We need new methods to solve our economic hurdles
Aug 23, 2011
<br>THE business of the 9th Parliament has been dominated by riots and strikes, depreciation of the shilling, and continued public outcry about deteriorating social services.
Dr. Sam Okuonzi
THE business of the 9th Parliament has been dominated by riots and strikes, depreciation of the shilling, and continued public outcry about deteriorating social services.
I wish to thank MPs on both sides of the House for going above petty politicking. The recent upsurge of crises is only a continuation of the wider social and economic crisis which started to envelop this county two years ago.
Recent statements by the finance minister on the depreciation of the shilling and by the trade minister and cooperatives on the sit-downstrike by traders did not address the critical issues, or reassure members or the public that the Government was capable or willing sort out the situation.
The statements of the ministers showed that the Government was going to continue with business as usual. And yet there is a clear crisis in the country. It does not matter where the crisis is coming from. This business-as-usual policy is the pervasive reliance on forces of demand and supply to determine where this country should go. The forces of demand and supply have attained a divine character in Uganda.
The “forces of demand and supply†means the free-market policy. For example, recently when food prices rose beyond the reach of ordinary people, some government leaders said there was nothing anybody could do about it because this situation was determined by the forces of demand and supply. This explanation is as ridiculous as it is appalling and absurd.
While the free-market policy has served Uganda relatively well for the past 20 years by kick-starting and invigorating the economy, the policy has now largely served its purpose and needs to be replaced.
The over-reliance on the market forces has stifled policy innovation and has limited the range of policies the Government could use to address its challenges. The Government is stuck to a few well-rehearsed economic policy tools such as interest rate and treasury bills. As a country we have been programmed to a few predetermined actions and yet our circumstances have vastly changed, and continue to change rapidly, requiring innovative interventions.
The experience of the recent global economic crises corroborated by past and recent literature on market economics has clearly shown and confirmed that market economic systems can only work well for a time, then they get into economic crises, social polarisation and conflicts due to huge social and economic inequalities, population pressures and environmental degradation. Uganda took the freemarket
too seriously and has arrived relatively quickly at this stage of the freemarket cycle.
This stage of the economic cycle is typically characterised by market crushes, rising inflation, rising food prices, food riots, weak states vis-Ã -vis business interests (multinationals), dwindling prospects for economic growth, uncontrolled populations, decline in soil fertility, destruction of forest cover, destruction of fresh water sources and wetlands, and increase in environmental toxins and pollutants.
The ambivalence of population policy under free-market regimes is that big populations are desired for bigger markets. The fragmentation and collapse of public education, health and other social services in poor countries is another outcome of the forces of demand and supply.
Uganda and a few other African countries such as Kenya have stuck to unfettered free-market economic policy when the rest of the world (including architects of the original free-market policy, for example the US) is moving away from this system. US recently abandoned the free-market policy in the face of a looming collapse of their national economy and pumped hundreds of billions of dollars in stimulus packages.
China broke all known rules of the free-market to now soon become the biggest economy in the world. The Asian Tigers (Malaysia, Singapore, South Korea) did not practise the free market policy that Uganda has embarked on, but have hugely prospered and improved the lives of their people.
In the face of the current economic crisis in the country, it is time Uganda moved away from the path of business-as-usual based on the forces of demand and supply, to a remedial policy strategy to rescue the economy and place the country on a more plausible path to prosperity and social wellbeing.
The Government should use market principles selectively as a means to prosperity, stability and peaceful co-existence, but not as an end in itself. Where market forces are not appropriate, for example in situations of the current crisis, direct government interventions should be used.
In accordance with the Constitution, under social and economic objectives, the state is obliged “to direct all development efforts to maximum social and cultural wellbeing and to enable all Ugandans enjoy access to education, health services, clean and safe water, work, decent shelter, adequate clothing, food security and pension and retirement benefits. Therefore, a different economic model needs be developed and adopted to address the current crisis. Unusual circumstances require unusual solutions.
We need to adopt state ownership of critical industries, practise progressive taxation, adopt strong regulation of the market, protect and promote domestic industries, control and direct capital inflow into the country (uncontrolled capital flows distorts national priorities) and develop and consolidate regional markets. The Government should invest significantly in the agricultural sector, focusing on productivity through large scale provision of inputs, technology, storage facilities, and value addition, and by facilitating the marketing of the products.
The Government should also invest significantly in the health and education sector.
There is also need to invest significantly in promoting employment by innovative approaches covering all the youth countrywide. The Government should invest or direct the private sector to invest in tourism infrastructure and development to attract foreign exchange. The focus on infrastructure and energy development may continue, but at the pace that accommodates the above priorities.
Unless we change the economic policy course and formulate a pragmatic economic model to suit our purposes and circumstances, we are bound to move endlessly from one socioeconomic crisis to another.
