The Modern Economy, Tanzania’s Next Move

Costantine Magavila Costantine Magavila

The last century has seen the world converge on one understanding of how to best culture productivity through the responsible use of ‘capitalism’ as its primary operating system for creation and protection of value, so much so, that it has drawn a clear line between what would have been best characterized as a primitive economy and the new order of the world - a modern economy.

In the last stages of releasing my second book, Ubishi Komaa na Maisha, which speaks to owning one’s life narrative by addressing norms that may not be normal as the premise for achieving true peace of mind, which I believe is the real purpose of life; I found myself in an economic meltdown of my own creation born out of circumstances I could have better managed.

My initial struggles to free myself from my financial quagmire, which involved predominantly calls to friends and associates amongst other things, presented me with a powerful first hand revelation of where our struggle really lies as a people [Tanzanians], for which a solution is no longer an option if we are really to reclaim ownership of the destiny of this great country.

So compelling was this discovery that the working title for this article, which aims to put into context a situation which was personal to me, at some point, was “slave economies”.

As it were in the beginning is now and forever shall be.

Tanzania is arguably one of Africa’s most inherently conflicted nations due to its unique history – we live in a modern economy (the new order of the world post globalization and digitalization), yet we are prone to using primitive methods still when engaging with this economy consequently reaping the worst of both worlds (the modern and primitive world); mshika mbili...

The result is a consumption driven economy that does not produce nor create capital for its own - effectively becoming a slave economy (an economy structured by design to be dependent as opposed to being self reliant) in the process.

Much has taken place under the current administration (led by HE Dr. John Pombe Magufuli) to arrest a situation that saw CCM, Tanzania’s ruling party, in 2015, garner its smallest victory since multiparty party politics ensued in the country two decades ago.

These measures include putting the Government back in the driver seat in availing services key to feeding our humanity; a critical component of governance – life (health care), understanding and mastery of our environment (education) and mobility (infrastructure).

To achieve this, economic levers have been pulled, putting to test an economic system that has been growing very much out of its own fruition for nearly 30years now.

Unlike Ujamaa, which provided a clear blueprint, the economic system that we adopted after was a mixed bag of external directives and internal aspirations, but lacked form and rhythm, birthing a predominantly black economy, where most real economic activity takes place offline and out of the government’s radar, denying Government effective control of the economy while still exposing it to social and political accountability from an increasingly disenfranchised and restless populous.

Upon taking office, Magufuli’s administration quickly took to collecting taxes, in a move that was both circumstantial and strategic; aiming to keep the government on top of its ever swelling obligations. This was accompanied by a significant shift in Government expenditure from the recurrent budget to the development budget to support provision of these critical services. The recurrent budget, by nature, stimulates consumption, while the development budget stimulates capital investment.

So basically, if you were at one time drinking 20beers because you were not paying taxes, now because of paying taxes, you can only drink 15beers because the 5beers you forego are building schools, hospitals and roads that you may not immediately or circumstantially want but will most likely eventually need when you have children or are old and in need of medical care.

By shifting expenditure, we also shifted the flow of money through established economic centers compelling business leaders, at least those worth the name, to mobilize capital so as to shift their business interest in line with the new direction.

This drive to collect unpaid taxes from the past has exposed me to one of the inherent challenges of a ‘slave’ economy. Arguably, a necessary evil, in a move which also aimed to send a clear message about Magufuli’s no nosense stance on graft in order to curb a culture of corruption that has eaten us to the core, this administration went on to collect even taxes from the past.

These tax ‘evaders’ viewed themselves as tax ‘avoiders’, if not, survivors in a system that demanded such. So in as much as ‘taxes’ from the past were not reflecting in Government books, they were effectively being paid to officials off-line, being used to make hefty contributions to politicians and other social interest groups as this was the economic system of the time, which few could escape without consequence.

For this reason, those who complied and repented their ‘sins’ by paying these taxes, technically found themselves double paying the tax man, eroding on their capital base along the way. Given the shift in Government expenditure as explained above, this capital would have come in quite handy at times like this where new capital is required to tap into the shifting flows of money as per our new fiscal agenda/ priorities.

