Countries of the World/COUNTRYS.BIN/dp/0365/03650.txt

Text File | 1991-06-25 | 38KB | 582 lines

$Unique_ID{COW03650}
$Pretitle{262}
$Title{Tanzania
Chapter 4A.   The Economy}
$Subtitle{}
$Author{Donald P. Whitaker}
$Affiliation{HQ, Department of the Army}
$Subject{land
villages
percent
government
village
development
ch
ujamaa
agricultural
rural}
$Date{1978}
$Log{African Elephant*0365001.scf
}
Country:     Tanzania
Book:        Tanzania, A Country Study
Author:      Donald P. Whitaker
Affiliation: HQ, Department of the Army
Date:        1978

Chapter 4A.   The Economy

[See African Elephant: Artist's Rendition]

     Tanzania's economy IN the mid- and late-1970s was profoundly
agriculturally based. It was socialist in character and structure and
distinguished by its approach to economic development, which demanded that
economic growth be accompanied by an equitable distribution of the wealth
generated. It differed markedly from the economy at independence, which bore
the imprint of colonial capitalism and was part of, and dependent on, the
international capitalist system. Moreover in 1961 the country's limited
manufacturing, modern agricultural, commercial, and financial sectors were
overwhelmingly foreign owned. The new government then looked forward to
substantially greater African participation and ownership but essentially
along the lines of the existing economic system. It also intended to make a
significant break with the old pattern by altering the emphasis on the
production of agricultural commodities for export to develop an economy more
balanced structurally.

     In line with this intention, the first comprehensive, long-term
development effort, a five-year plan begun in 1964, stressed development of
the manufacturing and marketing sectors as the way to increase the national
income. Because of Tanzania's low level of indigenous capital resources as
well as debt-servicing constraints on government borrowing abroad, the plan
placed great reliance on securing capital from the country's private (in
essence, foreign) sector-in the form of reinvestments in Tanzania-and from new
investment from abroad. Indigenous cooperative movements and joint government
participation with the private sector in industrial and commercial projects
were anticipated and looked on as the best way to effect a more equitable
distribution of the nation's increasing gross domestic product (GDP-see
Glossary), which was projected to grow at an average annual rate of 6.7
percent.

     Implementation of the five-year plan did not go as expected, and in 1966
a mid-plan assessment was made. The assessment pointed out that because of a
shortage of skilled and professional staff and certain constraints on fund
availability in the public sector, the private sector was expanding at a
relatively greater rate than anticipated, and problems had been encountered in
securing foreign aid for public sector projects. The government had also
learned, however, that it was able to mobilize internal resources to a much
greater extent than it had believed possible. Between 1964 and 1966 the GDP
had grown at an average annual rate of only about 5 percent; this was partly
explained by a drought in 1965 and a drop in world commodity prices in 1965
and 1966. A concurrent decline in agricultural employment had occurred,
whereas employment in industry and public services rose, and urban real
incomes over the two years had shown a considerable increase. The net result
of this had been to widen the gap between the incomes of urban wage earners
and those of smallhold farmers.

     After the assessment a new course was chartered for the economy by
President Julius K. Nyerere in a document presented to a national conference
of the Tanganyika African National Union (TANU) at Arusha in January 1967.
Published the following month and since known as the Arusha Declaration, its
basic theme was self-reliance. It called for primary emphasis to be placed on
rural development and stated the determination of TANU to lead the nation on
the path to a socialist society. The broad objectives enunciated were social
equality, self-reliance, the abolition of stark poverty, and the
transformation of the economy and society. Two major economic strategies were
considered fundamental to achieve these goals. The first called for state
ownership of industry, services, financial institutions, and the export-import
marketing apparatus; and the second for collective ownership and production in
agriculture, which was to be achieved through the medium of the ujamaa village
(see Glossary) (see Ujamaa Villages and Villagization, this ch.). There would
also be a limited number of state farms cultivating certain crops that could
benefit from large-scale operations and management.

     The economy that evolved after the Arusha Declaration followed these two
strategies, but pragmatic considerations resulted in certain modifications
from time to time as programs were implemented, and external forces-world
inflation, for one-over which Tanzania had little or no control necessitated
readjustments within the economy. The general nature and thrust, however,
remained socialist, but comparisons with the centrally planned socialist
economies of Eastern Europe showed important dissimilarities. Tanzania has
rejected the idea that improvement in the material standard of living could
best be achieved through an emphasis on industrialization. The model projected
was rather one of an agrarian society in which industrialization was to have
an important but subsidiary role. Social ownership of the principal means of
production was a basic tenet; but a place was seen for private capital in
modern small-scale industries and businesses. Also distinguishing Tanzania's
socialism was the decentralization of responsibility for regional and district
development activities, including the delegation to local bodies of a large
amount of control over local expenditure. The Arusha Declaration gave no
attention to the classic Marxist-Leninist concept of struggle between existing
economic classes, although a principal argument advanced for the economic
transformation intended was that it would prevent the formation of
socioeconomic classes.

Income Distribution and Gross Domestic Product

     Since the Arusha Declaration of 1967, a fundamental policy position has
been that disparities between urban and rural incomes must be minimized and
that significant differences in wages and salaries generally must be prevented
from developing. A major move in this direction was the nationalization of
significant parts of the productive and commercial sectors that had as one
principal aim preventing the emergence of an urban class earning high incomes
through capital investment in industry and commerce. Government leaders and
the leadership echelons of the parastatal corporations also were forbidden to
enter into private businesses or other activities for remuneration, a
prohibition that was aimed at forestalling the rise of an urban elite enjoying
higher incomes (see ch. 2; ch. 3). The principal measures affecting urban
income distribution, however, were progressive taxation and, in wage and
salary raises, the use of inverse scales that greatly reduced and frequently
allowed no increases at the top levels. In early 1977 President Nyerere noted
that in 1967 the highest salary in the public sector after taxes was twenty
times greater than the minimum wage but that, as the result of the
government's incomes policy, the ratio had been reduced to nine to one by the
end of 1976.

     Rural income distribution varied considerably by regions because of
natural differences in conditions affecting cultivation. Within regions the
development of cash crops in certain areas had resulted in marked income
differences between the occupier of the land and workers-for example, among
the Chaga-although the establishment by the government of minimum wages for
agricultural workers had reduced this somewhat (see land Tenure, this ch.).
Villagization, especially after 1973, may also have had some effect in such
areas in leveling incomes, b