Passing the buck won’t end vicious cycle of poverty
Sunday June 19 2022
President Yoweri Museveni has advised Ugandans to look for alternatives to expensive food commodities, adding that the country was looking at producing agro-commodities that are in short supply globally to reap from the food crisis. PHOTO | NMG
In the sweltering heat that is typical of July in Kampala, a frustrated western expatriate, who had been retained as an adviser to a senior figure in Uganda’s policy circles, made a damning confession: Nobody knew what to do to fix the Ugandan economy. “If there was anybody who had an idea what needed to be done, they would have done it a long time ago,” he said.
That befuddlement now appears to be a contagion that afflicts many of the people who have been trusted with the mandate to run the affairs of government. There was general bemusement this week, when President Yoweri Museveni, who has been at the helm for 36 of the 60 years of Uganda’s independence, blamed the rampant poverty in the country on his predecessors.
In Kenya, Deputy President and presidential aspirant William Ruto has blamed the topsy-turvy state of affairs in the country on “the handshake,” that pivotal event which reset the country’s — until then — confrontational politics on to a new path of shared destiny.
Both Museveni’s and Ruto’s views could be interpreted as either a deliberate diversion or a slip in their understanding of basic economics. The theory of the vicious cycle of poverty makes the audacious suggestion that poverty causes poverty. In the typical setting, a poor person stays poor because his productive capacity is low. That leads to low income and limited capacity to command goods and services in the economy, low saving, low or no capital accumulation, low investment, low production and poverty. Aggregated on a national scale, you have a huge, near intractable problem on your hands.
To tackle poverty, interventions must identify and focus on a pivotal point in that cycle. In Uganda, and most of sub-Saharan Africa, poverty has become structural, reinforced by a growth model that is characterised by public spending, especially on infrastructure. While infrastructure is a key enabler and brings the comfort of rosy economic growth numbers, in Africa, it is a poor distributor of income. Because of low levels of economic integration, most of the expenditure goes back to source countries.
The jobs generated by infrastructure projects are low-paying, with incomes that are just sufficient to keep the labourer alive.
Another problem for Uganda is the high dependence ratio. Only a quarter of the population is productive. Many cannot save any of their income and expensive credit simply traps them in debt. With population growth ahead of economic growth by as much as 300 basis points, many times real growth is low or negative. Manufacturers feel this through low aggregate demand and the taxman, a narrow tax base. Add corruption to the mix and poverty becomes deeply embedded.
Whatever the fault with their views, President Museveni and Deputy President Ruto should be commended for thinking about the problem. The attempt at retrospection is good but they should not simply pass the blame for present failures to the past.
East Africa’s basic problem is corruption, bad governance and bad politics. Corruption distorts planning and transfers wealth from the poor to those who are already privileged. Leaders have the executive licence to clean governance and weed out the rotten apples.
Let them cultivate the political will to tackle corruption and build the economies.