GDP-ism
I read Dr. Louis Kasakende’s article on January 13th 2012 and I was convinced that Uganda need new thinking if we are to get out of the current crisis. I would want to offer another perspective because we may be missing the point with the current debate on interest rates.
We have to understand that for two decades we have worshipped Gross Domestic Product (GDP) as the official economic religion for Uganda taking a cue from the Bretton institutions (World Bank and IMF) that have led the ‘world-GDP-evangelism’. We have maintained an impressive 5%-7% GDP growth for over 2 decades and we patted ourselves on the back. Today we have scratching our heads with an inflation running wild up to 30%. What went wrong?
If you look at our income poverty numbers they show that we have only been able to reduce income poverty from about 56% in 1997 to 25% today. This looks impressive. But before we celebrate these numbers, one of the most alarming things in our statistics are our inequality figures, (measured by a measure called gini-coefficient) – it is one of the highest in the world! This means that the rich are getting richer and the poor and getting poorer at a very high rate. When we look at what has been driving this growth, it is clearly the top 10% that have prospered as never before and also developed an insatiable consumerist appetite, which is one of the main drivers of growth. These include – ‘second-hand everything’ and cheap Chinese goods all financed through donor financing and not real economic production.
As we look at the current economic and social crisis we are all hell-bent at focusing on symptoms like the interest rate debacle making the rounds today. But clearly one of the key issues that we need to focus on are the links between GDP-led growth and social progress. For example, over the last two decades of our growth, formal sector jobs have been systematically shrinking starting with the early 1990s down-sizing of the public sector and the increased informal sector and privatization of all industries. To validate this, one just has to look at the number of boda bodas and hawkers across Uganda.
We live in a country of clearly unbalanced growth. The stagnant agricultural sector which supports over 80% of the population is subsistence in character and the services sector that is fastest growing is very much sluggish and characterized by poorly constructed buildings and sloppy hotel industry. This unequal growth has also led to mass suffering of several rural Ugandans with significant land dispossession and many more land conflicts than we can manage taking root in all parts of the country.
Our faith in GDPism has increased social stress and clearly damaged social cohesion. In the recent year alone we have witnessed countless conflicts; from sheikhs fighting to head religions, to Bishops up in arms over Dioceses, to Pastors taking each other to court, to ethnic tension like those in Eastern Uganda today among the Bagisu and Sabiny and country-wide violence against women and iron-bar thieves increasing and many more conflicts. One the other side for the elite in Uganda; the walls on their houses are growing higher and security is becoming a thriving industry. One may think this these are not related to economics – but when the economy does not take social welfare as an objective the results is social unrest.
In order to deal with our current crisis we need to acknowledge that neo-liberalism and market-obsessed economics is dead. We need to now establish a new type of economics and economic institutions that focus on changing our behaviors so that whatever we do we understand that there is a need to provide for social equity and not just chase the capitalist agenda of profit making – which monetary policy serves. We need pluralism in macroeconomic decision making that focuses on the provision of the basic necessities of life, focuses on minimizing economic damage like high interest and focuses on human dignity for all. These are not things that conventional growth economics will deliver and not Mutebile and team.
We must abandon familiar formulas and seek radically different solutions. Politically this means inverting the decision-making pyramid and ending the market’s primacy. We can no longer leave our lives in the hands of failed neo-liberal economics. Decision makers cannot be corporations, banks and multinationals or even governments alone. It is clear that our corporations and banks are incapable of doing business without dumping costs on society like the recent example of interest rates. We need to ensure that the basic decision-making agency is the citizens of Uganda from the local level up. These citizens should be able to participate in setting their levels of entitlements to basic services, determining the costs of basic services and financing their social services through provision of local taxes and those partly devolved from central government. Citizen-led participatory democracy is the only option today. This is what was called for in the original NRM 10-point programme, this is what is being agitated for in the Arab region and should be our focus in the Africa region. Market-based systems are now incapable of sound resource allocation and we should not live under the illusion of GDP-ism.
