Economic growth Vs development

In his book “The Next Convergence”, the Nobel laureate in economics, Michael Spence, found that between 1950 and 2005 only 13 countries in the entire world sustained an average rate of GDP growth of 7% and above. Uganda’s 6.74% growth over the last 30 years is close to the world’s best record. Also remember that per capita income is calculated by deducting the rate of population growth (Uganda’s average over the last 30 years is 3.24) from GDP growth. Therefore, Uganda’s per capita income has been growing at an annual average rate of 3.5%.

Hence, although Uganda has been able to almost double GDP every 10 years, it could only double per capita income every 20 years. Uganda’s per capita income was $403 in 1986. But this figure is misleading because at that time the price of the dollar was determined by government, not market forces. The only way to get an accurate figure is to find the price of the dollar on the black market in 1986, which I have failed. The foreign exchange rate was liberalised in 1991 and Uganda’s per capita income fell to $160 ($283 in 2016 prices). Today it is about $670 depending on the exchange rate.

If you think Uganda is crawling, look at this: the USA has the world’s 10^th highest per capita income at $56,000. In fact it has the highest per capita income among large nations with a hinterland. This is because it sustained per capita income growth at an annual average rate of 2% between 1900 and 2010. In Europe only West Germany (between 1950 and 1975) sustained a higher per capita income growth rate (at 3.8%) than Uganda under Museveni. East Asia’s growth rates (at 5.8%) are therefore unprecedented historically.

Uganda’s per capita income growth has been severely undercut by a very high population growth rate, the second highest in the world. If our population grew at 1%, our per capita income would have grown at 5.74%, which is almost the average for East Asian nations (5.8%) during their intense period of transformation. Whom do we blame for our nation’s love of many children? The opposition is likely to say Museveni. Whoever is to blame, a high population growth rate means fewer working people paying for very many defendants, a factor that reduces the rate of savings and, therefore, investment.

Thus, Uganda is poor not because Museveni has performed poorly on the economy but because he began from a very low base and also because our people love to produce many children. Uganda reached a peak in per capita income in 1970. From then the economy declined till 1987. Museveni spent the first 13 years of his administration digging Uganda out of a pit, and our country regained her 1970 per capita income in 2000. That means we lost 30 years. In fact, the best way to judge Museveni is to begin in 2000.

Over the last 15 years, (2000 to 2014), Uganda’s economy grew at an annual average rate of 6.82% – an impressive number by historical standards. It has been the 19^th fastest growing economy in the world, 10^th in Africa. When we remove mineral rich nations from the sample, Uganda becomes 9^th in the world, 3^rd in Africa behind Ethiopia (1^st) and Rwanda (2^nd). Therefore, Uganda is on the right path economically.

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amwenda@independent.co.ug

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editor@independent.co.ug