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Why economic growth matters

Evidence of how GDP growth has led to improved wellbeing of the majority of Ugandans

THE LAST WORD | ANDREW M. MWENDA | Critics have been accusing me of being simplistic by focusing on economic growth as a major success of President Yoweri Museveni’s administration. Uganda has sustained an average annual rate of growth of nearly 7% over the last 34 years. Some argue that the country could have done better by comparing us to China, which had a growth marathon of over 10% per year between 1978 and 2008. Yet China is different from Uganda; especially when we look at factors that drive rapid growth such as a shared national consciousness (leading to high levels of trust), the existence of a strong state, high levels of human capital, diffusion of technology, and access to the sea and proximity to large markets.

Most indicators would predict that Uganda could actually have performed worse. We lack a shared national consciousness; making a shared vision difficult to craft. It has had low levels of human capital development (measured by the number of years an average citizen has spent in school). We have a very high dependency ratio (median age is 16 years); so most working Ugandans spend a large share of their income looking after kids instead of investing in productive activities. The country was engulfed in myriad civil wars for the first 20 years of her growth marathon (1986 to 2005).

Uganda is located far away from the sea, making access to international markets expensive. Our country was surrounded by Kenya to the east, and Tanzania to the south both of which were stagnating in the 1980s and 90s; Rwanda to the south, which was civil war between 1990 and 2001; DRC to the West which was economically retrogressing and later in civil war from 1996 to now; and Sudan to the north which was also in civil war. Beyond our immediate neighbors are Burundi, Somalia, Ethiopia and Central Africa Republic all of which were in civil war. Your neighbor’s growth adds about 1-2% on your growth through positive externalities. It is, therefore, a miracle that Uganda sustained such impressive rates of economic growth between 1986 and 2010.

Critics say that growth has increased inequality; that incomes have been concentrated in a few hands. This is only partly true. First, for most countries, early periods of growth tend concentrate income in a few enterprising hands. But when most labour moves out of agriculture in rural areas to industry and services in urban areas, political agitation for income redistribution gains momentum. But it would be dangerous for Uganda to begin a massive income redistribution program at low levels of development; the country would be redistributing poverty.

The measure of income inequality is the gini-coefficient spread between zero (complete equality i.e. everything is owned equally) and one (a few own everything i.e. total inequality). Uganda’s gini coefficient is 0.395, among the best in its income bracket. It is better than Africa’s leading democracies: Zambia (0.575), Botswana (0.65), Ghana (0.423), South Africa (0.625), Nigeria (0.488), Kenya (0.485), Senegal (0.403) and Malawi (0.461). Only Tanzania (0.376), Benin (0.365) and Ethiopia (0.33) do better. Our neighbors Rwanda (0.504) and Burundi (0.424) are not better.

Indeed, evidence shows that Uganda’s growth has been widely shared, the failure of Museveni’s government to articulate this consistently notwithstanding. For instance, we can measure things that indicate improved living standards and wellbeing of the population such as education, health, quality of housing, access to clean water, electricity, food security and access to modern amenities such as televisions, cars, radios, motor cycles etc. On each of these indicators, the numbers speak for themselves.

For instance, life expectancy at birth is the best indicator of improved health. This has increased from 39 years in 2000 to 65 years today. Life expectancy is greatly affected by infant and child mortality. The biggest influence on reduced infant and child mortality is not medical services (curative medicine) as most people would think but improved nutrition (a proxy for increased incomes allowing for access to better food), improved hygiene (a proxy for improved education hence awareness of the germ theory of disease), improved sanitation, access to clean water and improved conditions of living; especially the quality of housing.

The quality of housing is also a good proxy for improved incomes and thus better standards of living and wellbeing. In 1991 only 12% of Ugandans lived in a house with permanent walls. In 2014, it was 43%. Houses whose roofs were built with permanent materials were 40% in 1991 and 70% in 2014. Houses whose floors were made of rammed earth floor were 77% in 2002 and in 2014 had fallen to 32%. It is almost six years since the last population and hosing census. These numbers must have greatly improved since. Other factors such as access to clean water (76% nationally), access to electricity have greatly improved.

