THE great question of poverty alleviation cannot be resolved by the ‘Invisible hand’, nor can it be resolved by the command approach of the utopian socialists
By Col. Felix Kulayigye
IN the recent Joseph Mubiru Memorial lecture, organised by the Bank of Uganda, two scholars criticised the invisible hand as responsible for the current global economic crisis.
However, Prof. Mohamood Mamdani was a well-known Marxist while Prof. Joseph Stiglitz was a new convert to those that criticised the invisible hand, as the best tool for effective and optimal allocation of resources.
Whereas Mamdani, wondered as to when his colleague had seen the light, his submission agrees with the original proponent of the invisible hand, Adam Smith! Mamdani asserted that the people not free from state and capitalist control, whose motivation of profit maximization negated people’s welfare, but also encouraged private business managers to accumulate personal wealth at the expense of the people. He argued for the people to control both the state and private business.
In the 1990’s, Stiglitz, as chairman of President Clinton’s economic advisory council, advocated for free market economy, which the west believes is the classical economy postulated by Adam Smith in his wealth of nations. Adam Smith believed people should be free of control by any authoritarian institutions.
That, if you had a perfect liberty, markets would lead to perfect equality of people.
Ironically, this is opposed to the capitalist way, because for them, the entrepreneurs control the factors of production.
Adam Smith thought division of labour was not good and argued that ‘in any civilised society, the government is going to have to intervene to prevent division of labour from simply destroying people’.
Thus, Adam Smith’s belief in the people’s right to control their work is similar to the Marxian economists who believed in the working class controlling their production and, therefore, output.
After all the intrinsic value of labour lies in the value of its output, which should be determined by forces of demand and supply, and not fi xing prices. The socialists of course believed there must be a state controlled by the working class, which would determine resource allocation and output distribution.
The great question of poverty alleviation, therefore, cannot be resolved by the ‘Invisible hand’, nor can it be resolved by the command approach of the utopian socialists who thought the working class should not only control output but their destiny directly.
This is as a result of distortions in both extremes such as failure to realise the actual level of profi t and wages done to the wastage of economic resources, unemployment, domination of monopolies and trade unions.
The emerging debate is whether the state in the Third World promotes and defends the interests of the workers, and peasants or whether hope lies in the ‘independent’ political organisations of ‘progressive elements’ (commonly known as civil society organizations) to be the vehicle for people’ economic and political emancipation!
State bureaucracy has undermined the ability of the state to deliver on the people’s aspirations, either due to corruption, effi ciency or sheer ineptitude coupled with compliancy of job permanency.
Civil society on the other hand cannot be the hope since it is neither indigenous in origin and ideology nor is it independent.
There is no country that has developed successfully through adherence to free market principles.
Countries in the west have always practiced protectionism and government support through subsidies has characterised their agricultural and industrial policies.
Jeffrey Sachs praises John M Keynes who, during the great depression of 1930’s predicted the end of poverty, for their grandchildren, while Prof Sachs is urging that we can end poverty in our time. He attributes this possibility to the wealth of the rich world plus availability of vast knowledge from science and technology to end poverty by ensuring food security and income growth.
However, the invisible hand has failed the developed states; it cannot be the answer to ending poverty. It would not be the post independent African state either, because, not only was it weak, it also lacked the correct lenses to identify the problem correctly and therefore prescribe the right policies.
We need a strong state that appreciates its mission.
The writer is the UPDF/Defence Spokesperson
Only strong states deliver