Appendix II: The Legacies of Julius Nyerere

Tanzania under Mwalimu Nyerere: Reflections on an African Statesman

Author: Godfrey Mwakikagile

Paperback: 220 pages

Publisher: New Africa Press (28 November 2006)

ISBN-10: 0980253497

ISBN-13: 978-0980253498

The Legacies of Julius Nyerere:

An Economist's Reflections

by Professor Gerry Helleiner,

University of Toronto

I spent some of the best years of my life working in Dar es Salaam in the late 1960s when Mwalimu Julius Nyerere was its inspiring young President.

In later years, I worked for shorter periods in Tanzania - under each of its Presidents - and had many occasions to reflect on the longer-term role that Nyerere played in his own country. Internationally, too, I have frequently had the honour and privilege of working in Mwalimu’s ambit, most notably through the South Commission and the South Centre.

I believe I may be the only economist to speak at this conference. (In fact, it is quite possible that I am the only economist in attendance.) Much of the economics profession has taken rather a dim view of the legacy of Julius Nyerere. (I won’t dignify with quotation or repetition some of the things I have heard said about him in the World Bank.)

It is precisely because I am an economist - and Mwalimu so evidently was not - that I want to put my profound admiration of his record and his legacy on the record.

It is undoubtedly in the field of economics that Julius Nyerere has received his worst press, and in which his legacy has been seen as most negative. The heading for his obituary in the (London) Financial Times read “Man of integrity whose policies hurt his country”. That in The Economist, while generally friendly, concluded: “He was a magnificent teacher: articulate, questioning, stimulating, caring. He should never have been given charge of an economy.”

Personally, I see his legacy in the realm of economic and development policy rather differently.

Mwalimu’s grasp of the traditional tenets of economic theory was probably weak and so was that of his closest advisors and speechwriters (although there were those within government of whom this could certainly not be said).

Most of the criticism coming from economists relates to his “socialist” policies. But his government’s most damaging economic policy errors, in my view, had little to do with socialism per se. They came relatively late in his Presidency and were on the relatively non-ideological issue of exchange rate policy; they were errors shared by many other low-income countries in the early 1980s.

As for his “socialism”, some elements can be faulted as far more serious in their negative economic consequences than others. Nationalizations and restrictions on competition (including price controls) in the trading, industrial, agricultural and financial sectors were far beyond governmental management capacities and proved costly. Widespread (and even forced) “villagization” in the rural sector was not only economically costly but also deeply unpopular.

The “basic industry” policy - to the extent that it was part of Nyerere’s “socialism” - was also mistaken in that it was premature and inappropriate for so economically small a country; it too proved costly.

All of these “socialist” policies could be foreseen (and were) as likely to slow overall economic growth and development both immediately and over the longer run. (My personal anxieties in this regard, circa 1969-70, may be found in an article in the Journal of Development Studies, Vol. 8, no. 1, January, 1972.) Arguably, none seemed likely, of themselves, however, to create the degree of economic collapse that occurred in the early 1980s. Nor, in my view, did they. Severe macroeconomic shocks - oil prices, weather, and war against Amin - and their serious domestic mismanagement were required for that.

In the early 1980s, as the UK White Paper on international development put it in its commentary on African experience, the “worldwide international climate ... left little margin for policy errors” (Eliminating World Poverty: A Challenge for the 21^st Century, White Paper on International Development, November 1997, p. 9).

In Tanzania, there undoubtedly were such policy errors. Again, my view is that Tanzania’s economic dislocations in the early 1980s were only partially attributable to its efforts to restructure the economy towards socialism. Far more serious were the errors in macroeconomic policy in the face of severe shocks (as well as, of course, the shocks themselves).

It is important for critical economists (and others) to recall that there were other elements in Nyerere’s socialist programme - increased equity in the distribution of income; an attempt at a direct assault on bottom-end poverty (including provision of primary education and clean water); a “leadership code” for politicians and civil servants; major reform of the educational syllabus; and (at least rhetorical) emphasis on self-reliance and reduced aid dependence.

These elements of Nyerere’s “socialist” programme excited widespread admiration and support (ultimately too much support of an unhelpful kind) from many academics and policymakers in the capitalist West, particularly in the Nordic countries and the Presidency of the World Bank. So compelling was this side of his socialist aspirations and practice that, for some time, admirers were prepared to give Tanzania the benefit of the doubt on the less propitious elements of its “socialist” development policy and its economic sustainability.

Sadly, as Tanzania’s resource constraints tightened and macroeconomic policies faltered in the late 1970s and early 1980s most of these supporters lost confidence in the overall Nyerere socialist vision. Their withdrawal of financial support then worsened what had already become a crisis situation.