Other indicators of wellbeing and increased standards of living such as access to television, mobile phones, cars, motorcycles, access to education (UPE and USE have been very successful even though quality is not as good) and access to medical services (like the average distance from a home to a health center) have all seen remarkable improvements. It makes little sense for us to get bogged down into a litany of statistics to prove these points.

Therefore, the claims by critics that economic growth has not been translated into improved living standards and wellbeing are spurious. As someone who grew up in the Uganda of the 1970s, 80s and 90s, I am always impressed, though not satisfied, with the improved quality of housing, dressing and even physical appearance (better fed) of Ugandans after these three decades of sustained growth. Regardless of the weaknesses people cite about using GDP and per capita GDP to measure success, all of which are legitimate and convincing, I still believe it remains the best instrument available to measure the standards of living of a population.

There is no country in the world with a per capita income of $800, which has a life expectancy of 75 years. Equally no country of such per capita income has provided its citizens with a large basket of public goods and services to the quality and reach of countries with per capital income of $50,000. This is not to say that money is all you need to make your citizens live a good life. Rather it is to demonstrate that high income (which is a result of sustain economic growth) is a fundamental prerequisite for achieving most of the human welfare goals we seek.

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amwenda@independent.co.ug

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8 comments

  1. Interesting analysis Mr M9. Uganda’s neighbors, Kenya and Tz economic growth rates stagnated in the 80s & 90s whilst Uganda’s remained high but unfortunately she still lags behind the two in terms of economic development – three decades later!
    What do you think of your school child who’s been improving significantly than his peers in class but still remains number three out of three pupils for a donkey years?

  2. Speculation I’d still the leading economic activity and foreign remittances still account for a decent portion of our forex. Get time and see what we spend on as imports then you will convince your critics that you didn’t pick this from the photocopy at some college for first year student of development economics. The reality is far different.

  3. 1.There are many aspects of the economy that economists have to explain for example; what is the impact of a country whose currency has more value visa- vis vi one whose GDP is highest in the world; for example Qatar,UAE,Switzerland have the highest GDP in the world but in reality are they richer than England,Japan or USA ?
    2.GDP is more about citizens ‘s spending capacity and quality of living.
    3.To me;It seems issues of GDP are meant for poor nations and for their leaders to work hard.I have never heard Trump talk about GDP he always discussing trade or stock exchange tradings .

    • Go back to class and study. USA has the highest GDP followed by China, Japan …Therefore, your strong basis of argument is null and void. You shot you self in that big mouth

  4. You Dick who doesnt know that the GDP of USA is high?Do you have a passport?Have you been to UAE? are you aware that most of the people who live and work in Dubai are not natives of UAE and they are more than the natives of UAE? My concern with GDP in relation to development and as a measure of development is that it has flaws; it instead favors nations with small populations ;for example the citizens of UAE ,Qatar Norway,Switzerland have a better standard of living compared to those of USA who are over 300 million.

    Let me simplify it for you Dick; if you earn 2 million shillings yearly but you have 100 children to look after and another has 2 children and earns 1 million shillings who would be in a better position to provide better health care,clothing ,education,food for their children?

    About my loud mouth;its coz i am a Briton and a lawyer;what a combination why wouldn’t i be loud!!!!!

  5. Empty mouth “My concern with GDP in relation to development and as a measure of development is that it has flaws; it instead favors nations with small populations ;for example the citizens of UAE ,Qatar Norway,Switzerland have a better standard of living compared to those of USA who are over 300 million” Gives an example; “Let me simplify it for you Dick; if you earn 2 million shillings yearly but you have 100 children to look after and another has 2 children and earns 1 million shillings who would be in a better position to provide better health care,clothing ,education,food for their children?”. STUPID. You can’t even see that the example you have given counters your argument rather than providing for it!!! I I can’t manage to argue with the kind of your understanding and level.Go to class and learn

  6. @ Dick did you just stray on this page?Are you looking for School fees from me or what?How do you say “Can’t and manage in the same sentence?You have just admitted that you can not manage my level of discussion need i say more?

    You reason like People Power chaps they are the ones who abuse any living creature.

    For your information i completed my Masters Degree when i was just 25 years of age .

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