Event reports
For two decades and before the apparent burst, many African economies, Uganda inclusive, held on to impressive economic growth rates averaging more than 5 percent. Such good news, however, eluded many people, at least in terms of the quality of life they experience. A significant number remain in poverty and lack basic necessities including food, safe water, medical care and housing, to mention a few. This has resulted in unwarranted cases of underdevelopment such as death from preventable diseases, high illiteracy rates, starvation and malnutrition among others. A high risk of social instability prevails as neither the impressive growth rates nor the education system manages to provide promising answers to the challenge of a rapidly growing and largely unemployed population.
By and large, Africa’s prevalent “economic models” are markedly lacking in terms of improving human welfare and creating sustainable wealth. Sustainable wealth creation MUST thus be the ultimate business of every state. It can go without mention that African states have a gigantic role to play in this regard since the average GNP per capita is just about $1,800, the lowest of all continents.
The question for Uganda is what set of economic policies promise two crucial requirements: the successful creation of wealth and care for every individual. Neoliberalism, which underpinned the 1990s structural adjustment, engendered a catastrophic breakdown of social services whilst condemning the less fortunate to deprivation. On the other hand, the idea of a welfare state, as pursued for example in the Scandinavia, is not without the risk of perverse incentives given the potential to dissuade hard work and thus the possibility to obstruct wealth creation.
Questions around human welfare and economic development motivated a roundtable meeting of experts hosted at Makerere University in Kampala by the University Forum on Governance (UNIFOG) and Konrad-Adenauer-Stiftung (KAS). The conversation reflected on the Social Market Economy model with a view to explore the extent to which it can inspire policies for a welfare-compatible economic development regime in Uganda.
Mr Mathias Kamp, country representative at KAS and main speaker at the event offered a ruminative validation for the focus on Social Market Economy. He introduced the concept “ordoliberalism”, which he explained to be Germany’s main understanding of Social Market Economy. Precisely, “ordoliberalism is a Latin word which means “New-World-Order” and “strive for freedom.” The state, Mr Kamp unequivocally insists, must regulate the economic process, set the rules for competition, and provide public services, but refrain from micromanaging citizen’s affairs. These conditions, he observed, are critical foundations of a Social Market Economy. It requires “a strong state but which has the discipline to exercise restraint”, Mr Kamp cautiously observes.
All instances of successful development cases, Dani Rodrik (2000) educates us, are ultimately the collective result of individual decisions by entrepreneurs to invest in risky new ventures and try out new things. This is perhaps where the social market economy principles of individualism and freedom become crucially relevant. In this regard, Mr Kamp unreservedly sided with the classical proposition that our natural self-interest will always make individuals strive for the improvement of their own situation. In other words, the presence of a fair and just system of rule of law the guarantees freedom and private property in necessary to incentivise innovation and hard work among individual members of society with the potential of wealth creation as the collective result.
It is very likely to be impossible that the whole of society succeeds at the same speed and level. There will always be those that are left behind, sometimes—if not most—due to disadvantages out of their individual control. A value society ought to take into account the realities of success and failure and therefore not condemn its less fortunate to deprivation For instance, you can put a disabled person on a wheel chair and an able-bodied person to compete on the same race. It is from this lens that the social market economy principle of solidarity comes in handy. Moreover, those who succeed may hardly account their achievement to their personal sweat alone given the inevitable contribution of public goods and services such as education, transport infrastructure or the natural Environment.
Interestingly, several indigenous societies in Uganda practice a considerable degree of solidarity. Take an example of the mandatory burial groups through which communities support families in grief. But solidarity has been less integrated in the national economic policy framework, perhaps because the concept was never listed among the 10 points of Washington Consensus, the prescription which Uganda, like most of Africa continues to implement as a blueprint for economic management—forget the fact that John Williamson, its chief architect, has since admitted he meant no blueprint all developing countries.
Solidarity, as discussed at the meeting, means social economic arrangements that take care of the less fortunate, for example, having some form of benefits for those who fail to find a job or are simply unable to work.
Exciting as the principles social market economy may appear, as Mr Kamp repeatedly echoed at the roundtable, it is not a copy and paste economic model but rather a set of values that can be reflected upon to inspire a system of economic stewardship that engenders a happy nation.
However, whenever economic issues are considered the interests of powerful actors should never be missed. As one participant at the roundtable observed the successful adoption of any of the principles of social market economy will be contingent on whether such policies meet the interests of the “big boys” or rather, the power holders in politics and business. Indeed recent research, for example by Douglas North and others (2009) suggests that reform only succeeds when influential groups feel that change is within their interest.
As the debate at the roundtable suggested, the major challenges, if Uganda is to consider adopting certain principles of a society market economy rotates around building a value based economic society, and ensuring that the reform packages meet the interests and incentivise influential elite to buy into and promote them.
Most importantly, as Acemoglu and others (2012) convincingly and eloquently suggest, inclusive economic institutions, where they exist, are underpinned by egalitarian political institutions. Perhaps improving welfare and economic development in Uganda is more of a political question than it is economic.
