The Quest for Institutional Reforms in Uganda: Navigating the Quagmire of Neoliberal Capitalism

 

By Sebaggala  Richard

 

The need for institutional reform in developing countries, especially those that have long been victims of colonialism and the neoliberal economic policies imposed by former colonial rulers, has become even more urgent in light of recent research by Nobel laureates in economics. Their groundbreaking work underscores a fundamental truth: institutions matter. Sustainable development depends on well-functioning political and economic institutions to ensure long-term prosperity. In countries like Uganda, however, this path is complicated by a double legacy: the lingering effects of colonialism and decades of neoliberal reforms promoted by the International Financial Institutions (IFIs).

Neoliberalism, an economic and political ideology, emphasizes free markets, minimal government intervention, and individual economic freedom. The policies of neoliberalism promote privatization, deregulation, and reduced public spending. It is based on the belief that if markets can operate freely, they will allocate resources efficiently and promote growth. In developing countries, this ideology has been enforced through Structural Adjustment Programs (SAPs) led by the International Monetary Fund (IMF) and the World Bank, which made financial support conditional on adopting these market-based reforms.

For Uganda, this has led to a —difficult and inescapable situation—resulting from the entanglement of neoliberal capitalism and its impact on governance and economic structures. On the one hand, neoliberal policies rely on the freedom of the market and less government intervention. On the other hand, Uganda is confronted with the consequences of these reforms: weakened public institutions, increasing inequality and limited social safety nets. Instead of promoting growth, these policies have often exacerbated socio-economic problems and made it more difficult for Uganda to implement meaningful institutional reforms.

The contrast becomes even clearer when comparing the neoliberal model that has been imposed on developing countries with practices in developed countries. While pushing neoliberal reforms abroad, many developed countries maintain significant public sector involvement. Kamala Harris’ proposal to provide $25,000 for first-time homeownership in the US highlights the critical role that the public sector continues to play in addressing social needs. This raises a crucial question for Uganda and other developing countries: should they continue to follow the prescribed path of limiting public sector involvement or is it time to rethink their approach and pursue more balanced, inclusive institutional reforms that reflect the socio-economic realities they face?

The neoliberal reform package and its consequences

Uganda has often been hailed as a "star performer" of neoliberal reforms in Africa. In the late 1980s and 1990s, the Ugandan government implemented far-reaching changes that transformed the economy from a state-led to a market-oriented model. In fact, Uganda adopted one of the most comprehensive neoliberal reform packages on the continent (Harrison 2006). These reforms included the privatization of state-owned enterprises, deregulation of key sectors, liberalization of trade, and a significant reduction in the role of the public sector in the economy — all to promote what some scholars refer to as a "market society"

Neoliberalism is based on the assumption that free markets lead to efficient outcomes and that the benefits will eventually be passed on to all. In Uganda, this ideology has led to widespread privatization, the dismantling of public services, and the deregulation of many sectors, particularly agriculture. The dissolution of state marketing boards, the weakening of cooperatives, and the reduction of the government's role in the provision of important public goods such as health and education were the main features of this change.

However, the neoliberal reforms in Uganda were not limited to economic transformation; they also changed the social fabric and moral norms of the country. The neoliberal model emphasizes individualism, self-interest and the pursuit of personal gain, often at the expense of community values such as reciprocity, solidarity and mutual aid. This shift towards a market-oriented moral code that devalues traditional social norms has had a profound impact on Ugandan society.

While these reforms helped Uganda achieve a degree of macroeconomic stability in the 1990s, they also brought with them significant challenges. Critics argue that Uganda's market-based policies have contributed to new forms of inequality, entrenched corruption and weakened the ability of the public sector to deliver basic services. For example, the dissolution of cooperatives has left smallholder farmers exposed to market forces, often leading to exploitative trade practices. In addition, the erosion of state institutions has exacerbated inequality and increased the vulnerability of the poor. In the absence of robust regulatory oversight, corruption flourished, leading to a "moral restructuring" of the Ugandan economy, where individualism, profit maximization and opportunism took precedence over community welfare and ethical corporate governance.

