How to avoid the failures of structural adjustment in the Dev plan

I have been a critic of Uganda’s economic policy since 1987 not to discredit the NRM government but to draw its attention to the empty half of the glass – particularly the social and environmental sectors that have been neglected. In designing and implementing stabilization and structural adjustment programs (SAPs), the government made four fundamental mistakes which should be avoided in the development plan.

First, the government opted for the extreme version – shock therapy – of structural adjustment calling for a comprehensive and simultaneous implementation of many elements like liberalization, privatization, retrenchment, export diversification and inflation control etc. Officials who recommended a gradual and sequenced approach to cushion the social and environmental impact of adjustment were dismissed or marginalized. The shock therapists believed very strongly in the pure theory of the invisible hand of market forces, private sector growth and trickle down mechanism. Accordingly the state had virtually no role in the economy. In the development plan, the government should avoid extreme version of state intervention.

Second, the government relied too heavily on foreign experts – senior and junior – in the design and implementation of SAPs. The senior and renowned development experts are generally theoreticians (no disrespect is intended) who spend most of their time and energy developing economic models and have no practical experience. There are distinguished economists that have written excellent development theory text books without ever stepping in the Third World. Most of those economists that visit developing countries spend most of the time lecturing and not listening or they ask questions designed to confirm pre-determined solutions.

During the implementation phase the government relied heavily on young foreign experts mostly well intentioned but lacking experience. And the overall management of the program was undertaken by the IMF and World Bank staff stationed in the Ministry of Finance and Central Bank (S. Mallaby 2004) that was interested in macroeconomic stability – inflation control, balanced budget, economic growth and per capita income – hoping that other including social sectors would benefit later through the trickle down mechanism which has not taken place since 1987. This error should be avoided in the development plan.

Third, understandably but erroneous the government hired young loyal NRM cadres and ministers in positions they were not qualified for. The problem of poor education and lack of experience manifested itself for example during barter trade negotiations. George Kanyeihamba then Minister of Trade recorded that “… cadres who were supportive of the NRM government’s efforts in this sector [barter] of trade were either ignorant or inexperienced …” (G. W. Kanyeihamba 2002).

Constructive, frank and honest advice from Ugandans for a balanced and gradual approach between economic growth and social development was taken by government officials to be sabotage by supporters of the opposition and dismissed it with contempt. The undeniable government poor performance as reflected in the collapse of ecological, education and health systems should send a strong message that from now on NRM or any other government should listen. If NRM government had listened it probably would not be suffering the embarrassing mushrooming diseases of poverty such as jiggers, scabies and trachoma etc.

Fourth, government and foreign measurement of success stories has not been entirely accurate. The increasing number of houses in rural areas with corrugated iron sheets has been explained in terms of coffee liberalization that put more money in the hands of peasant coffee growers than ever before. This may be true. But there are areas where the number of houses with corrugated iron sheets has increased where coffee does not grow. Scarcity of free thatch grass caused by clearance of wetlands for farming purposes since the introduction of Amin’s ‘economic war’ forced households to sell their meager assets and purchase iron sheets.

The increasing number of mobile phone users has been presented as a success story. But when you ask how many Ugandans are using mobile phones for commercial purposes estimates do not go beyond 30 percent. Seventy percent are therefore using them for non-economic purposes. Purchasing airtime has become very expensive. And when you add on the many hours of travel between rural and urban areas (there is no electricity in rural areas) to charge the phones the mobile enterprise becomes a liability for the majority of users who are increasingly cutting back on food and other basic items to have enough money for mobile phones.

Many in government and donor community have argued endlessly that controlling inflation has attracted foreign investors that have boosted economic growth. Private investment was designed to be the engine of economic growth and job creation. The latter has not happened. Instead foreign investors have located in the capital city of Kampala where they are maximizing returns mostly from labor-saving enterprises and repatriating profits to their bank accounts in their home countries, leaving Uganda saddled with over eighty percent including fifty percent of university graduates unemployed.

As we begin the implementation of the five-year development plan, the government and development partners must draw lessons from the shortcomings of structural adjustment in order to balance economic, social, institutional, infrastructural and environmental development. Most importantly, government should listen and take constructive criticism seriously regardless of its source and adjust as appropriate. This way it stands a better chance of avoiding adverse and embarrassing outcomes.

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