Analysis of Sugden & Wilson’s proposition of a dual approach to development in the light of the Ugandan experience

Introduction:

The development agenda, following the creation of the Breton Woods institutions at the end of World War II, was dominated by state dirigisme based on import-substitution industrialisation policy. This economic approach, although criticised for not helping the poor because of its insensitivity to distributional issues, continued to be followed until the 1970s when the development success of the East Asian economies of South Korea, Taiwan and Malaysia emerged. Unlike the other developing countries, these economies were able to maintain high growth rates while significantly reducing income poverty, owing to policies such as land reform, spread of education and massive employment in unskilled labor intensive export industries (Kanbur, 2008).

With the discovery of the East Asian economic success, the 1970s became a decade of considerable rethinking of the economic development approach. But, the decisive push for the paradigm change emanated from the economic crises of natural resource-based economies, especially in Latin America, following the collapse of the second oil boom in 1979 (Hayami, 2003). The US Federal Reserve reacted to this shock by raising interest rates, with a resultant rise in the dollar. Debt repayment burden for developing countries with dollar labelled debt such as Latin America became unsustainable, and the crisis turned to be one of lack of foreign exchange to service debts and purchase imports. In this context, the inward oriented development approach was abandoned in favour of a new paradigm based on competition, market orientation and openness (Birdsall, de la Torre and Caicedo; 2010).

Thus, quick opening of markets was encouraged in order to integrate the global economy, it involved implementing reforming policies such as trade liberalisation, liberalisation of inward foreign direct investment, liberalisation of interest rates, a competitive exchange rate, privatisation, etc. These different policies were based on the neo-liberal doctrine which is theoretically motivated by the efficiency of markets. This doctrine has also become associated with the Washington consensus. Coined and formulated by John Williamson[1], this concept is used to group together a number of reforming policies including those mentioned above.

By undertaking such reforms, developing countries experienced either stagnation or a real decline in per capita income and, income inequality rapidly increased, both within and across countries (Agarwala and Hanna, 2000). Connecting to the global network thus appeared to be producing poverty as well as wealth, underdevelopment as well as development; a process that corresponds to the law of uneven development described by Hymer[2].

This model of development which is embodied in the Washington consensus was challenged for its tendency to produce conflicting results. A number of authors argued for the search of an alternative method to development and particularly, Sugden and Wilson (2002, pp.113) proposed that “localities pursue a dual approach, that considers the need to follow a certain protocol in the global system, while simultaneously nurturing local policies that are directly rooted in their own community objectives”.

In the coming sections, I will analyse the validity of this proposition in the light of the Ugandan experience. But first, I will start with an explanation of the notion of development then, I will use the Ugandan case study to demonstrate whether a dual approach to development is feasible or not.

 

Explaining the notion of development:

What is “development”? There is no straightforward answer, in the sense that defining the concept has remained a major theoretical and practical challenge. A number of competing ideas exist as to how to best measure and promote development (Sant’Ana, 2008). In economics, for example, the process followed by countries or regions to raise their standards of living is labelled development. This, according to economists, is attained when a concomitant increase in the stock of physical capital and human capital, and an advance in technology is realised (Cefni’s, 2011). In other words, the concept of “development” refers to economic growth according to economists.

An alternative understanding of the concept was conceived by the United Nations Development Programme (UNDP) when it introduced in their 1990 Human development Report (HDR) the notion of “human development” as a process of enlarging people’s choices. It was recognised in the report that a large spectrum of choice was only accessible to people who could lead long and healthy lives, acquire knowledge and have access to resources needed for a decent standard of living (Sant’Ana, 2008). To measure the availability of these three fundamental dimensions, the Human Development Index tool (HDI) was devised.

These two approaches illustrate how the conceptual indeterminacy of “development” can make possible the expression of competing ideological, theoretical and practical views of human well-being and advancement. Having said this, Sugden and Wilson (2002, pp.114) express that no universally accepted definition of “economic” or “human” development is proposed by neither methodology.

For the purpose of this short paper, an economic view of development will be followed.

Dual approach to development:

Sugden and Wilson consider that localities and their communities, while working within the Washington or post-Washington consensus, should be left free to devise development strategies based on their history and culture, and that are in line with their own aspirations. This locality development requires according to Sugden and Wilson (2002, pp.127) a process of democratisation of decision-making in order to reach the goal of truly democratic development process.

The case of Ugandan localities:

Uganda, as a developing country, has witnessed a period of economic mismanagement and civil unrest that lasted approximately from 1969 to 1985. During this period, the Ugandan economic activity went into recession with a negative GDP growth, rapid contraction of the private sector and, fleeing of the qualified professionals (The World Bank, 1997). Thus, when the National Resistance Movement (NRM)[3] came to power in January 1986, it decided to immediately implement interventionist and inward-oriented economic development policies with the unsatisfactory results according to the World Bank (1997, p.7) of multiplying the inflation rate by 3, of appreciating the exchange rate and of amplifying the shortages of goods and services.

