The Political Economy of Tanzania. Michael F. Lofchie

of gray markets, became a limitation on their entrepreneurial activities. So long as the state was still the official owner of the country’s major industrial firms as well as major services, such as hotels and bus companies, Tanzanian entrepreneurs were unable to invest their capital in these areas. This changed dramatically when the World Bank and other donors began to insist that the government of Tanzania divest itself of ownership in its publicly held enterprises. At that point, the newly forming class of private entrepreneurs had a direct stake in timely implementation of the Bank’s recommendation. When the divestiture process began in the early 1990s, the highest-ranking officials could position themselves and their family members, through various partnerships, to acquire an ownership share at bargain prices.

      Tanzanians have long been aware of the problem of official corruption, and it has been the topic of practically daily reporting in the country’s news media as well as the subject of an endless series of government investigations, reports, and studies. It has formed the basis of a widely publicized dialogue between the government of Tanzania and its principal donor organizations. Some of the most prominent agencies of the Tanzanian bureaucracy, such as the Prevention and Combating of Corruption Bureau (PCCB), are devoted to addressing this problem. Perhaps more important, ordinary Tanzanians experience corruption as a fact of daily life in the form of side payments to government officials for practically every bureaucratic transaction.²⁵ Corruption has been an important cause of the government’s willingness to use repression against its political opposition. Since corrupt gains constitute a major source of wealth for members of the political-economic oligarchy, it raises the stakes of losing political office, thereby encouraging the use of repressive measures to remain in power.

      The overriding question is why Tanzania has a politico-economic oligarchy. The blunt answer is that twenty years of a state-based economic strategy that depended upon coercive mechanisms of implementation foreclosed the possibility of Tanzanians developing independent bases of wealth or status outside the jurisdiction of the state. Tanzania’s oligarchy arose within the state apparatus, which continues to provide it with its major source of investible wealth. Tanzanians who have risen to positions of wealth in Tanzania have done so through their connections to the political process. Much of the wealth of the oligarchy especially that derived from corruption continues to be dependent on their ability to exercise influence within the state apparatus. Wealth and power in Tanzania are so inextricably interconnected that it is impossible to have one without the other.

      The politico-economic oligarchy is dependent on the state to suppress opposition leaders and parties. The police and security forces of Tanzania routinely harass the leaders and supporters of opposition parties, sometimes violently. The U.S. Department of State has painted a bleak picture of the human rights environment in Tanzania. In a 2010 report, it listed the following abuses:

      use of excessive force by military personnel, police and prison guards as well as societal violence, which resulted in deaths and injuries; abuses by Sungosungo, traditional citizens anticrime units; harsh and life-threatening prison conditions; lengthy pretrial detention; judicial corruption and inefficiency, particularly in the lower courts; restrictions on freedoms of press and assembly; restrictions on the movement of refugees; official corruption and impunity; societal violence against women and persons with albinism … and discrimination based on sexual orientation.²⁶

      The government’s willingness to use its police and security forces to repress opposition activities is a reminder that the Tanzanian oligarchy has a fundamental stake in holding onto public office. It has shown that it is prepared to go to great lengths to do so.

      The political alignment that has driven Tanzanian economic policy during most of the past twenty-five years has been a coalition of the political-economic oligarchy acting in concert with donor organizations. The linked processes of economic reform and democratic transition have been accompanied by frustration and misunderstanding on both sides. Much of the frustration misses the point altogether, which is that Tanzania has now become a society in which there are all-too-familiar disparities in wealth between those few Tanzanians who are members of the oligarchy and those who are not.

       Chapter 2

       Economic Decline and Authoritarian Rule

      The economic trajectory of post-independence Tanzania is painfully familiar. A poor choice of economic policies led to economic decline, which manifested itself in growing and acute scarcities of essential goods and services. Pervasive scarcities, in turn, gave rise to the rapid spread of parallel markets, which gradually came to provide a larger and larger proportion of what ordinary Tanzanians consumed on a day-to-day basis. Tanzania developed a binary economic system. The official economy, which was largely state regulated and controlled, delivered fewer and fewer of the goods Tanzanians needed and consumed on a daily basis. The unofficial or parallel economy grew exponentially and provided an increasing proportion. The combination of the two provided fertile opportunity for rent-seeking public officials and politicians.¹ Public sector corruption became blatant, universal, and ineradicable. Using the gains they derived from corruption, many public officials became active in the parallel sector as investors and producers, owning, or co-owning, private enterprises that provided goods and services that the legal marketplace could not.

      Tanzania’s evolving economic framework never corresponded very closely to President Nyerere’s social vision, and the gap between the two only grew greater as the government implemented a policy of protected industrialization. Even the most casual reading of Nyerere’s ideas on development suggests that his personal priority had to do with improving the conditions of life for Tanzania’s poorest social strata. During Nyerere’s presidency as now, this consisted principally of smallholder farmers, who were the overwhelming majority of the Tanzanian population.² As it evolved during the twenty-five years of the Nyerere presidency, however, Tanzanian economic policy assigned the highest priority to the creation of large-scale, state-owned industries. These were overwhelmingly urban, and they provided their greatest rewards to the white-collar stratum of managers and technocrats and to the owners of small businesses that provided collateral services, such as transportation and catering. The new industries also offered generous benefits to their industrial workers since, according to economic theory, the industrial wage had to be set at a high enough level to induce farmers to migrate to the industrial sector.

      To capitalize those industries and to provide them with a steady flow of machinery, raw materials, and other inputs, the Tanzanian government imposed higher and higher levels of taxation and price regimentation in the agricultural sector. Throughout the Nyerere presidency, Tanzania’s rural sector was not treated as the chosen recipient of beneficent transfers from better off segments of the society but, rather, as a source of revenue that could provide capital for the industrial sector. Contrary to much of what Nyerere said and continued to believe, the economic framework that Tanzania implemented during his presidency was perverse with respect to the distribution of wealth. It featured a planned transfer of economic resources away from the poorer elements of the society, the small farmers, to the far better off inhabitants of a new industrial sector, its workers, managers, and civil servants.

      If Tanzania has attracted global attention because of the social ideals of its founder-president, it has attracted equal attention for having had one of sub-Saharan Africa’s worst performing economies during the decades following independence. During the period between independence in 1961 and the beginning of economic reforms in the mid-1980s, Tanzania’s economic record was one of persistent decline. According to World Bank figures, Tanzania’s real per capita income stagnated during the forty-year period from 1960 to the turn of this century and actually fell during the 1970s and 1980s.³ Even these dismal numbers do not provide a complete picture, however. Much of the recorded growth took place in the expanding public sector and reflected the massive growth of the central government’s bureaucracy. Most Tanzanians did not benefit from this growth, and many believed that their real standard of living—measured on what they could actually obtain in the way of housing, food, clothing, and other vital amenities—fell during most of that period. The government based its calculations on the official exchange rate, which exaggerated the dollar value of its shilling-based economy. This practice concealed the extent to which living standards