The aim of this session was to build political consciousness in the fellows. Understood in Marxist terms, consciousness is inherently political, because it is inextricably linked to one’s sense of their place in history and is also a result of political-economic circumstances.
Defining Political Economy
Several differing meanings have been ascribed to the phrase “political economy” over the course of time. Michael Mugisha interpreted its meaning mainly through Marxist lenses, as the interaction between political and economic forces. Karl Marx defined political economy as how the ownership of the means of production influences historical processes. On the other hand, Michael also shared Adam Smith’s understanding of political economy as the science of managing a nation’s resources to generate wealth. Simply put, it is the study of the interrelationship between economics and politics.
The Importance of Political Economy Analysis
Political Economy Analysis is an essential tool for understanding the interaction of political and economic processes in any society. Michael argued that the political economy is shaped by rules and regulations that enable and/ or curtail how people cooperate and compete. It describes how individual actors, public institutions and societal forces interplay, drawing a map of the political settlement within a particular society or a socio-economic sector. If mishandled, Michael noted that this interaction may end in social instability. The government has to set a legal order that sustains the smooth competition of economic and political forces. And of course, it has to maintain monopoly over tools of coercion and violence in order to avert it.
Political economy analysis helps us to understand the role of government in the economy. For a government to function, it needs to develop its extractive capacity – the ability to collect taxes. Collecting direct taxes, Michael noted, brings the government into the politics of resistance, which makes trade taxes (taxing on goods and services instead of directly taxing individuals) more attractive. However, Michael decried the fact that the commanding heights of Uganda’s economy are controlled by exploitative multinational capital.
Unregulated foreign direct investment (FDI), which Uganda welcomes, is detrimental to the development of indigenous corporations, which curtails our socio-economic transformation. This is due to the fact that foreign companies usually have several advantages built across a long period of doing business in many countries. For instance, they often enjoy huge economies of scale, come with advanced technology, are provided with cheap and long-term finance from their home countries, carry long experience, and often have deep pockets. Contrasting the benefit earned from tax revenues collected from them and the extent of damage they have on existing local firms, which they usually displace from business, it is easy to see how the balance of profit skews in favour of multinational capital at the expense of Uganda’s long-term development. It is even more appalling that most of the major sectors in Uganda today, such as banking, insurance, manufacturing, construction, and telecommunications, are controlled by foreign capital.
Political economy analysis also involves understanding how governments function. Michael posited that the government for instance has to build a surveillance capacity to track commercial transactions made by its citizens. This is how it establishes how much tax a citizen should pay per transaction.
Michael added that the government also has to build its bureaucratic capacity, to enable it manage and execute public policy. For example, the Uganda Revenue Authority (URA) has an entire bureaucratic staff that collects taxes. But it also has to work with other government departments such as the Ministry of Finance in order to execute its work. In URA alone, it can be said that there is a political economy of taxation.
Understanding political economy also enables leaders to appreciate social challenges and provides the knowledge to improve social conditions. Due to the vested selfish interests in-built in markets, they often do not serve vulnerable communities. It therefore takes a leader who is aware of how power and resources are distributed and contested in different contexts to reign in on markets and serve society better.
As leaders intervene in political, economic and social issues to serve their people better, political economy analysis renders them lenses with which to understand who the stakeholders in various political-economic arrangements are, what they have to gain or lose, and how to handle their contradictions to mitigate the deleterious effect of these contestations.
Michael observed that the political economy of a country should be shaped in the long term to maintain social peace, manage the health care system, support economic transformation, etc.
Public servants need to be skilled in political economy analysis because it empowers them to meaningfully discourse with stakeholders to solve social challenges.
Leaders should be able to understand different points of view from different forces acting in society to develop solutions peacefully while serving all forces equitably. Political economy is the source of the knowledge to manage this.
To summarize, political economy plays a fundamental role as a tool of analysis, to help us explain why things are working or failing in society – and why they work or fail in a particular way. It takes into account the roles played by different stakeholders such as politicians, business people, civil servants, peasants, the informal sector, manufacturers and others – to understand their interest in and influence over public policy.