  • The Washington Consensus Policies

This apparent failure led the NRM government to turn to the multilateral development agencies such as the International Monetary Fund (IMF) and the World Bank. At this time however, these two agencies had already shifted away from state dirigisme and inward-oriented development strategies to a new paradigm consistent with the traditional emphasis of the neoclassical school (i.e. competition, marked orientation and openness).

The Ugandan government was thus presented a “structural adjustment policy” as a condition for receiving grants. From May 1987, it received two Economic Recovery Credits (ERC I and II) with the conditions of liberalising trade (including liberalisation of foreign exchange market, removal of price controls and import liberalisation), improving demand management, raising government revenues and restructuring public expenditures (The World Bank, 1997). The results of these reforms were considered quite modest in comparison of what was expected. A new instrument, the structural adjustment credit, was thus negotiated in the end of 1991 between the Government of Uganda (GoU) and the Breton Woods institutions. The objective was to deepen the previous structural adjustment programs by reforming the regulatory and business environment, and by privatising 85 percent of all state owned enterprises by the end of 1997, including parastatals in the power, telecom, water and transport sector (The World bank, 2002). These reforming policies that fall under the Washington consensus approach were meant to stimulate private sector-led growth and improve the effectiveness of the Ugandan government.

But from the mid-1990s, the Washington consensus reforming policies started facing enormous criticisms for their inability to foster growth and reduce poverty. Indeed, Structural adjustment programmes with their policies of deregulation, liberalisation and privatisation failed to advance the traditional economies of the less developed countries but also, made them less efficient according to Hayami (2003, p.21). Propositions were then made to consider new priorities such as focussing primarily on poverty reduction and partnership with appropriate institutions in each country in reducing poverty.

The incorporation of these new priorities into the old label made possible the advent of a new label coined by Joseph Stiglitz as the “Post – Washington Consensus”.

  • The Post – Washington Consensus

In this new context, a new strategy of poverty reduction was spelled out by the Government of Uganda in its Poverty Eradication Action Plan (PEAP)[4] of late 1997. The main objective was to reduce income poverty to below 10 percent by 2017, and to ensure the achievement of universal primary education and primary health care, and also safe water. The means to concretise these new goals were according the Breton Woods institutions the continuation of policies of macroeconomic stabilisation and economic growth. In other words, policies of trade liberalisation, business and financial sector environment deregulation, and privatisation of the bulk of state-owned enterprises had to be pursued (The World Bank, 2002).

As a result, Ugandan GDP growth averaged 7 percent per year for the period of 1997 to 2010, and even so the size of the economy and the country’s per capita income were still considered very low. Indeed, income poverty touched 31 percent of the population in 2005/06, with the majority of them living in the northern part of Uganda. A disparity between rural and urban income levels exists in addition to these regional disparities. For example, the mean consumption of Kampala which is the richest area is still today 2.5 times higher than the poorest area in the northern region. There is also an inequality within rural and urban areas that remains persistent (Government of Uganda, 2010).

These trends have put into question the effectiveness of the top-down, sector-specific policies which have not been able to develop balanced, diversified rural and urban economies. In other words, it was admitted that the system as it was, was prone to produce poverty as well as wealth, underdevelopment as well as development. And to mitigate these unsatisfactory results, the need to a new approach that will be built on local knowledge to tailor public policy to specific circumstances was recognised (UNCDF, 2010). This localised method was also to be used to guide local development strategies and was adopted by a number of countries.

  • Localisation

In Uganda, a Pilot Project relative to District Development was conceived in collaboration with the United Nations Capital Development Fund (UNCDF) in June 1997, after the admission that localised strategies of strengthening the development process were needed. It was to operate within the guidelines set by the Local Government (LG) Act[5] of 1997 and at the District level[6]. In line with the PEAP, the aim of the project was to resolve the issue of poverty by making the development process (i.e. the delivery of public goods and services in particular) more inclusive, efficient, effective and sustainable.

For reminder, the LG Act mandated the district councils the preparation of comprehensive and integrated development plans incorporating plans of lower LGs. The application instrument of this mandate was the Pilot Project for it was aimed to be used to provide the technical assistance and financial resources needed to allow the definition, testing and application of a variety of participatory planning, allocation and investment management procedures (GoU, 2001).

