On April 19, 2010, President Museveni launched a five-year development plan in Uganda with a focus, inter alia, on full employment and state intervention, reminiscent of Keynesian economic model which drove the post world war economic boom until the second half of the 1970s when a combination of stagnant economic growth, rising unemployment and inflation (stagflation) rendered the model irrelevant. It was replaced by the Washington Consensus or stabilization and structural adjustment programs (SAPs). Unlike the Keynesian model which focused on creating jobs and promoting state participation in the economy, the Washington Consensus focused, inter alia, on macroeconomic stability through inflation control and private sector participation in the economy as the engine of growth under the guidance of the invisible hand of the market forces and a trickle down mechanism.
In Africa Ghana was among the first countries to embrace the Washington Consensus. A combination of factors which included excess capacity, the return of Ghanaians from Nigeria that boosted the numbers of cheap labor, generous donations, good weather including adequate rainfall, favorable trade conditions, guidance from the IMF, the World Bank and prominent international development economists as well as a committed government under the leadership of Jerry Rawlings, Ghana registered rapid economic growth and per capita GDP. It became a “star performer and success story” to be emulated by other developing countries.
However, the colonial economic structure – and its inherent weaknesses of fluctuating volumes and prices – characterized by the production and export of raw commodities led by gold, cocoa and timber remained intact.
Along the way, things began to go wrong. The excess capacity was used up, the growth of the private sector as the engine of growth fell far short of expectations, the manufacturing sector could not compete with cheaper imports and went out of business and the commodity boom gave way to a slump. In these circumstances, fiscal deficits became unavoidable, external debt increased and corruption crept into the economy.
President Rawlings expressed uneasiness about the disappointing results under the Washington Consensus which his country had embraced with both arms. Gradually, Ghana quietly fell off the international radar of star performers. The World Bank and IMF passed on the baton to Uganda.
After sixteen months of debate within the government between the shock therapists and gradualists, the former with the support of the President, World Bank, IMF and prominent international economic advisers won the day. In May 1987, the government entered into an agreement with the IMF on stabilization and structural adjustment of Uganda’s economy. Macroeconomic stability through inflation control, exchange rate adjustments, privatization and liberalization of the economy, export diversification and setting prices right would constitute the new model to be driven by market forces that would also distribute equitably the benefits of economic growth. The state would have minimal business in the economy.
As in Ghana, the colonial structure of the economy – and its inherent weaknesses of commodity volume and price fluctuations – based on cotton, coffee, tea and tobacco supplemented by non-traditional primary commodities of foodstuffs such as fish and beans, and cut flowers remained intact. As in Ghana again, excess capacity, generous funding from donors and a return of peace in parts of the country, drove rapid economic growth and per capita GDP. The president and his government became the darling of the west and a star performer, quickly attracting development ideas from all corners of the globe and making Uganda the laboratory for experiments.
Uganda’s star performance reached a peak in the 1990s and the success story began to fade. Commodity prices fluctuated wildly, private sector growth fell below expectations, de-industrialization and job losses became prominent due to cheap imports especially used products. Critics were silenced as saboteurs in the opposition camp and external interference in Uganda’s domestic affairs. Rosy – but questionable – statistics continued to be produced and ‘population explosion’ was blamed for economic slow down because increasing resources were being spent on consumption rather than on investment in income-generating activities.
As time passed it became difficult to hide the truth. The spreading diseases of poverty like jiggers for lack of shoes and proper housing, scabies for lack of soap, under-nutrition of women manifested in infants born underweight and increasing neurological disabilities including insanity, excessive consumption of alcohol as frustration took its toll, increasing crime, domestic violence and sex workers became too prominent to be denied by the donor community and ultimately the government. The IMF and World Bank admitted they had given some wrong advice. The President admitted when he addressed the United Nations General Assembly in New York in September 2009 that there were many things that were left undone by his administration. A few weeks later, the Prime Minister, while addressing a meeting of ministers and permanent secretaries, finally confessed that the Washington Consensus model had not worked and would be replaced by a development plan which the President launched on April 19, 2010 thus officially driving the final nail in the structural adjustment coffin, marking the fall of the second African star.