Building Blocks of the Political Economy
According to Michael Mugisha, there are several elements involved in the creation of a successful political economy, including; initial conditions, ideas, institutions, levels of industrialization, and the international context.
a) Initial Conditions
These are those factors or circumstances in the evolution of political and economic institutions that shape how they develop and their characteristics. These factors normally influence how a nation’s legal framework is written and enforced. This, according to Michael, can impact social peace, drive economic transformation, and shape overall governance. one such initial factor determining our political economy is the colonial legacy. This is a challenge for many countries in Africa. Fragments from our colonial history still have an enduring impact on the political economy of African states. The politicization of ethnicity by our colonial masters as they executed the divide-and-rule policy still plagues how African elites contest for political power, often politicking along tribal lines. This initial condition of colonialism has led to division, inequality, and so many other social ills because our political economy was misdirected from the beginning.
b) Ideas
Ideas such as capitalism vs socialism, free-markets vs central planning or government intervention, and neoliberalism vs conservatism – build political economy because they influence which policies are passed, how public institutions are designed, what intellectual movements emerge, and generally how societies are organized in their economic and political life. This consequently guides how resources are distributed and how power is organised and disseminated. Ideas are thus a powerful force influencing how economic systems, political structures, and social relations are organised in Uganda.
c) Institutions
Michael observes that institutions are the places or mediums where ideas and initial conditions happen. These could be legal institutions, political institutions, financial institutions, education institutions, among others. These institutions are the organizations that structure human interactions in society. They shape a country’s political economy by determining how resources are allocated, how power is exercised, and how economic and political decisions are made.
d) Level of Industrialization
Michael also noted that a country’s “level of industrialization” also shapes its political economy. The process of industrialization happens through the transformation of an economy from an agrarian one to one based on manufacturing and industry. This transformation subsequently affects a country’s economic structures, social dynamics, and political institutions drastically. As a country begins to go through various stages of industrialization, it experiences a shift from being an agricultural-based to a manufacturing-based economy. These changes also impact on how power is organised, distributed, and contested in a particular society.
e) International Context
The prevailing “international context” also shapes a nation’s political economy. Countries always function within the interplay of global economic trends, with influence from international organizations, and under the limits of geopolitical dynamics. Michael highlighted the increasing role of China as a global player that is redefining the balance of power in the world, shaping it highly towards multipolarity. A multipolar world comes with broader opportunities for developing countries like Uganda to find development finance and generally bargain for a place in the world without being over dependent on one major global power. Additionally, international organizations like the International Monetary Fund (IMF), the World Bank, and the World Trade Organization (WTO) also have influence over national political economies because they set rules of economic engagement, offer financial assistance, and provide policy guidance. Developing countries often have to adjust their domestic policies in order to align with the conditions and recommendations given by these institutions, hence affecting their political economy.
Challenges in Uganda’s Political Economy
Michael noted that to understand the public policies that Uganda usually pursues, one has to observe the interests that stand to benefit from those policies. He identified some of the elite groups which are at the helm of such policies to include; military elites, Civil Society actors, traditional leaders, religious leaders, and multinational corporations’ compradors, among others.
These need not be self interested individuals consciously seeking personal gain. Rather, they often advance the interests of their social groups subconsciously.
One of the challenges of Uganda’s political economy is the dominance of foreign capital in Uganda’s economy through their powerful corporate representatives (compradors) both in the public and private sectors. Their influence can be observed partly through the nature of the reinstitution pursued by Uganda under President Yoweri Museveni since 1986. One realizes that Uganda adopted a particular design of political institutions and public policies that serve the interests of this group. At the price of burying state enterprises, these groups – both domestically and internationally – pushed for policies that would enable them benefit from the economic reforms Uganda made i.e., SAPs. This history has implications on our country’s political economy to date!
In 1986 when NRM came to power, the economy had totally collapsed. Western countries insisted that as a prerequisite for lending Uganda to finance basic public services such as maintaining law and order, the country had to first reach an agreement with the IMF. The IMF then demanded that to lend Uganda any money, the government had to accept “stabilisation” measures i.e., withdraw state subsidies from education and health, liberalise foreign exchange, control inflation, privatise state owned enterprises, liberalise and deregulate the economy, etc. The government acquiesced to these reforms out of desperation.
This shaped the subsequent policy orientation of the government, cultivating a public and private sector ideological commitment to the neo-liberal economic gospel. Consequently, the social forces that came to dominate intellectual and political life in Uganda up to today are hostile to any form of political economy that would promote successful indigenous business ownership.
