International Political Economy

This essay is divided into three parts: The first section shall engage in a comparative review and analysis of the works of Jacob Viner (1948), Alexander Hamilton (1791) and Friedrich List (1885 /1841) . The three works base generally on the concept of the economy but in particular they bear adequate intellect and authority on the issue of economic nationalism, the adoption of developmental policies and their application in the real world scenario of “economic warfare”.

Viner’s writing is to an enormous degree recent, as compared to list’s and Hamilton’s respectively; it revisits the Seventeenth and Eighteenth Century economic practices and then elaborates the policies as grounded in National pursuit of Power and Plenty; he writes in inquiry of whether States concerned themselves with pursuit of power, as central to acquisition of plenty or whether plenty created an ease in acquisition of wealth; this essay will neither repeat his methodology nor belittle it but rather will identify the policies and institutions the states used to become wealthy and powerful.

List writes after a lifetime of analyzing and evaluating the national economies of numerous states; these included, Italy, Germany (pre-Unification), Spain, France, Russia and the United States among others. He writes as a nationalist and patriot, proposing policies for Germany to use to develop, his central premise being that native manufacturing entities must be promoted and improved in value and a strong navigation policy ought to be adopted; his frustration however is when the proposals are underwritten as non pragmatic, non applicable, too idealistic for Germany and threatening to the Nobility.

On finding the very policies in America list remarked that the best work on political economy which one can read in that modern land is actual life. Hamilton’s writing was not so much from a perspective of academia as it was in civil service; he writes as the Secretary of the Treasury in the United States, faced with the challenge of impeded progress in international trade due to the low competitive value of their raw materials.

He proposed and concerned himself with the question of manufactures and how its promotion could possibly render the United States independent of foreign Nations for military and essential supplies. In spite of their disparities in time the three present near identical if not totally similar notions on economic nationalism, they premise their writing on a principle of a disciplined and patriotic application of economic policy.

The second section shall identify, analyze and highlight the major policies celebrated as proper for national development, due regard being given to the fact that “national development” is a relative notion. In this essay it is rendered as that development achieved through the application of a nationalistic economic framework clearly distinct from that “development” propagated by preachers of economic liberalism and free trade. The third and last section of the essay will then examine at length the lessons of good practice that can be borrowed and applied by a developing economy like Uganda.

A Comparative Review The Report by Hamilton to the United States Congress in 1791 identified seven policies that can be used or applied to improve manufacturing: the division of labour, extension of the use of machinery, jobs for the unemployed, promotion of emigration, promotion of talents and skills development, availability of a favourable atmosphere for different forms of enterprise and creation of a steady demand for agricultural surplus.

List condemns the notion of free trade as propagated by Adam Smith (1937/1776), he presents a number of polices but stresses the primacy of domestic industry and manufacture in combination with a monopoly of Navigation and Naval power, import of capital goods, and only raw materials. He coins the phrase kicking away the ladder and calls it the clever common device used by all who have progressed to impede their competition and is considered to be the first proponent for the protection of domestic industry.

Frieden and Lake (1987) assert, in agreement with Viner (1948) that nationalistic policies range around seven core principles: the limitation or total ban of the import of luxurious goods, import of raw materials while discouraging its export, preventing the Haemorrhage of any form of National wealth (gold and silver), importing of skilled artisans and machinery while discouraging the same, and the formulation of navigation laws that directly benefit the domestic economy.

Contemporary political economists with a predisposition to economic nationalism argue firmly and authoritatively that today’s advanced and developed countries use egoistic cum nationalistic policies to become wealthy, Chang (2002, 2007), Kiiza (2007, 2008) and Weiss (1998). There exist a close relation between viner, List and Hamilton on the policies that they propose.

The import of raw materials is proposed by the trio, entailing the concentration on those products that will feed the demand of the domestic manufacturing industry for raw materials; they concur that exports of raw must be prohibited and prevented since they rob the domestic economy of the crucial resource it needs for transformation. In terms of export the trio insists that economies chasing development must export nothing, apart from manufactured goods. List uses the term finished goods to mean the goods have reached their final level of industrial transformation and consequently highest level of quality possibly attainable.

It is important to note that for this particular policy to succeed the export of materials used in manufacture must be prohibited and the duties on such materials reduced (Hamilton 1791). The haemorrhage of wealth which in mercantilist times was Gold and Silver was forbidden. Evidence suggests that the States of old had extreme punitive measures for the cause of loss in National Wealth that included execution as a capital punishment (Frieden and Lake 1987). Viner concurs with the above prohibition, list seems to emphasize that the power of production of wealth is more important than wealth itself.