The first serious external pressures upon the Government of Tanzania to reform its economic policies were related primarily to its macroeconomic management policies, not to its socialism, and they came, of course, from the IMF. According to the IMF tenets of the times, what Tanzania most required in the late 1970s and early 1980s was cross-the-board governmental austerity and severe currency devaluation.

It was the effort at imposition of such IMF conditionality that prompted Nyerere’s famous public outburst (in 1981): “Who elected the IMF to be the Finance Ministry for every country in the world?” (or words to that effect).

There followed an almost total breakdown in Tanzania-IMF relations. Julius Nyerere may be said to have fired the first African salvo in the great debate over the role of the IMF in Africa. (By a quirk of chance, it was at about the same time, 1980 that the annual meetings of the IMF were to be chaired by Amir Jamal, Tanzania’s then Minister of Finance. I remember his recounting his surprise when, upon his arrival in Washington for the meetings, IMF staff presented him with a draft of his introductory remarks. He thanked them for their thoughtfulness he delighted in recalling, but told them he had brought his own speech.)

At this point (1980-81), Nyerere and Tanzania were still sufficiently respected that the then-President of the World Bank, Robert McNamara, initiated a mediation effort to seek an accommodation between the IMF and the Tanzanians. This was to be attempted through the provision of technical assistance for the preparation, in Tanzania, of an alternative to the IMF’s stabilization and structural adjustment plan; the Government of Tanzania was given a voice (and indeed veto power) over the composition of the three-person team which was given the ultimate responsibility for the task.

With both expatriate and local staff working together in Dar es Salaam for a year, an alternative structural adjustment programme was tortuously constructed. Anticipating later African debates, it called for much greater emphasis upon supply-side expansion than demand-side restraint; much greater care over the distributional effects of required macroeconomic adjustment (with conscious effort to maintain equity of sacrifice); and a more gradual programme for the implementation of reforms.

The effort failed, however, when neither the Government of Tanzania nor the IMF found the programme satisfactory. (This is probably the appropriate point to recount another anecdote, one of my favourite Mwalimu stories.

Upon personally welcoming the agreed three-person team to Tanzania as it embarked on its task, the President followed his initial niceties to the group, each of whom he knew, with the prescient introductory substantive comment: “You know, gentlemen, I asked for money, not advice!” A more succinct statement of the problem of conditionality has probably never been made.)

A major “sticking point” in the failure to agree on what was, for its time, a highly innovative programme (as well as a potentially important model for IMF-member country dispute resolution), though not the only one, was the Government’s (mistaken) reluctance sufficiently to devalue its currency. I am personally convinced that, like so many laymen, Mwalimu did not understand the role of the exchange rate; some (not all) of his advisors gave him very bad advice.

As the Government went ahead on its own more and more donors (including now the World Bank) lost faith in Tanzanian macroeconomic management, the economy spiralled further downward, corruption grew, and all-around confidence in the entire Nyerere vision was lost.

The advent of Reagan-Thatcher influences on economic policy throughout the world and in the Bretton Woods institutions (McNamara left the World Bank in 1981) furthered darkened external views of the Tanzanian situation.

The necessary policy turnaround - now in much more dire economic circumstances, and with both much more external policy leverage and, significantly, a degree of non-governmental (mainly university) technical influence - finally began in 1986, after Nyerere’s departure.

When the turnaround came, except for exchange rate action, which, by its nature, had to come more swiftly (in effect, it began with the “own funds” import programme in 1984), it came fairly gradually and slowly. By the mid-1990s, the economy had significantly recovered and donors had returned. Remarkably, political stability had been a constant.

By this time, however, Tanzania was in trouble over other issues. Corruption had reached the highest levels of the Government and party (attracting public criticism from, among others, the now-retired Mwalimu, who now also supported competitive elections in a multi-party system); the central economic policymaking machinery was demoralized and in disarray; and, partly in consequence, aid donors were almost totally “driving” such development efforts as were under way (outside the private sector).

Economic growth was taking place but there was a notable absence of any public “vision”, such as had characterized the Nyerere years, as to where the country was going and why. Economic policy was seen as dictated by the international financial institutions and the aid donors. (For an account, see the Helleiner Report, Report of the Group of Independent Advisers on Development Cooperation Issues Between Tanzania and Its Aid Donors, Gerald K. Helleiner, Tony Killick, Nguyuru Lipumba, Benno J. Ndulu and Knud Erik Svendsen, Royal Danish Ministry of Foreign Affairs, June 1995.)

The Government of Benjamin Mkapa, newly elected in 1995, set out with the encouragement of some of the major aid donors, to restore ownership of its own development programmes, fight corruption, and recreate a sense of vision of the country’s direction.

