A couple of months ago, the Uganda Bureau of
Statistics produced its survey showing that between 2012 and 2017, the number
of people living in poverty increased from 19 to 27%. This provided
considerable grist to the anti President Yoweri Museveni mill. It confirmed the
accusations of his critics that the president has been mismanaging the economy.
I think these studies obscure, rather than highlight, the
actual problem facing us. Our country/continent should aim at structural
transformation, not poverty reduction. Making peasants earn more is not a
solution to Uganda (and Africa’s) economic backwardness. There is no country
where the majority of people depend on agriculture for a livelihood, which is
rich. Our challenge is how to transform peasants into industrial/service
workers. But that is a debate for another day.
Now government critics have always dismissed UBOS statistics
as propaganda. They argue that we can measure poverty by just using our eyes.
They have been mocking me, asking what happened to the “rosy picture” of
Uganda’s economic growth that I have “always painted”. Yet UBOS figures
actually prove the point that economic growth is critical for poverty
reduction. For example, over the last five years, Uganda’s growth has slowed
down from an average of 7.4% between 2001 and 2010 to an average of 3.9%
between 2012 and 2016.
The more important point, however, is that most people
grossly misunderstand the challenge of economic development. This is a very
slow and painful process whose results can only be realized after a long time
lag. Economists and statisticians use the “rule of 72”. This rule says that if
an economy (or anything else under measurement) grew at an annual average rate
of 1%, it would double every 72 years. If it grew at an annual average of 7%,
it would double every ten years. It is not accurate but gives us a good idea.
Now 7% is about the highest rate of growth any country has
ever enjoyed in history. Of course some outliers like South Korea did 9.4%
between 1960 and 1990 and China 10.2% between 1980 and 2010 among a few others.
I tend to remove from the sample countries that have relied on natural
resources to grow fast because they are enjoying God’s (or nature’s) bounty.
Equally, I remove city-states like Hong Kong and Singapore because, lacking a
hinterland, they did not have a peasantry to transform from agriculture to
industry.
Let us assume a country had a per capita income of $150 as
Uganda did in 1986. Let us assume its per capita income grows at a supersonic
speed of 7% per annum. This country would reach $300 after ten years, $600
after twenty years and $1,200 after 30 years i.e. it would still be a poor
country. It would take 70 years to reach a per capita income of $19,200 – which
is the lower rungs rich countries.
Uganda’s per capita income growth has been slow because of a
very high rate of population growth. Remember per capita income is calculated
by subtracting the population growth rate from the GDP growth rate. From 1986
to 2016, Uganda’s GDP grew at an annual average of 6.74% while its population
grew at 3.2%, giving us a per capita income growth of 3.5%. At this rate, per
capita income in Uganda doubles every twenty years. Now it may be surprising to
many that no country in Europe ever achieved this over 30 years, except West
Germany between 1950 and 1980, which did 3.8%.
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