It is now agreed that structural adjustment program (SAP) or Washington Consensus (WC) experiment failed badly in Uganda. The program was reluctantly abandoned in 2009. Ugandans who welcomed NRM on promise of better things ahead for everyone feel betrayed especially when they see how the connected elite families have become so rich while the majority cannot even put one decent meal on the table. And they wonder why foreigners continue to shower praises on the NRM government. Ugandans in and out of government and even development partners know that things are not alright. There is potential danger of excessive income inequality, spreading and deepening poverty and associated ills. As Uganda is in the process of preparing a successor program, it is important that we understand what went wrong over the last twenty six years and avoid repeating the same mistakes. There are many reasons for failure led by corruption and sectarianism. Due to space constraints, we shall focus on failure to adapt WC doctrine to Uganda conditions and relying largely on policy makers, staff and advisers not sufficiently versed in the task at hand under the NRM government.
Stabilization and structural adjustment program or the Washington Consensus was originally intended for Latin American countries to address serious economic problems especially overwhelming external debts and very high inflation. By 1983, external debt had risen to $315 billion and in Bolivia inflation had reached 14,000 percent by 1985. There was fear that hyperinflation might lead to the spread of political chaos. Starting in Bolivia, WC was built on the economic reform experiment in Chile began a decade earlier by the military regime of Pinochet and the Chicago University trained economists (Chicago Boys) and Chicago economics professors. The Chicago School doctrine was applied to Bolivia through a shock therapy strategy. Happy with the results, the designers of the WC influenced the IMF and World Bank and some western governments and eventually agreed that the doctrine be extended to the entire globe in its original form – the so-called one size fits all.
By the time NRM government adopted WC in 1987, there was sufficient evidence from Chile, Ghana, Bolivia and Uganda itself (WC was launched during Obote II regime but was suspended in 1984 because of disagreement with the IMF) that changes in the original design were necessary to adapt it to Uganda conditions. The original design was to create a market economy based on private sector, market forces and trickle-down economics with minimal state intervention through rapid implementation of simultaneous actions which included ending price controls, elimination or reduction of subsidies, open domestic market to international trade; elimination of restrictions on private sector through new laws; privatization of public enterprises; and establishment of price stability (low inflation in single digits which Uganda fixed at 5 percent per annum) through tight monetary (like high interest rates) and fiscal policies to be achieved through balanced budgets, public staff retrenchment and wage freeze.
Under pressure from the donor community and foreign experts, Uganda which was broke and needed money urgently and could be assisted provided it met certain conditions including elimination of mixed economy model abruptly abandoned the popular ten point program and accepted the entire package of Washington Consensus doctrine. Thus, failure to domesticate WC and adapt it to changing conditions such as eroding excess capacity and rising unemployment has contributed to serious outcomes that are haunting the NRM government. The rapid economic growth and reduction in inflation was erroneously attributed entirely to the success of economic reforms under the operation of market forces and laissez faire capitalism. On this false basis the government was content to let the economy continue to be driven by the WC doctrine. The truth of the matter is that the greater part of the success came from excess capacity NRM inherited in 1986 and relatively peaceful conditions in some parts of the country. The rapid decline in economic growth rates since the mid-1990s is largely related to exhaustion of excess capacity. But NRM did not adjust to this change.
The second and perhaps more serious challenge was the team that was charged with implementation of the program. At the technical level, key departments of finance and central bank were filled with young European economists and NRM cadres with little or no experience. Senior external advisers were not sufficiently versed in Uganda’s history and especially the difficult political and economic situation of the 1970s and first half of the 1980s. Ugandans with relevant expertise and experience on economic reforms under Obote II were either marginalized or retrenched because they served in the ousted Obote’s government. Economists in the diaspora some of whom had been engaged in economic reform programs were advised not to return home. Museveni elaborated on this policy during an interview with a foreign journalist in 1993, calling on Ugandans in exile to stay there, earn and send some money to sustain their relatives at home.
Analysis of Museveni’s appointments to key and strategic cabinet posts and advisers reveal a consistent but perplexing pattern since 1986. Museveni has relied mostly on medical doctors, lawyers and political scientists, not economists. And this might explain why it was not possible to adapt WC to local conditions or negotiate good deals with donors or be in charge of economic matters because they lacked sufficient knowledge and experience. The first minister of finance who was a professional economist with knowledge of economic reforms under Obote II was dismissed at the start of the WC in 1987 and was replaced by a medical doctor. The first prime minister and later vice president was a medical doctor, the deputy prime minister in charge of the economy among other functions was a lawyer. Since then vice presidents have been two medical doctors and now a lawyer. The long serving prime minister was a political scientist. He has been replaced by a lawyer. The ministry of foreign affairs that discusses economic matters in international meetings especially of the United Nations and its agencies and commissions has had a medical doctor and lawyer. The Speakers of parliament where economic decisions are made have been lawyers.