He comments rhetorically that a state with industries for manufacture is greatly better than a “priest ridden” state like Spain. Hamilton engrosses himself to protect the fiscal integrity of the United States by establishing, as Secretary of the Treasury a mint, national bank and proper policies of financial management. Skilled artisans and machinery was to be imported and their export prohibited, the three writers all agree that foreign labourer that posses rare skills should be encouraged to settle within the state so as to augment production.

Hamilton in particular stipulates that this endeavour can be overcome through the glorification of American ideals of democracy, religious tolerance, equality for all and freedom of expression in every possible way to promote the influx of immigrants. In fact after List’s ideas are refuted in Germany he went into exile in America where the government of President Jackson was so impressed with his economic philosophy that in 1830 it appointed him Consul for the United States at Hamburg and later Leipzig.

On machinery and extension of the use of machinery (defined as an artificial force brought in aid of the natural force of man and of labour, essentially an increase of hands (Hamilton 1791)) to enhance production capacity in agriculture and specifically to develop the manufacturing industry, Hamilton proposed adoption with two important observations. The first, that machines are easily employed in manufacturing industries as compared to agriculture.

The second is that a state ought to manufacture critical and important products for itself because to import foreign manufactured products that can be produced domestically is to transfer and in effect to lose the advantages accruing from application of machinery in a domestic economy. The trio lays emphasis on navigation laws as a core component of economic nationalism; List argues that the presence of good laws and a supreme navy will protect the trade routes of a State and prevent distortion of the market through insecurity.

Hamilton insists that like Great Britain, United States of America must improve on the transport network to facilitate the transportation of commodities. According to Viner (1948), and Frieden and Lake (1987) the development of Navigation laws dictated that a quota of trade be conducted on board British ships and impacted positively on the ship building industry as it promoted the trade. The division of labour as a presented by Hamilton and List is meant to create different directions and dimension to which labour can be employed.

The emphasis in the Report by Hamilton is that labour must be separated or diversified due to three reasons: It leads to the development of greater skill from continuous and exclusive application to a single object, avoids the loss of time as labour transitions from one employment to another and it makes easy the employment of machinery; more emphasis is placed on the reality that with time the operators of the machinery become skilled and creative in the use of a special machines and fabrications of the said machines becomes a distinct trade.

Luxurious and expensive leisure was discouraged since it depleted the savings of people; Hamilton imposed a Whiskey tax in a move interpretable within the above context. The writers also propose the use of judicial and legislative mechanisms to prevent the dubious copying of manufactured goods and to prevent the loss of reputation in the arena of international trade. A number of policies and proposals by these three economists are dissimilar.

Hamilton concerns himself at length on the subject matter of creation of jobs for the unemployed; in his words classes not engaged in particular business, promotion of the development of talents, creating an atmosphere to promote various field of enterprise and above all to secure a steady demand for the Agricultural surplus in America.

(Hamilton 1791) List (1885 /1841) urges that any surplus power of a State (Military and Labour) must be directed towards the colonisation of subjects of barbaric nations, to make war and contract alliances with the exclusive regard to a state’s colonial, commercial and maritime interests; he emphasises that the Colonial power must reserve the right to supply colonies with manufactured goods and to receive raw materials from colonies at a preferential term. An Analysis of Policies and Institutions for Economic Development Chang (2002) and Kiiza (2007, 2008) assert that today’s developed States made use of nationalistic policies to develop and become both wealthy and powerful.

The policies when elaborated include and are generally centred on the following: A ban or prohibition of imports that are luxurious in nature, import of raw materials while discouraging their export, a ban on haemorrhage or transfer of national wealth, export of only manufactured goods and a ban on non essential finished good, export of technology in the form of skilled personnel and machinery, and the adoption of navigations laws (Frieden and Lake 1987).

According to Kiiza (2007) the tenets, tentacles or facets of economic nationalism (mercantilism) are not necessarily set in stone; they are dictated and driven by the contingent needs of an economy. In fact he contends that the tools may involve direct state involvement in the promotion of development, indirect approaches by Government like subsidization, protectionism and economic openness. It is clear therefore that to achieve economic success and development States must apply economic policies that are nationalistic, developmental and concomitant with their domestic needs.