The author is Member of Parliament for Vurra Constituency
THE business of the 9th Parliament has been dominated by riots and strikes, depreciation of the shilling, and continued public outcry about deteriorating social services.
I wish to thank MPs on both sides of the House for going above petty politicking. The recent upsurge of crises is only a continuation of the wider social and economic crisis which started to envelop this county two years ago.
Recent statements by the finance minister on the depreciation of the shilling and by the trade minister and cooperatives on the sit-downstrike by traders did not address the critical issues, or reassure members or the public that the Government was capable or willing sort out the situation.
The statements of the ministers showed that the Government was going to continue with business as usual. And yet there is a clear crisis in the country. It does not matter where the crisis is coming from. This business-as-usual policy is the pervasive reliance on forces of demand and supply to determine where this country should go. The forces of demand and supply have attained a divine character in Uganda.
The “forces of demand and supply†means the free-market policy. For example, recently when food prices rose beyond the reach of ordinary people, some government leaders said there was nothing anybody could do about it because this situation was determined by the forces of demand and supply. This explanation is as ridiculous as it is appalling and absurd.
While the free-market policy has served Uganda relatively well for the past 20 years by kick-starting and invigorating the economy, the policy has now largely served its purpose and needs to be replaced.
The over-reliance on the market forces has stifled policy innovation and has limited the range of policies the Government could use to address its challenges. The Government is stuck to a few well-rehearsed economic policy tools such as interest rate and treasury bills. As a country we have been programmed to a few predetermined actions and yet our circumstances have vastly changed, and continue to change rapidly, requiring innovative interventions.
The experience of the recent global economic crises corroborated by past and recent literature on market economics has clearly shown and confirmed that market economic systems can only work well for a time, then they get into economic crises, social polarisation and conflicts due to huge social and economic inequalities, population pressures and environmental degradation. Uganda took the freemarket
too seriously and has arrived relatively quickly at this stage of the freemarket cycle.
This stage of the economic cycle is typically characterised by market crushes, rising inflation, rising food prices, food riots, weak states vis-Ã -vis business interests (multinationals), dwindling prospects for economic growth, uncontrolled populations, decline in soil fertility, destruction of forest cover, destruction of fresh water sources and wetlands, and increase in environmental toxins and pollutants.
The ambivalence of population policy under free-market regimes is that big populations are desired for bigger markets. The fragmentation and collapse of public education, health and other social services in poor countries is another outcome of the forces of demand and supply.
Uganda and a few other African countries such as Kenya have stuck to unfettered free-market economic policy when the rest of the world (including architects of the original free-market policy, for example the US) is moving away from this system. US recently abandoned the free-market policy in the face of a looming collapse of their national economy and pumped hundreds of billions of dollars in stimulus packages.
China broke all known rules of the free-market to now soon become the biggest economy in the world. The Asian Tigers (Malaysia, Singapore, South Korea) did not practise the free market policy that Uganda has embarked on, but have hugely prospered and improved the lives of their people.
In the face of the current economic crisis in the country, it is time Uganda moved away from the path of business-as-usual based on the forces of demand and supply, to a remedial policy strategy to rescue the economy and place the country on a more plausible path to prosperity and social wellbeing.
The Government should use market principles selectively as a means to prosperity, stability and peaceful co-existence, but not as an end in itself. Where market forces are not appropriate, for example in situations of the current crisis, direct government interventions should be used.
In accordance with the Constitution, under social and economic objectives, the state is obliged “to direct all development efforts to maximum social and cultural wellbeing and to enable all Ugandans enjoy access to education, health services, clean and safe water, work, decent shelter, adequate clothing, food security and pension and retirement benefits. Therefore, a different economic model needs be developed and adopted to address the current crisis. Unusual circumstances require unusual solutions.
We need to adopt state ownership of critical industries, practise progressive taxation, adopt strong regulation of the market, protect and promote domestic industries, control and direct capital inflow into the country (uncontrolled capital flows distorts national priorities) and develop and consolidate regional markets. The Government should invest significantly in the agricultural sector, focusing on productivity through large scale provision of inputs, technology, storage facilities, and value addition, and by facilitating the marketing of the products.
The Government should also invest significantly in the health and education sector.
There is also need to invest significantly in promoting employment by innovative approaches covering all the youth countrywide. The Government should invest or direct the private sector to invest in tourism infrastructure and development to attract foreign exchange. The focus on infrastructure and energy development may continue, but at the pace that accommodates the above priorities.
Unless we change the economic policy course and formulate a pragmatic economic model to suit our purposes and circumstances, we are bound to move endlessly from one socioeconomic crisis to another.
The author is Member of Parliament for Vurra Constituency