Monday April 28 2014

There should be less govt and more private sector in the economy

By Fred. K. Muhumuza

When Williamsons’ Washington Consensus of less government and more private sector in the economy was being advanced a quarter of a century ago, not many could imagine a situation where government would actually exit business but not its officials. The present day strong relationship between politicians and business means capitalism needs to be saved from today’s ‘capitalists’.

Across the globe, many rich people have no association with creation of any commodity value but close networks with politics. This emerging era of economic bugs has been amplified by the emergence of economically illiterate populist politicians – to borrow from the Economist of February 15. In this regard, anyone who thinks economic solution will suffice to resolve the challenges related to the economic crises and the increasing civil conflicts/tensions is simply playing ‘economy stupid’ – to borrow Carville’s slogan for the Clinton 1992 campaigns.

Of course the biggest global problem today is economics but the root cause is governments’ pendulum swings to anarchy (too little government) and autocracy (too much government). The crony capitalists, within and outside government, have taken advantage of the withdrawal of government from the economy to capture and extract rents from both public and private assets. This is the anarchy part of present day politics and economics – the Politiconomy – and includes replacement of genuine people by ghosts. Talk of the Oligarchs in Russia and Eastern Europe.

Whenever society rises against economic disenfranchisement the capitalist political elite and their peers quickly crack down using state machinery – including biased legal and regulatory procedures. This is the autocracy side of the Politiconomy. As the world continues down this route, it will not be news to have a crackdown on media or communication platforms like YouTube and Twitter.

The emergence of weak and strong governments, depending on what best serves the ruling elite and their private peers, has edged out developmental states. The need for genuine economic and social development continues to be undermined by the new coalition – the no government organisation (NGO’). Notice the mathematical apostrophe of compliment, meaning it is neither a Non-government organisation nor a government.

Barrack Obama could not secure changes in gun legislation because a powerful lobby of a few thousands chose to keep millions insecure. In the same America, a few bank officials brought down the capitalistic structure by building a pack of toxic loans/assets to earn super bonuses. At home, Uganda’s next budget will dish out an excess of $400 million in interest payments, largely to holders of domestic financial assets that never built any significant counterpart assets in the real sector. There were hardly any jobs created except an implied hope that lower inflation and continued feeding of the extensive bureaucracy would lead to private sector development. Indeed it did, but what a private sector!!

The future requires non-conventional politics to form and run governments that can deal with all forms of corruption. We must reinvent Government as government.

To do so, begin in China – the most responsive economy today, which is drawing its agility from the politics and politicians. For lack of space, I will give one clue. In 2013, China punished about 182,000 officials for disciplinary violations – an increase of 28 per cent from 2011. The world may not treat China as democratic, but what democracy do undemocratic people deserve? If a person’s actions take the right to a decent living from millions of other humans, then such a person has lost the right to any human rights. He is not human.
It would be ‘economy stupid’ to think that problems such as jobs and poor service delivery are not economic but even more ‘economy stupid’ to think that the solution is economics. Like China, the world must first deal with the Politiconomits. But how can the no government organisations do that? Watch this Space.

Dr Muhumuza is a research fellow at the Economic Policy Research Centre.