In retrospect, the mercantilist approach as elaborated by viner (1948), Chang (2007, 2002), Kiiza (2007, 2008), Hamilton (1791), and List (1885 /1841) is greatly strengthened and granted authority due to its success in States where it has been applied and in particular within the East Asian Tigers or in the words of Handleman (1996) the Newly Industrializing Countries. (NICs) It is noteworthy that these States applied certain elements of the classical mercantilism with a blend of modern economic principles that include some slight changes from their applications in the past.

The use of a professional, technical and a disciplined bureaucracy contribute greatly to economic transformation, according to Johnson (1982) Japan perfected the amalgamation of ideology of nationalism and official bureaucracy to achieve late but rapid industrialization, Kiiza (2007) weighs in that bureaucracy is the institutional embodiment of economic nationalism and Chang refers to it as the meritocratic bureaucracy.

The use of experienced and motivated bureaucrats that are in terms of ideology patriotic and nationalistic, to whom the ideals of State and Nationality are given primacy over individual desires. The Good bureaucracies’ thesis as propagated by Evans and Rauch (2005) entails the replacement of the patronage systems of state officials with a professional bureaucracy whose goal is state development; this coupled with the fact that bureaucrats should have good institutions, is an example of a policy that buffers or makes stronger the application of economic nationalism.

The direct involvement of government in economic transformation is a vital and perhaps most fundamental factor that supports economic nationalism. The case of the NICs or East Asian Tigers indicates that economic leaps are possible and easier when the government of the day takes the primary responsibility (Stiglitz 1996). Hong Kong, Japan, Malaysia, Taiwan, Indonesia, Thailand and South Korea are quoted by Stiglitz as economies where government involvement has led to economic transformation.

When the Japanese government adopted protectionism for Toyota in 1939 by expelling General Motors and Ford from operating in Japan and then extending financial bailout from the Central Bank to Toyota (Chang 2007) its actions made the statement that in times of economic crisis the hand of the State must steer things back to normalcy directly or indirectly.

In an effort to elaborate further on the role of Government Stiglitz (1996) theorises development in terms of different metaphors: the engine metaphor where government must identify the engine for growth and then rave or increase its rpm, a Chemical metaphor where government is seen as a catalyst to accelerate growth, biological metaphor or the adaptive systems thesis that government must help its economy to adapt to change or perish and the physics or equilibrium metaphor where the private sector and government must both do their part to foster economic growth.

Stiglitz indicates that the East Asian Tigers have used a “Trinitarian” hypothesis to approach industrialization though; the development of technological capabilities, increasing the domestic capacity to manufacture a range intermediate goods from plastic to steel and the promotion of exports. These policies however could only be achieved through reforms in education, allocation of capital to areas of high technological reform, and research.

He further argues that the promotion of exports should be preceded by improvement in product quality to foster a positive reputation coupled with good infrastructure to ease transport and preferential access to capital and Forex exchange. Lessons of Good Practice for Uganda Uganda should adopt a more strict fiscal control framework. Under the pressures of what Chang (2007) calls the unholy trinity; the country liberalized its capital accounts leaving it to the mercy of the turbulent markets.

Notably the WTO, IMF and World Bank are at the fore front of the propagation of liberalized capital accounts, deregulation of Foreign Direct Investment, and privatization of state owned enterprises; in short they enforce wearing of Friedman’s golden straightjacket. A new proposed framework should ensure accountability of the National Forex reserves with severe punitive measures for its misuse and frequent audit to prevent corruption.

There is a need to restructure the import and export mechanism that exists today, a total ban would distort the markets severely and cause diplomatic tension, notably though it is important for Uganda to stop importing fake duplicates of batteries, phones, clothing, shoes, bags and other commodities, import of commodities produced domestically like sugar should be reduced or banned all together. The presence of these commodities increases expenditure and exhaustion of savings as the population buys these items repeatedly to replace the ‘short lasting’ duplicate.

Uganda must transform the quality of raw materials that we export; Coffee and tea should be processed before its export to give it a better quality and value on the international market. An ancient Chinese proverb expressed the importance of education very clearly, it says “If you are planning for a year, sow rice; if you are planning for a decade, plant trees; if you are planning for a lifetime, educate people”, in Uganda education requires serious revision and transformation; a reduction of the subjects to the core essentials. Ordinary Level students learn extensively about the St.

