The debate about the future of Uganda that our presidential
candidates should be conducting
We are in the middle of an election campaign and, because
our country is poor, the biggest issue should be how to make it rich. For about
30 years, the incumbent, President Yoweri Museveni has been working to grow the
economy. To get the best assessment of how he has performed, I go to an
organisation that is very good at measuring such things; the International
Monetary Fund (IMF). The IMF has data on the economic growth rates of 189
countries since 1950. Its website shows how Uganda has grown over the past 25
years. It also allows us to compare Uganda against the rest of the world.
For a country to develop i.e. transit from being poor to
rich, it needs to sustain growth over generations. For instance per capita
income in the United States of America today is $54,000 at Purchasing Power
Parity (PPP) – the 10th highest in the world. This is because the U.S.
sustained an average annual rate of per capita income growth at 1.5% over the
last 150 years. Economists agree that this is a result of the U.S. sustaining
good public policies supported by sound political institutions.
Another point is that sustaining high rates of growth over
the long-term is extremely difficult. Many countries enjoy brief periods of
fast growth and retrogress to slow, stagnant, or even negative growth. This has
been the problem of most nations of post-colonial Africa and Latin America. It
has been most typified by Argentina.
In 1910, Argentina was the 6th richest country in the world
in per capita income at PPP. However, its fast growth spurts have always been
followed by years of slow, stagnant, or even negative growth. Today, it is
55th.
In his book, The Next Convergence, the Nobel laureate in
economics, Michael Spence, found that between 1950 and 2005, only 13 countries
in the whole world sustained economic growth rates of 7% and above over a
period of 25 years. Sustained 7% growth is important because is about the best
rate of growth any country has ever sustained over 25 years.
Secondly, economists and statisticians use “The Rule of 72”
to estimate the time it takes to double a nation’s income at a specific annual
growth rate. The rule says that if an economy (or anything else for that
matter) grew at an average of 1% annually, it would double every 72 years. If
it grows at 7% annually, it would double every 10 years.
Therefore if you began measuring Uganda’s growth journey
from a per capita income of $250 (where Uganda was in 1986 using 2015 dollars),
and consistently grew your per capital income at an annual average rate of 7%,
your per capita income will double to $500 in the first 10 years, $1,000 in 20
years, $2,000 in 30 years, $4,000 in 40 years and $8,000 in 50 years. You need
65 years to reach the lower rungs of advanced country per capita income i.e.
$24,000. The lesson here is that economic development is a marathon, not a
sprint. The winner would be our own Stephen Kiprotich, not Jamaica’s Usain
Bolt.
So what do the IMF figures reveal about Uganda’s performance
under Museveni? For the first five years of his administration (1986-1990), the
economy grew at an annual average rate of 5.23%, making it the 38th fastest
growing economy in the world. From 1986-1995, it averaged 5.67% and was 25th
fastest. Then 1986-2000 (the first 15 years), it was 5.91% and 19th. For the
first 20 years (1986-2005), the growth rate was 6.32%, making it the 15th. For
the first 25 years (1986-2010), the average growth rate was 6.5%, making Uganda
the 12th fastest growing economy in the world.
Seen in reverse and using 2013 as the base year going
backwards, the figures show how Museveni has been performing in recent years.
Over the last five years (2013-2009), Uganda’s average growth rate has been
5.06%, making it the 44th fastest growing economy in the world. Someone can
argue that this is evidence that Museveni’s performance is faltering. But
remember that economic development is a marathon, not a sprint. Five years is
really a sprint. So we have to judge over a longer period.
If we go backwards, to the last 10 years (2013 to 2004),
Uganda’s average growth rate has been 6.67% (which is really an excellent rate
by all standards), making our economy the 31st fastest growing economy in the
world. If we push farther, over the last 15 years (2013-1999), the growth rate
is 6.82%, the 26th in the world. The last 20 years (2013-1994), growth is 6.92%
and 12th in the world. Finally the last 25 years (2013-1989), the growth rate
has been 6.56%, making Uganda the 11th fastest growing economy in the world.