While much remains to be done, to a remarkable degree, it seems to me, it has been succeeding. It reached an important agreement, in principle, with the aid donor community on appropriate aid relationships - and, again, while much remains to be done, there can be no doubt that ownership of economic policy and programmes is returning to Tanzania.

The Government has prepared its own policy framework paper (PFP) and its own long-term vision statement (both with non-governmental inputs), led its own public expenditure review (PER) and the new Tanzania Assistance Strategy (TAS), and will now develop its own Poverty Reduction Strategy Paper (PRSP). Increasing (though still too small) proportions of aid expenditure are flowing through (or at least reported in) the national budget as the central economic administration strengthens.

Tanzanian-led sectoral strategies and policies are being developed and implemented in health, roads and education. Prime emphasis throughout these efforts is to address the principal problems of poverty and to do so under Tanzanian, not donor, leadership. (More details on all this can be found in a paper prepared for the May 1999 meeting of the Consultative Group for Tanzania: Gerry Helleiner, “Changing Aid Relationships in Tanzania, December 1997 through March 1999”, Dar es Salaam, mimeo, 1999.)

One senior (and informed) World Bank official has remarked (to me privately) that, despite all the favourable press on Uganda, Tanzania is actually about four years or more ahead of it in terms of truly nationally-owned (and thus sustainable) economic policy for overall development. Tanzania may seem to move more slowly, he noted (and I agree), but it does so on a firmer and more stable base.

This base was established, I would argue, in the time of Julius Nyerere - a politically unified country; shared values as to equity in income distribution and political participation; and determination to develop and implement one’s own policies and programmes.

Because Tanzania now has in place all of the key elements for sustained development - macroeconomic stability; broadly sensible incentive structures; broad political participation and stability; growing national self-confidence, ownership and capacity - I believe it is likely that, barring calamities of weather or the terms of trade, Tanzania will soon be everyone’s favourite African “success story” (and model).

It is now “conventional wisdom” in Washington (even in the IMF, at least in terms of its rhetoric) and in donor capitals that poverty needs to be addressed as a matter of highest priority; that political stability and good governance (notably reduced corruption) are prerequisites for development; and that national ownership of programmes is critical to their success.

It has taken them a long time to reach these positions. But Julius Nyerere was espousing them and trying to build practice upon them 30 years ago. His slogan of “socialism and self-reliance”, if transmitted today as “equity, honesty and ownership”, would win universal assent. He was decades ahead of his time in these matters.

Today’s key Tanzanian policymakers - both politicians and technocrats - grew up and were educated in the Nyerere years. They have undoubtedly learned from earlier economic and other policy mistakes. (Mwalimu was himself a learner and pragmatist, who often changed policy positions when the evidence as to the failure of previous approaches seemed clear.)

I believe that the respect, which Mwalimu enjoyed in his own country right up until his death indicates that they also retained much that Mwalimu had taught. They now can build “humane governance” on the political and value base he constructed. (The apt concept of “humane governance” has recently been developed to encompass sound and equitable economic and political governance, including responsive and participatory institutions, respect for human rights, and special provision for the most needy and most vulnerable. See Human Development in South Asia, 1999, Mahbub ul Haq, The Human Development Centre and Oxford University Press, Pakistan, 1999.)

Whatever his other mistakes in the realm of economics, in one area of economic policy Mwalimu was dead right - and, again, ahead of his time.

Both in his anguished cry about the IMF in 1981 and in his subsequent work in the South Commission and the South Centre, he steadily maintained the need for fairer international (or global) systems of economic governance, particularly in the financial sphere. It is important to underline his consistent emphasis upon equity in global economic governance arrangements because there is every sign that current reform efforts in the international financial arena are overly focussed upon efficiency considerations and the avoidance or minimization of the effects of systemic crises.

This focus has resulted in some effort to incorporate some of the interests and concerns of the newly emerging countries and the largest of the poor countries and this certainly constitutes important progress in global economic and financial governance; but it leaves out the poorest and weakest. The latter are unrepresented - either in the new Financial Stability Forum or in the even newer Group of Twenty (G20), chaired by the Canadian Finance Minister. (The G20 has also contrived to exclude all of the so-called “like-minded” countries, who might be expected to take a deeper interest in the problems of the poorest countries and peoples, as they have done in the past on debt relief and other issues.)

Nyerere’s activities in the international/global sphere included efforts to bolster analysis, both economic and political, to inform those who speak for the developing countries, especially the poorest among them, in international negotiations and organizations. The developing countries are still woefully weakly equipped to deal with the batteries of well-funded economists, lawyers and lobbyists who defend Northern interests in international discussions and the media.

He was among those who saw, far ahead of others, that there is ultimately no substitute for one’s own technical, professional and institutional strength. Today it is known as “capacity building”, and it has entered “conventional wisdom” as to what is to be done not only in Africa but throughout the developing world.