Lawrence Sea way in North America, and A Level students are exposed to the ideals of the French revolution and European history without equal degree of exposure to country specific subjects in the areas of economy, health sector, geography or governance. The education system should impart both the theory and practical skill to enhance creativity. The length of period spent in study should be shortened to enable the state to benefit from the potential labour force of the youth; the area of Technology should be one of great investment by the state.

Uganda must promote productive talent; artisans in all productive trades should be encouraged and assisted to perfect their trade: at Kisekka market in Kampala, the bulk of mechanics are school drop outs (O-Level) and yet they carry out major repairs that could challenge a seasoned graduate of engineering; these mechanics do not communicate in English nor do they live a sophisticated life, they deal in repair of mainly Japanese vehicle: this is a potential labour force for a vehicle assembly plant, machinery production and repair.

The capital city of Uganda is ridden with “phone technicians” or repair men, who work in small over crowded rooms but do repairs for mobile phones from all over the globe; this too is potential labour force for a phone production entity. The education system should be shaped in a manner that sharpens the skills of such individuals. The government must facilitate employment by lowering the tax on income, entrenching employment quotas for all foreign firms that invest in Uganda and supporting the indigenous investment schemes.

The tourist sector in Uganda for example has been hijacked by foreigners; most Tour and Travel companies are predominantly owned by foreigners and yet the service provided should be monopolized by Ugandans. The private security sector which should ideally not have any foreign nationals employed in it due to national security interest is embarrassingly predisposed in the reverse. Hush Security a Chinese security firm for example allows its foreign employees to carry arms within Uganda territory. Since 2009 Uganda has been spending slightly over 8. 2% of its GDP on health, the condition in public health facilities is wanting.

The health system in Uganda needs reform especially in terms of investigating epidemics, access to the medical facilities, availability of medical personnel and much needed medicines. The State must build confidence in its own health infrastructure by banning or preventing “medical tourism” for government officials using public funds. The sector should be prioritized in budget allocation. The State must reform the infrastructure; from roads and rail to water and air transport. The roads need to be better planned; the possibility of successfully improving road infrastructure is greater at the peripheries of the country rather than at

the centre because the population distribution leans more to the “industrialized” and urban centres. In the urban centres the high activity rate coupled with developments adjacent to the roads makes it difficult to widen them however to when it comes to paving and repairing roads leading to distant peripheries in the country for example the Soroti-Katakwi Road to Moroto Municipality, the quagmire of limited expansion is nonexistent; Once the roads are tarmac ked a toll system should be set up to generate revenue for maintenance.

Rail must be revived, at least for cargo transport and passenger transport where possible; this will save and prevent the destruction of the roads by heavy trucks. Water transport can be improved by placing condition worthy water vessels on all major water bodies to ease transport. Air transport can be improved by commissioning a national carrier and acquisition of up to date airport specific equipment; to date for example Uganda Civil Aviation Authority still uses the military radar for civilian traffic. The government must expand enterprise by commencing new initiatives, a national air carrier or a rail system will both create jobs.

Expensive minerals and natural resources should be exploited for national interest; Oil especially must be used for nationalistic and balanced development. Agriculture needs transformation into a high tech, capital intensive activity to release excess labour for deployment in the industrial sector. In Britain for example 60% of the Agricultural produce consumed is produced domestically by 2% of the population, in Uganda 82-85% of the population is engaged in “rudimentary” agriculture. (Central Intelligence Agency 2012).

The British phenomenon ought to be the “visionary” ideal of the political leadership at Nakasero. The military should be trained, well armed and remunerated with a goal of making it a professional entity. This will prevent internal and external threats from “impediments” of development. The coercive fingers of the State should create security for business to flourish by hunting, criminals, robbers, looter and smugglers. Uganda’s recent purchase of State of the art Sukhoi-3s has extended the country’s Air superiority in the region; never the less it robbed the treasury of much needed Forex reserves.

The State must engage in projects of the future for example nuclear power for civilian use; this would solve the power problems of Uganda and allow government to concentrate its limited finances in areas like education, welfare and health. In conclusion the economic scenario in Uganda is deplorable, a shift from the Agricultural sector into the service and industry is the only ladder to economic progress in Uganda; this purpose driven initiative must be undertaken primarily by the government through abandoning the mere manipulative policies of Chang’s unholy trinity and embracing East Asian type economic nationalism.

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