In reality, these objectives were not totally met because the design of the project itself did not facilitate the incorporation of participatory planning and allocation mechanisms in the implementation of the programme. As a result, no social development analysis was undergone and for that reason, many cultural and social factors disturbing individual and community access to social facilities were not addressed. Moreover, no strategy of women and other vulnerable group’s inclusion was made. Finally and as a whole, the project remained in line with the sector wide approach policy guidelines of the PEAP[7] thus; people were not given the ability to propose more suitable service delivery alternative strategies or more comprehensive approach to the solution of their problems (UNCDF, 2001)..

At the completion of this Pilot Project in 2002, the GoU decided a national-wide replication with the help of the concerned World Bank institutions.

In the meantime, a second District Development Project was initiated in response to the challenges encountered during the previous one. The challenges included, as mentioned above, a limited inclusive participation[8] at the community levels and the lower local governments. The focus of the second project was thus mainly on capacity building, and targeted a number of results in regard with the objective of strengthening the coordinated participatory planning and budgeting mechanisms for LGs and lower local levels. These results included: “ i) Harmonised participatory planning guidelines tested, refined and implemented; ii) Capacity of LGs in strategic planning enhanced; iii) Mechanism for vertical and horizontal communication, transparency, accountability and reporting put in place” (UNCDF, 2007). The targeted districts were the same of those of the first Pilot Project and, the implementation phase which was deemed satisfactory lasted until 2007.

A third District Development Project[9] was initiated in 2008. It was built upon the achievements of the two previous projects but, it went beyond the PEAP policies of social services delivery and effective local government system. It focussed on the Local Economic Development (LED) following the view that when given the opportunity, localities and their communities can pursue a development agenda that is likely to be in line with their own aspirations (Sugden and Wilson, 2002).

The mission of the project was to contribute to the:

“ a) Development of LED Governance Capacity within LGs; b) Developing LG capacity towards enhancing the Business Enabling Environment of their locality; c) Business & market development services to respond to the strategic requirements of the private sector; d) Development of capacity at the National level for assessing the Nation LED Context and enhancing it in response to LED promotion needs; e) Ensuring that Gender Equity is mainstreamed in all LED promotion initiatives; and f) Enhancing access to the justice system at the local level emphasising the strengthening of the system’s capacity to respond to LED requirements” (UNCDF, 2008).

The above objectives show that the aim is to clarify, activate and strengthen the critical role of LGs towards the promotion and guidance of LED. The Project’s implementation was divided into two phases[10], with the first phase targeting 5 Districts[11] and the second another 10 Districts[12]. The execution of the activities in phase two was linked to the availability of funds.

Conclusion:

This case study has demonstrated the feasibility and the need for a dual approach to development although; it seems that the learning process of such an approach takes a long time. Confirmation was made that development policies based on the Washington Consensus and the Post-Washington consensus will lead to regional, rural, and urban disparities in terms of income poverty. Because they are top-down and sector-specific policies, propositions of bottom-up and community specific approach to development for mitigating reasons were made. This localised approach reflects the idea of Sugden and Wilson that localities should pursue a dual approach to development. This is a pertinent approach but, will require in my view a longer process of learning then expected when it comes to its application in the customary based economies such as Uganda

Bibliography:

[1] See the paper of Ravi Kanbur. 2008. “The Co-Evolution of the Washington Consensus and the Economic development Discourse” [Online], Cornell University, p.3

[2] See Sugden and Wilson. 2002. “Economic Development in the Shadow of the Consensus: A Strategic decision-making approach”, Contributions to Political Economy, Nº21, pp.435.

[3] It is the movement of the current President Yuweri Kaguta Museveni and has overthrown the then incumbent regime of Milton Obote.

[4] The PEAP focussed mainly on the sectors of education, health, roads, water , and production.

[5] It is the decentralisation legislation. It devolved to Local Governments the responsibility to deliver services in five key sectors: education, health, water, roads and agriculture. For more information, see Assignment One.

[6] Five Pilot Districts were chosen for the project, Mukuno, Arua, Jinja, Kabale, and Kotido.

[7] In the five districts, investments were made in the area of education, health, roads, water and production. In the sector of education for example, the District of Arua invested in the construction of new classrooms, provision of desks and chairs for the pupils, and the completion of stalled structures and the renovation of existing ones. The District of Kotido on the contrary invested mostly in the construction of new classrooms, dormitories, kitchens and stores. This is due to the fact that the schools in Kotido provide boarding to pupils as a way of ensuring their regular attendance.

[8] For reminder, the idea of localisation or locality development implies democratic engagement in the process from the most local level.

[9] It was conceived in partnership between the UNDP and UNCDF, the Government of Austria and the Government of Uganda.

[10] Phase one was to start in the first year of the implementation and gradually expand over the programme period.

[11] Phase one Districts are: Arua, Kitgum, Busia, Kayunga, Isingiro.

[12] Phase two Districts are: Lira, Moyo, Amuru, Abim, Butalejja, Soroti, Masaka, Wakiso.

 

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