The irony of this situation is that many of these business leaders, who were once titans of trade, wielding billions between them; now find themselves with only the primitive method of making calls to friends and associates in search of fresh capital? Not that there is anything wrong with this, in principle, but could there not be a better way?

There are things that were, are and forever shall be and our pursuit for sustained economic prosperity should never undermine these fundamental truths that even the modern economy in all its might does not displace but simply reinforces using more sophisticated methods.

As we take this leap of faith in Tanzania’s next big step, albeit 30years behind schedule, this article, aims to remind us of the strength of the foundation on which we stand as a people and how we owe it to ourselves to make the most of it by, at the least, investing our time in understanding what is really going on.

A modern economy – re-explained.

Any economy is built around three main components: capital formation (uwezeshaji), production (uzalishaji), consumption (ulaji) and is dependent heavily on how money (the medium of resource exchange) flows through these faucets to enable it to keep moving. A modern economy differs from a primitive economy primarily in this regard: how we manage the flow of money once capital is formed and consequently redistributed to enable production and consumption while creating new capital.

Whereas, in a primitive economy, you are either born into ‘wealth’ or you have to crudely acquire it by use of force, a modern economy avails capital through structures and instruments that ‘free up’ access to capital even to those who are not born into wealth using scientific systems that everyone can master.

This is essentially the spirit of a free market economy: freeing access to capital, not just trade, so even those who are not born into wealth have an opportunity to access capital.

In this light, self reliance is a real and inescapable truth that we are quickly coming to terms with in this era of increased nationalistic tendencies. A robust economy has to aspire to control all these three faucets to ensure its long term prosperity, if not, security and sovereignty.

Together we stand, divided we fall.

Whatever your opinion of Ujamaa may be, it is arguably the single most profound and significant ‘gift’ that Mwalimu Julius Kambarage Nyerere afforded this great nation. Reaffirming his commitment to national unity, Mwalimu also oversaw our transition into multiparty politics and ensured that no allowance would be made for political parties that propagated inherent social divisions like ethnicity and religion.

Any State has to be held together. Whether by force or desire, unity is not an option in defining a Nation State. The enduring strength of a State, though, is vested heavily in what holds its people together. As Africa’s foremost master states crafter, Mwalimu understood this.

Mwalimu also understood that in as much as most of the established Nation States of the world at the time had evolved beyond their founding premise, most of these States were formed as an extension of either 1) a society brought together by ethnicity (i.e. China), 2) a society brought together by religion (i.e. Iran), 3) a society brought together by circumstances best explained through tradition (i.e. The UK) and/ or 4) a society brought together by circumstance informed by an idea of what connects them (ie The USA).

With this understanding seeded deeply in mind and heart, Mwalimu consciously went with the fourth direction of defining our State as an idea explaining what connects us as a people that he amplified as our Statehood - Ujamaa.

So, in as much as the world today communes around universal values (global citizenry), without a Global state to enforce them, we are technically dependent on Nation States, and what holds them together, to materialize these values as a shared and tangible truth.

There is no real victory without sacrifice.

Mwalimu’s generation, quite like most of the founding generations of the strongest and most enduring Nation States of the world, invested first in building the State they needed to enable them to build an economy that would ultimately reinforce the State in turn and not undermine it.

Quite like personal development, the bedding ground for enduring financial prosperity is vested heavily in seeding personal values and guiding life principles (our life narrative) that ensure our financial pursuits do not undermine our ‘humanity’.

The primary requirement for building a sustainable economy at both the individual and national level, is seeded in informing and owning our narrative of ‘who we are’ to the extent that it becomes a shared ‘faith’ or ‘truth’ that serves as the premise for self governance in the face of the blinding temptations that characterize unchecked economic growth and that we are ultimately willing to fight to protect.

The State, at best, is the state of mind of its people as a result. A resilient State has to ‘control’ the psychology of its people as a pre-requisite using either crude or (and preferably) sophisticated methods.

This is where the Chinese and Americans, who sit on the two extremes of social identity navigation, are more alike than we may want to believe. China, still being in its ‘formative’ stages of robust Nation State formation or social identity navigation, depends heavily on institutions to enforce State values (where Adam Smith’s invisible hand is very visible), whereas America has succeeded at transferring the stewardship of State values, once exclusively the reserve of institutions (albeit government, religious, or academic etc) to individuals, who now hold to count these same institutions referencing State values as they form part of their individual ‘faith’ (where Adam Smith’s invisible hand is actually invisible but still present).