If you take the last 10 years, there are 25 countries that
have averaged growth rates of 7% and above. When you stretch it to 15 years,
this number falls to 21 countries. And when you stretch it to 20 years, the
figure falls to only 11 countries. But when you stretch it to 25 years (which
is a generation), only six countries have sustained growth rates of 7% and
above. Clearly, many countries can afford high growth in the short term (a
sprint) but few sustain it over the long term (a marathon), which Uganda has
done.
These findings were disarming to me especially because I
have always argued that Museveni has presided over an incompetent government.
Unless we believe growth comes from the blessings of the gods, there must be
policy and institutional competences our government has acquired that have
allowed it to sustain impressive growth rates over such a long period.
We also tend to think Museveni governed better in the first
five to 10 years. This may be true in terms of the moral purpose of his
government. However, this data shows that Museveni has successfully run the
marathon of growth.
The IMF growth figures also contradict my second bias that
Museveni has stifled institutional development and personalised the state. For
any country to sustain such an impressive rate of growth over such a long
period of time, it needs good institutions – unless we say institutions do not
matter for growth. Only windfalls in form of high prices for minerals like
diamonds, gold or oil can allow a mismanaged country to sustain high growth
rates. May be my biases captured only a part of Uganda’s reality. Without high
priced minerals, only consistently good policies and sound institutions can
explain Uganda’s growth story. With hindsight institutions like the ministry of
finance and the central bank are good examples.
Some would argue that the life of nations is not only about
growth, which is a valid argument. Using GDP to judge Museveni’s performance
over the last 25 years is like using one subject to judge the performance of a
student studying ten. People care about many other things in a country like
jobs (which are scarce) and health and education services (which today are in a
sorry state). People also care about democracy, freedom and human rights. And
then there is the moral purpose of government. Widespread corruption under
Museveni, where the resources of the many have been turned into privileges for
a few, means our president scores badly there.
Museveni can retort with some justification that he has done
well with roads, electricity and water – and that we should not expect him to
be 100% perfect. He can also argue that in the long term, what matters most is
growth. This is because the ability of the state to provide public goods and
services depends in large part on its ability to generate revenues to finance
them. Only sustained economic growth over the long term can ensure constantly
increasing state revenues to meet public expenditure demands. At our current
level of GDP, Uganda’s revenues are too small to finance a large basket of
public goods and services that we associate with a modern state.
There is something fundamental in this data. Museveni placed
Uganda on the rails of growth and has sustained it over the long term,
achieving a target that is excellent by all standards (being 11th out of 189
countries is not a small feat).
Over the last 25 years Uganda has performed better than
Singapore, South Korea, Hong Kong, Taiwan, Malaysia, Botswana, Mauritius, etc.
– the growth miracles of the last half of the 20th century. Many people may
question these growth figures. But evidence of growth in production and
consumption of goods and services like banking, beer, soda, cement, phones,
soap, sugar, electricity, internet, hotels, cooking oil etc. prove the point.
But then why are many of our people still poor? Although the
success of a nation’s economy is measured in the growth of GDP, the affluence
of its population is measured by the growth in per capita income. While
Uganda’s GDP growth has been impressive, its effect on per capita income has
been grossly undercut by a high population growth rate of 3.3%. This has given us a very young population
(50% are below 15 years and hence not working). Instead we have a high dependency
ratio.
Secondly, Uganda’s growth has been driven largely by
services. These tend to employ a few elites with a high level of education.
Agriculture on which 70% of our population depends for a livelihood has grown
sluggishly over the last 25 years. And manufacturing which creates broad-based
blue-collar jobs for the less skilled, thereby lifting millions out of poverty,
is still small, employing only a few. Museveni has talked a lot about it but
done little. He is now heavily investing in transport infrastructure (roads and
railways) and electricity, which is excellent. But is this really enough? What
more can we do to stimulate manufacturing growth? These are the issues we
should hear our presidential candidates talking about.
amwenda@independent.co.ug
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