Tag Archives: structural

“If things change, I change my opinion” – John Maynard Keynes

In Uganda things have changed in the political, economic, social and environmental areas since NRM came to power in 1986. The leaders whether under pressure or voluntarily genuinely changed their opinion to match the changes that had taken place in Uganda and at the global level. In 1987 they abandoned the ten point development model and replaced it with a fundamentally different model of structural adjustment which came into force in May 1987. In 2009, structural adjustment model was declared dead. In line with the global economic wind of change, NRM government announced it had changed its opinion and abandoned structural adjustment and replaced it with Five Year National Development Plan (NDP). But there was no fundamental change in content. The core elements of structural adjustment remained intact – macroeconomic stability and limited state intervention in Uganda’s economy. This was a tactical change to hoodwink Ugandans ahead of 2011 presidential and parliamentary elections. So, one can fairly conclude that since 1987 while things have changed considerably government opinion and practice have remained virtually intact. Is it possible for NRM to change its opinion commensurate with the changes that have taken place since 1987? It is unlikely and this is why, beginning with the president.

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Background to and impact of structural adjustment programs

This article has been written in response to popular demand. The mid-1970s marked the end of the global economic golden age since the end of World War II which was dominated by state intervention primarily to reduce unemployment and maintain a reasonable level of inflation. The government raised enough revenue to cover welfare expenses.

From the mid-1970s the global economy experienced slow growth, high unemployment and rising inflation (stagflation). The oil crises of 1973/4 and 1979 made matters worse leading to a recession in the early 1980s. Instead of applying fiscal and monetary policies such as raising taxes or cutting expenditure which are politically sensitive, governments resorted to borrowing made easy by abundant petro-dollars at low but flexible interest rates or simply printed more money causing high inflation and external debts.

By early 1980s many countries had accumulated so much debt that they could not service. Private lenders pulled back and demanded repayment of the debts. In order to control inflation, interest rates were raised making it even more difficult to borrow on the international markets. Third World countries resorted to borrowing from the International Monetary Fund (IMF) and the World Bank to repay the debts. IMF and the Bank would provide assistance with conditions attached designed to address domestic economic distortions considered to be the main cause of the problem.

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Western leaders should not wait until Uganda starts to burn

There is increasing political, economic, social and ecological evidence that Uganda is heading for a deadly collision between the rulers and the ruled. It appears that Uganda leaders and development partners have not learned from Uganda’s history since the 1960s.

The second half of the 1960s was characterized by a serious political and constitutional crisis that paved the way for the 1970 military coup that brought Amin to power. Amin destroyed the country demographically (over three hundred thousand dead), professionally, economically and socially hoping that he would silence dissent and rule for life. He even invaded a neighboring country to consolidate support at home. Amin’s atrocities resulted in a war with Tanzania and Uganda rebels that left many parts of the country devastated.

The 1980 general elections were won by Uganda Peoples’ Congress (UPC) led by Obote and certified legitimate by international observers (based on ‘prevailing circumstances’). The verdict was rejected by opposition parties. A few groups unhappy with the democratic process took to the bush and waged a very destructive five-year guerrilla war forcing a section of the national army to topple the government in July 1985 which was six months later removed from power by guerrillas led by Museveni.

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Uganda’s development plan is a repeat of structural adjustment program

President Museveni articulated his vision of the five-year development plan in the foreword to the plan. With due respect, he just restated the objectives of the Washington Consensus or structural adjustment program (SAP) which Uganda has been implementing since an agreement was signed between the NRM government and the International Monetary Fund (IMF) in May 1987. The program was dropped in September 2009 because it had failed to deliver as expected.

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Structural adjustment and violation of human rights

Because of the tremendous suffering during the two World Wars and the interwar economic and social hardship, world leaders decided – when they adopted the Charter of the United Nations in 1945, the Universal Declaration of Human Rights in 1948 and subsequent instruments including the binding Covenants on economic, social and cultural rights, and political and civil rights in 1966 – to introduce safeguards against violation of human rights like the right to work, earn a remunerative wage in a decent environment, access adequate and balanced food, healthcare, quality education for all and equitable sharing of the benefits of economic growth etc.

From 1945 to 1975, the world enjoyed a period of relative peace and security and the golden economic environment resulted in the overall improvement in peoples’ welfare. In Africa and other developing countries, the benefits of peace and economic growth manifested themselves in falling death rates and rapid population growth.

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The genesis and demise of structural adjustment in Uganda

Studies conducted by the World Bank in the 1980s and 1990s concluded that Africa was not doing well economically and socially largely because of distortions in the domestic domain. In its 1994 report entitled Adjustment in Africa: Reforms, Results, and the road ahead, the Bank noted that although there was no single explanation for Africa’s poor performance, economic decline was due in large part to poor domestic policies at macroeconomic and sector levels. The distortions were compressed into state intervention in production and economic regulation; overvalued exchange rates; large and prolonged budget deficits that undermined macroeconomic stability needed for long-term growth; protectionist trade policies and government monopolies through nationalized enterprises and financial institutions that reduced competition vital for increasing productivity; and a bias against exports especially of agricultural produce through heavy taxation.

The Bank recommended a new development paradigm (structural adjustment) to correct these policy distortions. It called for the state to be limited to the provision of basic services and a stable policy environment; promotion of exports with a focus on agriculture; promotion of private sector; maintenance of macroeconomic stability; and avoidance of overvalued exchange rates.

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