This is the secret to America’s inherent societal resilience and is arguably the one thing that makes China, America’s current economic ‘equal’ still quite vulnerable by comparison.

Mwalimu’s unique economics explained.

Mwalimu left a formidable state, so formidable that it defied the stereotypes that often characterize Africa’s post independence failed start. The sheer fact that in Tanzania’s current political landscape, the most influential politicians of note, do not have to originate from the largest tribes (ie like Kenya) or rule in terror because they don’t (ie like Ethiopia), is a testament to the objectivity and success of Mwalimu’s efforts in laying a bedding ground conducive for effective democratic governance. This mammoth achievement, concealed by the humble state of our economy at the time of his retirement, is the one thing that has kept us in state since but is often understated and celebrated much to its undoing.

Mwalimu also understood that most failed states failed as a result of the inherent weaknesses of primitive economies, where access to wealth was a function of either being born into it or literally having the muscle (or arms) to crudely acquire it. Both come with consequences to the greater societal fabric.

After learning from these consequences, modern economies, courtesy of the English, avail ‘open’ access or at least provide a framework for open access to capital formation that does not require you to be born into wealth or to use crude methods to gain this access.

To avoid the risk of having his young state benefit those who had a head start at the time, most of whom did not share our values as an independent people, Mwalimu held the economy under the stewardship of the Government as he did the hard work that any ‘parent’, worth the title, would do at the formative stages of a child – he prepared his people in the primary lesson of statehood by helping them answer the question of ‘who are we’ in as objective a manner as was possible given the circumstance.

So resolute was Mwalimu in his intention, that he did another first, for Africa at least – he put this definition of ‘who we are’ in literal ‘state’ through birthing the Arusha Declaration. Quite like the American Declaration of Independence, Mwalimu afforded us this objective reference as to ‘who we are’ as a people that one can either accept or reject without vagueness or prejudice.

On retirement, this definition of ‘who we are’ was such a ‘faith’ that it has arguably carried us as a united people to date, in as much as we have and continue to kick this gift horse in the mouth by not pro-actively seeding this ‘faith’ in generations that will need it more than those who founded it.

Mwalimu had achieved what very few African States had – unquestioned control of the psychology of a people founded on a premise that did not inherently divide the people or marginalize any specific group of the society.

The tale of two failed captures

So, when Mwalimu passed on, a vacuum of power naturally presented itself and the race to fill it almost immediately ensued. Sadly this race, which often leveraged social intrigues to conceal its true agenda, did more to undermine the gains made by Mwalimu than to actually fill the vacuum he left or even replace it.

Mwalimu kept under State watch the two most critical factors of any economy’s ability to create and redistribute wealth – land and capital. He did this through retaining State control over banks and land.

The generation that followed Mwalimu only saw an old and run down house that, given the artificial state of the then State controlled economy, had no market value. They consequently put it up as collateral to get funds to renovate it into a modern residence and used the remaining funds to buy a luxury sedan only to realize that they subsequently needed more money for electricity and fuel to power these assets. But the house also had land that the lender accepted to let them rent out in order to plant crop that would earn them keep after they nearly defaulted on the loans they took against the house.

Sadly, this generation of Tanzanians, who arguably aspired to take us forward into a new era of a modern economy were motivated more by primitive economic thinking than that of a modern one. A primitive economy, at its peak, was driven by consumption and trade and not capital formation as land is only valued for its inherent productive attributes. Lured by the trinkets of what they thought to be a modern economy – consumption, they rushed to capture the State, while handing over the heart of any economy.

The 80s were a boon for most socialist/ communist economies of the world after the fall of the USSR (Now Russia). While others were carefully opening their doors to the world, we were looking for someone to buy it altogether. In as much as the critical political and economic reforms that were embraced between 1985 and 2005 went a long way in stimulating the economy fueling an economic growth narrative comparable to those of China, North Korea and Singapore to name a few, unlike our more calculated ‘comrades’, this stimulation did not translate into a general public good because those who bought the ‘door’ had their own agenda in mind and at heart and not ours; understandably. One of my earlier bosses taught me this great life and business lesson – if you do not have a strategy of your own, you become part of someone else’s strategy.