At a time when discussing economic challenges in cabinet and parliament under a new development model since the demise of WC in 2009 is under way, Museveni is surrounded by a vice president who is a lawyer, prime minister who is a lawyer and speaker of parliament who is a lawyer. Museveni himself is a political scientist (Back cover of Consolidating the Revolution 1990). A number of ministers holding portfolios dealing with economic matters or impacted by economics are also lawyers. Most of these lawyers were trained at Dar es Salaam University during Museveni’s student days there. Many research and policy advisers have either been political scientists or professionals in public administration. Where are the economists? The few economists in the key ministries and departments are those connected with the abandoned structural adjustment. They have no capacity to address Uganda’s challenges under the new development model of public and private partnership. That is why issues of unemployment that require state intervention have been sidelined, allowing full reign of the invisible hand of market forces which has lost much of its relevance in the current economic crisis situation.
It is not entirely true that Uganda has lacked proper research and relevant information. Enough information has been generated. There are Ugandans that have done research, published findings and recommendations and submitted them to the government (president, speaker, prime minister, ministries of finance and foreign affairs) but were not acted upon. Some recommendations are calling for a shift from the full operation of market forces and trickle-down economics to public and private partnership but this advice has not been utilized. The government still believes in the magic of market forces and private sector as the engine of economic growth and distribution of economic benefits and government hands off. That is why some important demands like school lunch that require state intervention have been ignored.
Thus, Uganda is in trouble not so much because of external forces but because the government has been unable to adapt development models to national conditions. And this has been caused in large part by relying on professional advisers who are either not familiar with Uganda conditions or have no experience and because cabinet and senior advisers are not versed in economic intricacies and interconnections since the 1980s. The high turnover of ministers of finance, planning and economic development may have aggravated the situation.
Thus, twenty six years of NRM government in power do not appear to have taught them much. Consequently, for NRM it is business as usual relying on market forces and private sector as the engine of growth that has not worked as expected. This is one of the reasons why Uganda has continued to be trapped in absolute poverty, unemployment, illiteracy, poor health, hunger, poor shelter and clothing and environmental degradation. Improvements in Uganda will need a new orientation and composition of policy makers and advisers drastically different from what Museveni has had since 1986. Expertise in governance gained under structural adjustment over the last 26 years that the president talked about in Kisumu has been overtaken by events following the abandonment of the Washington Consensus that dominated Museveni’s government. Therefore Uganda needs expertise already versed in the new development model, not Ugandans who are going to learn on the job again.
ERIC KASHAMBUZI
UAH FORUMIST IN NEWYORK
Stabilization and structural adjustment program or the Washington Consensus was originally intended for Latin American countries to address serious economic problems especially overwhelming external debts and very high inflation. By 1983, external debt had risen to $315 billion and in Bolivia inflation had reached 14,000 percent by 1985. There was fear that hyperinflation might lead to the spread of political chaos. Starting in Bolivia, WC was built on the economic reform experiment in Chile began a decade earlier by the military regime of Pinochet and the Chicago University trained economists (Chicago Boys) and Chicago economics professors. The Chicago School doctrine was applied to Bolivia through a shock therapy strategy. Happy with the results, the designers of the WC influenced the IMF and World Bank and some western governments and eventually agreed that the doctrine be extended to the entire globe in its original form – the so-called one size fits all.
By the time NRM government adopted WC in 1987, there was sufficient evidence from Chile, Ghana, Bolivia and Uganda itself (WC was launched during Obote II regime but was suspended in 1984 because of disagreement with the IMF) that changes in the original design were necessary to adapt it to Uganda conditions. The original design was to create a market economy based on private sector, market forces and trickle-down economics with minimal state intervention through rapid implementation of simultaneous actions which included ending price controls, elimination or reduction of subsidies, open domestic market to international trade; elimination of restrictions on private sector through new laws; privatization of public enterprises; and establishment of price stability (low inflation in single digits which Uganda fixed at 5 percent per annum) through tight monetary (like high interest rates) and fiscal policies to be achieved through balanced budgets, public staff retrenchment and wage freeze.