The limits of neoliberalism and the need for institutional reform

While neoliberalism has brought Uganda some economic successes, it has also presented the country with significant social and economic challenges. Relying too much on the market’s ability to regulate itself, Uganda's reforms overlooked the crucial role of strong public institutions in addressing market failures and ensuring inclusive growth. The diminished role of the state in regulating industries, enforcing contracts and providing social safety nets has resulted in an economy that disproportionately benefits a small elite while the majority is left behind.

To move forward, Uganda’s institutional reform agenda must transcend the limitations of neoliberalism. Instead of further diminishing the role of the state, the country should prioritize strengthening public institutions to effectively regulate markets and provide essential services. As has been seen in many industrialized countries, a well-functioning state is essential for long-term development. Public investment in infrastructure, education, healthcare, and social protection programs is critical to reducing inequality and ensuring that economic growth benefits all sections of society — not just the wealthy few.

Uganda should rethink its reform strategy and draw lessons from successful economies that balance state involvement with market-led growth. A more integrated approach, where public investment complements private sector activities, could fill the gaps left by the neoliberal model. By investing in infrastructure, education, healthcare and social services, Uganda can build the human and physical capital needed for sustainable development.

In addition, strengthening the regulatory framework and revitalizing community economic structures such as cooperatives could help restore some of the moral norms and social practices that were weakened under neoliberalism. A reform agenda that recognizes the importance of both state and market-based institutions for equitable and inclusive development is essential for Uganda's future prosperity.

Conclusion: Revitalizing Uganda through balanced institutional reforms

Uganda's experience with neoliberal reforms provides crucial lessons for future institutional change. While the country has achieved some macroeconomic stability through market-led growth, it is clear that reliance on neoliberal prescriptions has left significant gaps in terms of equity, social welfare, and sustainable development. As Lodhi (2017) argued, neoliberalism has redistributed rather than generated wealth, eroded social welfare, and created conditions for political instability. To build a more resilient and inclusive economy, Uganda needs to move beyond strict neoliberalism and adopt a more balanced approach that includes both public and private sector collaboration.

 

1. Rebuilding government capacity for public services: Uganda's future depends on reinvesting in key public services such as education, health, and infrastructure. Neoliberal reforms have weakened the role of the state in these areas, particularly in education and health, leaving the most vulnerable populations without access to critical resources. Strengthening the state's capacity to deliver these services is crucial to reducing inequality and improving human capital, which are key factors for long-term development.

2. Strengthening the regulatory framework: Effective market regulation is necessary to prevent exploitation and ensure fairness. Uganda’s reforms should focus on rebuilding a regulatory framework that monitors labor rights, environmental protection, and corporate accountability. This will create a more equitable business environment where both small and large companies are held to standards that support sustainable and inclusive growth.

3. Revitalize cooperativism: The dismantling of cooperatives in the wake of neoliberalism has exposed smallholder farmers and local communities to volatile market forces. Restoring cooperative models, especially in agriculture, will create collective economic power and secure livelihoods. Cooperatives also promote social cohesion and mutual aid, which are crucial to building stronger, more resilient communities.

4. Inclusive economic planning and industrial policy: Uganda needs a strategic industrial policy that promotes sustainable growth and protects its economy from the vagaries of global markets. Rather than relying on unregulated foreign investment, the state should strategically direct its resources to sectors that can generate high levels of employment and innovation. This approach requires coordinated planning in which the state plays a central role in managing economic growth while ensuring that it is inclusive and benefits all citizens, not just a few.

5. Progressive taxation and social welfare programs: To address the growing inequality exacerbated by neoliberalism, Uganda should introduce a progressive taxation system that distributes wealth more equitably. This revenue can be used to fund robust social programs that provide a safety net for the poor, such as universal health care, unemployment benefits, and pensions. These programs are important to reduce dependence on market forces and improve the overall prosperity of the Ugandan people.

By addressing these five critical areas, Uganda can develop a reform agenda that moves away from the constraints of neoliberalism and builds a more equitable, sustainable, and resilient economy. A balanced approach — where the state plays an active role in public investment and regulation — will not only ensure that growth is inclusive but also secure a prosperous future for all Ugandans, not just the privileged few.