The most significant form of foreign investment, at the time of the most critical reforms that took place between 1995 and 2005, came in the form of financial services, primarily. The focus of these investors was not to bolster these institutions for the greater public good but rather to provide services to their, predominantly corporate and high value clients, who were looking at entering the country to tap into the market as it was opening up.

This explains why, twenty years on, the banking network that reaches the ‘people’ is still that which was predominantly created during the ujamaa era.

This group of well intending Tanzanians, went further in their pursuit of the crown; in order to keep in the good books of a party (CCM) still dominated by old guards who had drank from the goblet of Mwalimu’s Ujamaa, professed Ujamaa as their faith in public, and shunned direct exposure to industrial investment, like their counterparts in Kenya, preferring to tango in private with agents of capitalist interests allowing them to do the ‘dirty work’ of owning industrial investments. Content with commissions and contributions that would line their coffers allowing them to amass the wealth required to pursue their dream of State capture, while living the capitalist life they could only dream off in the past. In the process, they allowed a majority of the real wealth of the nation to slip out of their grip.

Unfortunately for these, otherwise well intending Tanzanians, in as much as their methods generated new wealth, these methods, which often included crude acquisition of wealth through corrupting the system, did not translate into them increasing their grip on capital formation (banking) and production (industry). This had the political consequence of isolating them from the greater public good as capital formation (banking) and production (industry) are critical for increased and meaningful inclusion of the public in any economy not just consumption.

At best, the masses were in turn tempted by the increasing consumption and lifestyle projected by this group of elites, while lacking effective means (employment) to gain access to the same in their own capacity, further marginalizing them in the process and fueling corrupt tendencies at all levels – survival of the fittest, if not fattest, became the standard and no longer the exception.

This lack of trickledown effect of money from FDIs that opening of our market attracted and the increased appetite for consumption of imported goods was liken to filling a basket with water, leaving us wealthier but more desperate as we struggled to get more money to keep the flow of money in the economy at the same level without a mechanism for capturing an containing this wealth.

With Tanzania’s population growing exponentially (we were 9.3m at independence and now are at 56m) and real development effectively retarded, these Tanzanians were not only denied access to capture Mwalimu’s State, which is securely guarded by a party system that is inherently built to ensure the survival of the Party (CCM) above individuals; but also and maybe even more evidently, given the current state of affairs, denied them access to effective economic capture, which is probably more important in the long term capture of State.

The role of technology re-examined

Some may argue, with regards to my observation of the expansion of the banking network in Tanzania, that technology has made physical branches obsolete?

For starters, technology, at its core, is a natural response to economics and our inherent ‘battle’ to control our environment. Technology (advances in technical knowledge) served to solve resourcing challenges in the way of increasing production yield. Technology has since evolved, creating its own resource gaps along the way, by inducing needs and wants that once didn’t exist but now seem natural to our being.

In this light, technology like an economy has to be controlled for it to really serve a social good. The advent of virtual money in this regard, is not an exception but the premise for the case I am trying to build.

Although a lot has changed since Keynesian theorizing (the theoretical foundation of the modern economy), it is this thinking that built the foundation for a modern economy. Apart from the evident infrastructure, virtual or physical, banking is routed in culturing savings (primary function of banking) to enable generation of credit to fund investment (secondary function of banking). Credit to fund consumption is a tertiary function of banking that assumes there is sufficient traction of the former (savings and investment) as a result of normalized income streams amongst borrowers. Credit for consumption is better effected in markets where the majority are formally employed and enjoy predictable income streams. In markets, like this, where the majority is self-employed and enjoys erratic income streams, credit for consumption has the inclination of disrupting economic flows as opposed to bolstering them.

The surge of technologies that alter the ‘banking culture’ of an economy have to be brought under scrutiny, if not control, less we risk building a system that achieves increased financial inclusion only by collecting money from the poor to give to the rich adding to the restlessness of its people.

Today, more Tanzanians are transacting through virtual money than ever before but do not garner the same benefits as those who do the same through the formal banking system when it comes to access to capital formation. Consequently, this generation of Tanzanians has more access to money (financial inclusion) but less control to inform how they use this money to form capital; we have the services but not the real value.

