Mwenda: Corruption does not affect economic growth (Daily Monitor (Uganda))

Veteran journalist cum political and economic commentator, Andrew M. Mwenda kicked up a social media storm last week after he suggested that the presence or lack of corruption does not impact economic growth.

“There is no scientific proof,’ Mwenda said during the Twitter debate “that corruption is not an impediment to economic development except for moral concerns”.

The debate, which attracted comments from key figures including Ramathan Ggoobi, a Makerere University Business School economics lecturer and city lawyer, David F. K. Mpanga, reminded Mwenda, of how Uganda was losing more than Shs500b annually but he shoot this down, saying: “The story of Shs500b being lost sounds outrageous but it doesn’t tell the whole story. And it’s what the Shs500b doesn’t say than what it says that matters.”

Excerpts of the same debate were published in The Independent magazine, where Andrew Mwenda is managing director.
In 2012 a World Bank report said Uganda loses more than Shs500b annually, however, this figure could have scaled up, considering that massive corruption scandals including the pension scam and graft in Uganda National Roads Authority have reported billions of shillings missing.

But the Shs500b, according to Mwenda could be peanuts, considering that Uganda has annual budget of Shs24 trillion.
“I think stealing Shs500b is peanuts (this is a theft rate of less than 2 per cent). In the wider scheme of things, a 2 per cent theft rate is really small. It means that you are utilising 98 per cent of the money correctly.”

“Even if one was right about the loss of Shs500b, one doesn’t know the other opportunity cost of not stealing it,” he added.
The Shs500b, which by the way could be more, stands above the Shs479b the Agriculture vote received in the 2015/16 budget.
Agriculture is a key sector of the economy, employing more than 60 per cent of Ugandans.

Massive budget growth
Uganda’s Budget in the 205/16 financial year grew to Shs24 trillion, highlighting the country’s ambitious growth plans, especially in terms of infrastructure and energy.
However, admittedly many government projects have either been delayed or stalled due to corruption, accentuating the apparent direct impact to growth.

In his observation, former Inspector General of Government, Augustine Ruzindana recently said: “When corruption is pervasive, everyone suffers ordinary citizens, the state and the private sector.”

Similarly, Peter Eigen, the Transparency International founder said corruption to a greater or lesser extent, poses a threat not only to the environment, human rights, democratic institutions and fundamental rights and freedoms, but undermines development and deepens poverty.

“If it is allowed to continue to provoke irrational governance, one driven by greed rather than the people’s needs, and to disrupt the development of the private sector, corruption will even deny that most fundamental of human needs hope,” Eigen wrote in a paper published by the UK-based Observer newspaper.
However, Mwenda argues that a study of economic history shows how hard it is to arrive to a conclusion that corruption per se undermines growth.

“There could be one or two papers with evidence that corruption affects growth negatively, but those papers too, don’t tell the whole story, and there are lots of other papers to contradict this, papers that show the productivity of corruption.”
He also suggests that “corruption is the grease Museveni has used to lubricate his power because it is the glue that brings Ugandan elites together”.

President Museveni has also been reported using Mwenda’s analogue of how corruption could be good when looked at differently.

In 2010, Museveni told residents of Masindi that whereas corruption leads to wastage of public resources, it also has a good side to it as corrupt civil servants and politicians invest the money in other sectors of the economy.

The President’s argument could loosely mean that thieves build the national economy however, he has also severally warned that “thieves will vomit the money they steal from government”.
Mwenda also argued corruption “may be the glue holding the nation together”, asserting that it is not the public service that holds “our multi-ethnic elites together in an entity called Uganda”, but corruption.

Development vs morality
When challenged by Aga Sekalala Jr, a Kampala businessman to “show me a convicted ‘public funds thief’ who has created 100 sustainable jobs, then you can promote the vice,” Mwenda said: ” development is not a morality issue” highlighting how the US and UK developed by enslaving blacks and ‘forcing Chinese to buy its (United Kingdom) opium.

Mwenda reminded participants in the debate that they should analyse and not moralise, saying: “If I am called to moralise, I will say the opposite about corruption. I understand that by analysing with cold logic divorced from morality, I am making many people cringe when you shade off moralism you see the world in a different light”

Corruption, according to Mwenda could inflate cost of goods but “if the stolen money is invested well, it may help drive dynamism in other sectors”.

In 2000, Mwenda said he studied South Korea but was appalled by the level of corruption in the country during its period of industrialisation and transformation.

Corruption, Mwenda said may contribute to poor economic performance but poor economic performance cannot be reducible to it, “since we really don’t know how the thieves spend their loot… we cannot be sure of its effects on the economy”.

Corruption can compensate for red tape

In a note published on the Transparency International website, Marie Chane says that while there is a large consensus on the negative impact of corruption on growth, some researchers argue the effect of corruption is context specific and associated with factors such as the country’s legal and institutional framework, quality of governance and political regime.

They conclude that, in some highly regulated countries that do not have effective government institutions, corruption can compensate for red tape and institutional weaknesses to “grease the wheels” of the economy.

However, the argument does not stand up to scrutiny when looking at the long-term corrosive impact of corruption on economic growth, equality and the quality of a country’s governance and institutional environment. Evidence indicates corruption affects long-term economic growth.


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