Development in 1981, and although a small number of Tanzanian economists had begun to envision the need for a more market-based approach to the country’s economic management, the political elite continued to be enthralled by the Nyerere ethos of socialism through central planning. Fear of punishment for dissenting views trapped Tanzanian leadership in a perverse game of rescue the failed hypothesis. Anyone who openly challenged the official economic orthodoxy risked harassment, dismissal, imprisonment, or worse.
The economic reasoning that prevailed during this period held that since socialism must be correct, the causes of economic failure must lie elsewhere. The cloak of infallibility that enveloped the president’s approach to development caused Tanzanians to look for traitors in their midst to explain the country’s economic decline. A politically popular explanation for the country’s economic difficulties was the presence of economic saboteurs who were attempting to undermine the economy from within. This, too, was a form of racial scapegoating. Although it was not explicitly racial, everyone understood that the term saboteur was code to refer to the Asian merchant class that had historically been a major presence in the Tanzanian retail sector. Under the influence of a highly popular political figure, Edward Sokoine, who became prime minister in February 1983, the Tanzanian government passed an Economic Sabotage Act that gave it broad authority to take action against individuals and businesses suspected of creating and profiting from the scarcities.9 Under the new law, businesses that sought to maintain an inventory of essential goods could be charged with “economic sabotage,” a crime that might be punished with lengthy imprisonment.
To implement the law, the government initiated an anti-economic saboteur campaign, and by April 1983 there were more than four thousand arrests under the law.10 Although the majority of those arrested were Asian merchants accused of the economic crime of hoarding, some were the African managers of state-owned trading companies. Practically all were imprisoned. Most of the private merchants arrested also suffered confiscation of their warehouses and stocks of consumer goods. The anti-saboteur campaign was a dismal failure that only made matters worse. It had a chilling effect on the entire Tanzanian business community; the atmosphere of fear it created only exacerbated scarcities that were already severe because of the degraded economic environment.
Viewed in retrospect, Sokoine’s effort to convince the Tanzanian public that the country’s economic woes were the result of the self-seeking behavior of a small number of greedy merchants—not the deficiencies of a dubious theory of development—was the last gasp for the Nyerere ethos. Since the Sokoine arrests included a number of successful African business entrepreneurs and managers, his approach to solving the country’s economic problems was becoming unpopular before his sudden death in an automobile accident in early April 1984, just over a year after assuming office. The most pronounced effect of Sokoine’s anti-saboteur campaign was that it accelerated the growth of the parallel economy. Tanzania’s official economy, with its excesses of regimentation and rent seeking, was already a difficult environment in which to operate. The anti-saboteur campaign added an additional element of fear and uncertainty since the government could arrest and imprison a merchant simply for holding a supply of stock in reserve. To evade the anti-saboteur campaign, many entrepreneurs shifted their activities to the parallel sector, where business had long since learned to evade detection, oversight, and intervention by the Tanzanian state.
The Parallel Economy
Scarcities of essential goods generated their own remedies in the form of parallel markets, and a vast parallel marketplace arose to supply goods that were otherwise unavailable. The principal economic difficulty with the parallel marketplace was high prices, reflecting not only scarcity but the element of risk inherent in illegal transactions. The growth of these markets had two immediate effects. The first was to discredit the official economic system by calling attention to its failures and shortcomings. A government-sponsored chain of retail stores, Cooperative Societies of Tanzania (COSATA), became an object of ridicule for empty shelves with posted prices for goods that were unavailable. The social effect of the parallel marketplace was to accentuate the inequalities between the society’s haves and have-nots.
The social differences between those who could afford to acquire goods in parallel markets and those who could not would generate demoralization even in societies where an ethos of social equality was not present. However, in Tanzania the differences between haves and have-nots became especially burdensome because the president’s philosophy attached such great importance to the idea that all Tanzanians would share the burden of socialist development. The fact that those who could obtain goods in the informal marketplace were often high-ranking members of the country’s political elite made the social discrepancy even more demoralizing. Over time, many Tanzanians became convinced that the president had to be personally aware of the widening socioeconomic gap in their society. Some even came to believe that his public message of social equality was a disingenuous attempt to provide legitimacy for members of his own coterie even though he knew that they were behaving in a socially predatory manner.
As is inevitable in an environment of acute scarcity, inflation eroded the purchasing power of both public and private sector incomes. Yet Tanzanians with positions in the public sector, especially those at elite levels, were in a far better position to ride out the economic storm than those who were not. The upper strata of state officials became a privileged class relative to the economic hardships suffered by the vast majority of Tanzanians. However, the political elite was able to hide much of its wealth from public view. A large portion of the elite’s real income was in the form of benefits that, while not monetary, nevertheless had great monetary value, such as government-provided houses, official cars, expense allowances, and salaries for household staff. National Assembly members received generous per diem payments while attending legislative sessions. Government officials who had to travel—many contrived to do so—also received generous per diem payments, sometimes in hard currency. Since public officials could easily falsify their expense statements, these payments often became an important source of supplemental income.
The more influential members of the political class enjoyed a wide variety of other nonmonetary benefits as well. They could use their positions to obtain government jobs for relatives and friends, business licenses for family members, government contracts for political allies, and special educational opportunities for their own children and those of their political associates. Although these privileges did not count as income, they were an important part of what differentiated membership in the political elite from nonmembership. Many members of the political class also managed to hide their income by sequestering assets overseas, in bank accounts or real property. High-ranking public officials were also able to use their positions to avail themselves of other opportunities not readily available to ordinary Tanzanians, such as overseas travel and education. The highest-ranking members of the elite were able to obtain special medical services overseas and preferred access to other scarce goods and services. These benefits meant that the highest members of Tanzanian officialdom were able to insulate themselves from the scarcities that affected ordinary citizens. The sum total of their privileges helps explain why Tanzanian officials, like those in so many other comparable countries, were among the most reluctant to change the economic policies that they were fully aware were imposing hardships on the majority of the population.
The early pattern of elite inequality in post-independence Tanzania was so well concealed from public view and scholarly scrutiny that it is all but impossible to determine the extent to which inequality may have worsened during the period of economic reform. The country’s socialist ethos and a leadership code that forbade second incomes caused members of the political elite to go to great lengths to conceal their real incomes. Their homes were not generally accessible to the public, and they derived much of their cash income from unrecorded activities such as rent seeking. Public officials could also divert part of their income to the businesses and farms of close family members or political supporters. In contrast to today’s Tanzania, where luxury homes and luxury goods abound, there were far fewer opportunities for the elite to engage in conspicuous consumption. Tanzania during the 1970s did not feature expensive hotels or restaurants; there were