Under pressure from the donor community and foreign experts, Uganda which was broke and needed money urgently and could be assisted provided it met certain conditions including elimination of mixed economy model abruptly abandoned the popular ten point program and accepted the entire package of Washington Consensus doctrine. Thus, failure to domesticate WC and adapt it to changing conditions such as eroding excess capacity and rising unemployment has contributed to serious outcomes that are haunting the NRM government. The rapid economic growth and reduction in inflation was erroneously attributed entirely to the success of economic reforms under the operation of market forces and laissez faire capitalism. On this false basis the government was content to let the economy continue to be driven by the WC doctrine. The truth of the matter is that the greater part of the success came from excess capacity NRM inherited in 1986 and relatively peaceful conditions in some parts of the country. The rapid decline in economic growth rates since the mid-1990s is largely related to exhaustion of excess capacity. But NRM did not adjust to this change.
The second and perhaps more serious challenge was the team that was charged with implementation of the program. At the technical level, key departments of finance and central bank were filled with young European economists and NRM cadres with little or no experience. Senior external advisers were not sufficiently versed in Uganda’s history and especially the difficult political and economic situation of the 1970s and first half of the 1980s. Ugandans with relevant expertise and experience on economic reforms under Obote II were either marginalized or retrenched because they served in the ousted Obote’s government. Economists in the diaspora some of whom had been engaged in economic reform programs were advised not to return home. Museveni elaborated on this policy during an interview with a foreign journalist in 1993, calling on Ugandans in exile to stay there, earn and send some money to sustain their relatives at home.
Analysis of Museveni’s appointments to key and strategic cabinet posts and advisers reveal a consistent but perplexing pattern since 1986. Museveni has relied mostly on medical doctors, lawyers and political scientists, not economists. And this might explain why it was not possible to adapt WC to local conditions or negotiate good deals with donors or be in charge of economic matters because they lacked sufficient knowledge and experience. The first minister of finance who was a professional economist with knowledge of economic reforms under Obote II was dismissed at the start of the WC in 1987 and was replaced by a medical doctor. The first prime minister and later vice president was a medical doctor, the deputy prime minister in charge of the economy among other functions was a lawyer. Since then vice presidents have been two medical doctors and now a lawyer. The long serving prime minister was a political scientist. He has been replaced by a lawyer. The ministry of foreign affairs that discusses economic matters in international meetings especially of the United Nations and its agencies and commissions has had a medical doctor and lawyer. The Speakers of parliament where economic decisions are made have been lawyers.
At a time when discussing economic challenges in cabinet and parliament under a new development model since the demise of WC in 2009 is under way, Museveni is surrounded by a vice president who is a lawyer, prime minister who is a lawyer and speaker of parliament who is a lawyer. Museveni himself is a political scientist (Back cover of Consolidating the Revolution 1990). A number of ministers holding portfolios dealing with economic matters or impacted by economics are also lawyers. Most of these lawyers were trained at Dar es Salaam University during Museveni’s student days there. Many research and policy advisers have either been political scientists or professionals in public administration. Where are the economists? The few economists in the key ministries and departments are those connected with the abandoned structural adjustment. They have no capacity to address Uganda’s challenges under the new development model of public and private partnership. That is why issues of unemployment that require state intervention have been sidelined, allowing full reign of the invisible hand of market forces which has lost much of its relevance in the current economic crisis situation.
It is not entirely true that Uganda has lacked proper research and relevant information. Enough information has been generated. There are Ugandans that have done research, published findings and recommendations and submitted them to the government (president, speaker, prime minister, ministries of finance and foreign affairs) but were not acted upon. Some recommendations are calling for a shift from the full operation of market forces and trickle-down economics to public and private partnership but this advice has not been utilized. The government still believes in the magic of market forces and private sector as the engine of economic growth and distribution of economic benefits and government hands off. That is why some important demands like school lunch that require state intervention have been ignored.
Thus, Uganda is in trouble not so much because of external forces but because the government has been unable to adapt development models to national conditions. And this has been caused in large part by relying on professional advisers who are either not familiar with Uganda conditions or have no experience and because cabinet and senior advisers are not versed in economic intricacies and interconnections since the 1980s. The high turnover of ministers of finance, planning and economic development may have aggravated the situation.
Thus, twenty six years of NRM government in power do not appear to have taught them much. Consequently, for NRM it is business as usual relying on market forces and private sector as the engine of growth that has not worked as expected. This is one of the reasons why Uganda has continued to be trapped in absolute poverty, unemployment, illiteracy, poor health, hunger, poor shelter and clothing and environmental degradation. Improvements in Uganda will need a new orientation and composition of policy makers and advisers drastically different from what Museveni has had since 1986. Expertise in governance gained under structural adjustment over the last 26 years that the president talked about in Kisumu has been overtaken by events following the abandonment of the Washington Consensus that dominated Museveni’s government. Therefore Uganda needs expertise already versed in the new development model, not Ugandans who are going to learn on the job again.
ERIC KASHAMBUZI
UAH FORUMIST IN NEWYORK
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