MEETING THE UNEMPLOYMENT CHALLENGE IN DEVELOPING COUNTRIES

The world population is approximately 7.1 billion people and according to the United Nations, 2.2 billion of them are poor or near poor. This is 2 out of 7 people in the world live in poverty amidst the wealth the world lives in. When seen from the global perspective the 2 out of 7 is comforting. However when seen from the Ugandan perspective, this is a major problem. The background of the budget says it is approximately 25 out of 100 people in Uganda are poor. This figure is comforting too but when you know that according to the recent report on the state of Uganda’s population, 78% are them is below 30 years old and 52% is below 15 years old! These people do not work and therefore they have no income and do not contribute to the country’s production. This is discomforting. Recently, a couple of two young men claiming to be members of the “Jobless Brotherhood” carried piglets to parliament. They were protesting about lack of jobs.

In recent months, Ugandans have been executed in China for smuggling drugs. It is said that they do this because they have nothing else to do that can give them an income. Newspaper reports indicate that the groups of people apprehended for participating in recent attacks in the Rwenzori region were young people lured into these activities because they had nothing to do. The youth are clamoring for money from government in the pretext of looking of finance to do business just because they have nothing to do. Youth unemployment is a major challenge worldwide. The recent global financial crisis led to youth unemployment rates of over 40% in Greece and over 50% in Spain. As developed countries, this was unthinkable but that is a fact.

In most of the developing countries, it is not easy to track unemployment. The reasons are it is not even easy to define it therefore you cannot put your fingers on it. The consequences of youth unemployment excerbate the challenges that economies have. Absence of income is usually attributed to absence of something to do in terms of employment. The consequences are idleness. The additional consequences are involvement in drug abuse, alcohol, possible illegal trade, gambling, theft. This too has consequences  including drug addiction, unwanted pregnancies among others. These have been documented, well known and they keep police forces around the world busy.

What causes unemployment? Following the industrial revolution in 1800 today’s developed countries moved away from subsistence farming to the factory system. Unemployment in these countries is a very serious matter. It causes untold misery but governments try to solve the problem by providing social security. Unemployment is now backed up by certain theories to explain it. For the developing world especially Africa who still live on subsistence farming, the unemployment theories which explain unemployment mainly in the West do not necessarily apply. The fact that 80% of the population in many African countries live off subsistence agriculture, live in rural areas, lack safe drinking water, have no sanitation facilities it waters down the challenge of unemployment. Indeed computing the unemployment rate in such developing countries is a problem.

Globally we have turned to macroeconomic policy, most recently governance and entrepreneurship to address economic challenges in the different countries. Indeed African countries including Uganda had to implement economic liberalization policies to follow suit the policies of the advanced west. These policies support the small group of capitalist globally. Countries worldwide including Russia have been faulted for not having enough democracy modeled in the experiences of the western countries. It has been believed that democracy leads to economic growth. Of course the growth is Singapore, South Korea, Russia has defied these beliefs. In recent years, entrepreneurship has been added to the drivers of economic growth. This has become a preoccupation to the countries worldwide.

Unfortunately poverty continues to linger around the globe though in different dimensions and facets. In the developed countries, absence of income makes you poor but does not deny you basic necessities of life. The majority of the people in these countries struggle to live on the weekly wages but are comfortable living in conditions where there minimum requirements are met. In the developing countries it is a different ballgame, the fact that these countries have not transformed yet, makes poverty look different. Absence of housing, safe water, sanitary facilities, basic clothing, turns poor people in developing countries into destitutes when compared to their counterparts in developed countries. The social security provided to the poor people in the developed west is provided through the extended family system in the third world poorer developing countries. It is even believed that amidst their poverty most of the poor people in the third world are happy. They are happy because they have not experienced nor seen wealth conditions like their counterparts in the west.

Much of the good life they see is on television and for this reason they crave to go see those developed countries with their magnificent buildings and equipment. It is different when you see these everyday but you d not have an income.

So what needs to be done? In the developed countries, the unemployment theories are a good guide though not sufficient to solve the problem. In the developing countries, you need new theories. The existing theories cannot explain unemployment in the developing countries and in my view, are not even applicable. It is time to develop a localized theory. This is not an academic thesis therefore I will not go into it what academicians ordinarily do. But from the lay persons perspective we can conceptualize the problem and provide some solutions.

In my other writing on my blog, I have attempted to explain some of these issues from my perspective. Let me do so again. Given the current situation in Uganda, my initial steps in addressing the unemployment problem would be to mobilize the ordinary folks to increase the agricultural production either by having more people involved or the same people opening up more land for agricultural production. The issue here is “mobilizing” which makes the matter tend towards a political issue. Getting people to believe that this is what they need to do. Having motivated people to produce more.

Next would be to increase the productivity of what people produce, this now turns into a policy matter. Is it through education, extension services, fertilizers or improved seeds or some or all? What is it that can give us higher yields? The combination of these two increased production and high productivity will create a new problem, market. For the country like Uganda the first market is internal and the second is regional, the third is international market is tricky. The international market for many developing countries is blocked. There are issues of standards, issues of competitors, tax systems and tax regimes which the developed countries have ably used to block Third world countries.

President Museveni has been talking about Value addition, indeed we need to add value to what we produce to export it. This will bring real money. But the export market beyond the region is a place maybe you will not go into due to the above reasons. The increased production and productivity should result into some incomes that will lead to demand for different products both food and manufactured products.  At this moment, policy becomes crucial. Who is going to produce what and where? This kind of policy making involves the international community. It is now about who establishes a factory, who finances it and of course the owner of the capital. This is an issue where even governments of different countries get involved. These are real jobs in the country which create value.

At the moment, Uganda has a series of jobs that give some people some income but are not appropriate. The Boda Boda for instance employs thousands of people. It is a convenient means of transport but very dangerous and very expensive. An efficient economy needs buses or trains not Boda Bodas. This will reduce the number of people employed but will make the economy more competitive. The creation of these alternative jobs in manufacturing will compensates the loss in the jobs of the Boda Boda and other similar industries will be losing.

There are a series of questions here, how do we position ourselves as a country to exploit this? This is in the selection of the industries where we can build competitive advantage. Agriculture of course looks like it. Tourism is the other. While they are mentioned here, they are not easy for the developing countries. Tourism still depends on the magnanimity of the developed countries. They are the key visitors and one negative article in their press back home will stop a flow of tourists. There are more people dying in New York streets than Uganda combined due to crimes. But a gun shot in any of Uganda’s town will halt the flow of tourism. Local tourism will not support growth, international tourism is at the hands of the international community. In agriculture, the jobs there are still at the mercy of the international community. The international community subsidizes their own agriculture and any attempt by the developing world to do so will be resisted by the developed countries. Malawi is a case in point when they attempted to subsidize agriculture, the World Bank withdrew support. After bumper harvests, they are now starving because they had to abide by World Bank conditions. Along with subsidies, the other problem is the pests that invade our main agricultural products like coffee, bananas, maize and of course the poor performance of our research institutes. We cannot have high productivity in such circumstances.

Job creation will continue to be tricky, there is a need for willingness on the part of the developed countries to let go to reduce poverty. Handouts are a development illusion. Loans are a death trap. Many studies have said so and have demonstrated the effect. The developed countries must support the poor to emerge out of poverty. The few countries that are supported like this have done well. Japan after World war II, Israel since it founding, Hong Kong, Taiwan, there was genuine support for these economies and their performance is not surprising. Of course unlike the poor African countries, which have not got to the level of the industrial revolution, these countries were at different stages in the development process either before they were devastated by war or before they were created.

Another solution is  investment in science, this will an argument for another time.