The characteristics of a modern economy.

In conclusion, if we truly aspire to build a modern economy, we have to proactively foster its existence by understanding it in its objective form:

The language of a modern economy.

‘State’ control of the mindset of the people is not an option, it is a prerequisite. The answer to the question of ‘who are we’ has to bring us together and has to be reinforced as a ‘faith’. Patriotism (uzalendo) is the direct consequence of this. In order to keep the country and economy in state, you have to seed the language of a modern economy which is based on the use of laws and financial principles as the standard for engagement. Management or managed productivity, as a function, is the product of gains that came out of the industrial revolution that, apart from fostering efficiency and effectiveness in production, had the effect of navigating business engagement towards standards and systems that inherently make it possible to, not only manage productivity, but more importantly foster the use of the law and finance as the principle languages of engagement in a modern economy. The gains of State control are best preserved if you get the people to argue following a standard frame as opposed to everyone using their own frame and having to shout in order to be heard as a result.

The essence of a modern economy.

‘State’ control of the people’s mindset is not enough if it does not enable people to take action on what they think and feel to safeguard their economic prosperity. This translates into creating a framework that avails capital as a public good (mali ya umma) and not as a private or exclusive good through creating and enforcing public access to the critical instruments of capital creation: capital markets and banking systems. You cannot effectively capture the State without holding the head of the snake as opposed to its tail by ensuring that the faucets of capital formation are within reach. This, when coupled with a clear graduation scheme of working class into the middle class fosters two inherent attributes key to our humanity: focus and predictability. Africa’s volatility is partly attributed to this: a middle class that is formed without a clear graduation system based on merit coupled with a majority of the people being engaged in the economy through the informal sector denies people focus and predictability, the breeding ground for societal restlessness.

The conduct of a modern economy.

Like the functioning of the human body, through which most of humanities creations have sought inspiration, the conduct of a modern economy requires that we ‘trust’ that everyone will play their part. Martin Luther King famously quipped that injustice anywhere is a threat to justice everywhere. Integrity and governing principles of engagement that foster trust in ones conduct are arguably the most critical components of a modern economy. From time management to keeping your promise, a modern economy requires that, to the least, our conduct be predictable and in line with expressed agreements. Integrity alone is not enough to govern our conduct in a modern economy, if it is not supported by culturing a strong work ethic. Like the human body in its formative stages (infancy) struggles to learn to walk without knowing why or how and decides not to walk once it knows why and how, the modern economy requires that we culture a commitment to conviction in the process and not just motivation in the outcomes. When we commit to motivation from the outcomes as opposed to the conviction in the process, we risk clinging onto possessions and positions as opposed to the person and the inner belief system that keeps us going even when there is no evident motivation to do so. The modern economy does not have an end game, it just has a norm/ rhythm and the norm is this endless struggle to survive and thrive; success is not only a reward for the struggle but more importantly the fuel we need to energize us to keep on with the struggle even if we do not see the evident need to do so.

The foundation of a modern economy

My father grew up at the last stages of colonial reign. He always reflects on how his father refused to let him continue with secondary education because he was more concerned about who would take care of the goats he would need for his bridal price at the time he would wed. He went to secondary school still and ended up becoming a world class diplomat. Under the British, whom we generally referenced as ‘exploiters’ and ‘evil’, education served its purpose so well that a village dweller like my father, could be transformed into a formidable player in the diplomatic arena of the modern world. Sadly, today, under the reign of our ‘fellow’ Africans and with all the evidenced signs of ‘development’, we have people born into a modern world but can barely comprehend their own environment let alone that of the world around them. To the Brits, education was so important that at best they segregated you from getting access to it, but once accessed, they ensured that it was of a standard that would reinforce its value in the long run. This is further evidence that the foundation of a modern economy is highly dependent on building a strong education system, without exception, that reinforces national values while aptly preparing pupils with skills and knowledge that will enable them to be masters of their environment in a modern economy. There is no greater crime that Africa has and continues to commit against itself than to bastardize education to the extent that its inherent and expressed value is continuously in question.

Our next step as a Nation State has to be projected through our banking and education system and how these serve the people in order to foster a culture for balance in creation of capital, production and consumption for its own.

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