staff and institutional arrangements are now needed to confront the new challenges. The National Recovery Plan (NRP) launched in October 2011 has offered an alternative blueprint. The Plan is accessible at www.udugandans.org.
The third idea that has not delivered satisfactory results is the ballot box. Western democracy based on periodic free and fair elections was introduced in 1958 elections to the Legislative Council. Some rejected it outright while others nominated representatives so that their interests are protected. The elections that followed since 1961 based on winner-take-all have produced unsatisfactory results in one case leading to a five year destructive guerrilla war. Proposals to address this problem which include proportional representation, restoration of term limits, an independent electoral commission, a level playing field and strict separation of powers among the legislative, executive and judiciary branches of government are contained in chapter two of the National Recovery Plan.
Uganda is thus almost poised for a new beginning. There is one remaining hurdle. We have a new wine (the National Recovery Plan) and an old bottle (the National Resistance system). The two cannot form a durable political economy couple. We need a new political bottle. There is consensus on this among Ugandans in the opposition and even within the NRM and increasingly in the international community that has dubbed Uganda a failed state under dictatorship. Uganda appeals to all concerned in NRM, opposition camp and development partners, friends and well wishers to come together under the joint leadership of what has been termed a Mandela for the opposition, a de Clerk for the NRM and a Macleod (British Colonial Secretary in 1959-61 that championed speedy decolonization of Africa) for the international community and forge a common position on how best to create new political bottle to match the new National Recovery Plan. Together Uganda will be well positioned to address the challenges posed by comparative advantage, structural adjustment and the ballot box.
Let me end with a warning. Ugandans and partners must realize that in the absence of economic stability in the sense of meeting basic needs of all Ugandans, there cannot be political stability. Economic stability is therefore a prerequisite for political stability. NRM switched priorities making political stability at gun point a prerequisite for economic growth and development. This arrangement has not worked calling for a return to the natural order of things – making economic development a foundation for political stability, peace and security. UDU favors rearranging NRM priorities as implied in the NRP.