The fallacies of neoliberalism

Moses Khisa

What you need to know:

The so called ‘control model’ did not start in 1970 with Obote’s ‘move to the left’, as Ggoobi asserts

I chanced on a text for a lecture at Makerere University in memory of Emmanuel Tumusiime-Mutebile, the late long time governor of the Bank of Uganda (BoU). The speaker was Mr Ramathan Ggoobi, Permanent Secretary (Ministry of Finance) and Secretary to the Treasury (PSST).

A PSST is arguably the most important and consequential government bureaucrat. Three previous successive holders of that office came through the ranks and were very well-schooled and deeply committed to neoliberalism – the ideology that adamantly insists free markets are self-regulating and are the best form of economic engagement, and that the government must be a mere night-watchman with no direct and active role. A state-owned business is bad business.

Dr Ezra Suruma fought a losing battle against neoliberal received wisdom, firmly buttressed by the International Monetary Fund and the World Bank. When he became Finance minister in 2005, Dr Suruma had in his corner Gen Salim Saleh as state minister. Both were sacked in 2009.

Saleh had long-running battles with the Ministry of Finance and the Treasury, and last year appeared to have scored a major victory when his protégé, Mr Ggoobi, was astonishingly named PSST, a position for which he had neither the requisite experience nor specialised training.

For years, Ggoobi had vended ideas that challenged the economic orthodoxy of BoU under Mutebile and the Treasury under Mutebile’s understudy, Keith Muhakanizi. Ggoobi’s ideas were aligned with those of his godfather, Gen Saleh, who also happens to be the second most powerful person in Uganda.

But if Ggoobi’s views as expressed in the Makerere University lecture in memory of Mutebile represent his current thinking, he has undergone extraordinary transformation barely a year since he become the chief economic technocrat and abandoned the business of preaching ‘economics that works’ (on radio and TV talkshows, and perhaps in the lecture rooms of Makerere University Business School where he was a lecturer).

There has always been a group of economic and political actors in Museveni’s ruling circle who strongly objected to the conservative and orthodoxy economic policies of Mutebile. In fact, a key member of this group, Dr Suruma, went as far as referring to the Bank of Uganda under Mr Mutebile as the number one neo-colonial agency in Uganda!

It is instructive that Saleh’s protégé, Mr Ggoobi, sees Mutebile in very glowing terms. In his Mutebile memorial lecture, Ggoobi rehashes the language of neoliberalism in ways that would have greatly impressed the late Mutebile and must definitely be very welcome to the IMF and the World Bank folks who maintain a hold on the thinking that undergird Uganda’s economic policy decision-making.

There are some misleading if not entirely false claims of the neoliberal orthodoxy that Mr Ggoobi has quickly imbibed, or at a minimum is now forced to embrace by virtue of being in charge of the Treasury in a country under the heavy influence of the IMF and World Bank.

The core fallacy is the insistence that it’s bad policy for the government to intervene (or interfere with free markets) during hard economic times as Uganda is experiencing now. Fuel prices have shot through the roof, and the neoliberal orthodoxy dictates that government cannot do anything to mitigate the situation because the causes are external and will autocorrect with time in line with market dynamics.

Today, the dollar price of petro in Uganda is almost twice that in the US yet in the latter country, which is the headquarters of neoliberalism and the ‘free’ markets ideology, the government was compelled to release a huge supply of gasoline from strategic reserves onto the market to arrest runaway pump prices.

Mr Ggoobi conveniently blames today’s economic hardships in Uganda on purely external factors but has no problem attributing the economic difficulties of the 1970s and 1980s to what he calls the ‘control model’ of economic management adopted by the Amin and Obote governments.

The so called ‘control model’ did not start in 1970 with Obote’s ‘move to the left’, as Ggoobi asserts.

Uganda’s economic policy approach throughout the 1960s had the state at the centre of a lot of economic activity, with impressive results. This was the case in other African states under the general strategy of import substitution industrialisation, commonly called ISI, which delivered the kind of growth that hasn’t happened under the era of neoliberalism.

The neoliberal choir at the Treasury, now led by Mr Ggoobi, sees no problem with granting goodies to revered foreign investors. They see it as good economics when the government commits to foot the tax bill for a foreign investor, in addition to free land and a quasi-monopoly status in the coffee sector, but bad economics to extend a fuel subsidy or cut the taxes to ease people’s pain at the pump.