late model Mercedes-Benz automobiles, and no shopping malls offering a glittering array of expensive goods. Many of the most lucrative benefits members of the governmental elite enjoyed did not appear in official figures on income distribution, which were based on salaries alone.
A significant source of difficulty for Tanzanian research has been the tendency for the government’s statistical data to make the country appear closer to the socialist imagery favored by the president than was in fact the case. Critics of the process of structural adjustment sometimes allege that market-based reforms have led to widening social inequality. However, this is difficult to verify since the monetary value of the total package of privileges enjoyed by the governmental elite is not easily quantifiable. Despite Tanzania’s culture of social equality, members of its governing class always enjoyed a material lifestyle far more affluent than that available to ordinary Tanzanians. They continue to do so. But whether—or the extent to which—this income disparity may have worsened during the period of economic reform, or whether it has simply become more conspicuous in the more openly permissive atmosphere of a market economy, remains unclear.
The income gap between members of the elite and smallholder farmers was particularly pronounced. There is a strangely persistent imagery of African smallholder farming as a subsistence economic activity insulated from the up and down cycles of the marketplace. This conception has always been profoundly inaccurate. Tanzanian farmers, like African smallholder farmers everywhere, have participated in the cash marketplace to purchase an array of goods, such as bicycles, radios, wearing apparel, and food items they do not produce themselves, as well as more expensive goods, such as concrete for flooring and galvanized material for roofing. They also needed cash to pay for educational and medical fees, pay local taxes and cooperative fees, and make remittances to urban relatives. As Tanzania’s rural economy deteriorated, cash for all these items became less and less available. For larger and larger numbers of rural Tanzanians, the direction of economic change was reversed; it was a matter no longer of moving from a subsistence lifestyle toward widening participation in the marketplace but of moving from a mixed economic pattern back toward subsistence cultivation as a strategy for economic survival. Where it did exist, subsistence production was the effect not the cause of broader scarcities, as degraded economic conditions drove smallholder farmers to give up production for the marketplace. As this process unfolded, the income gap between smallholder farmers and urban elites widened.
For most Tanzanians, the high prices in the parallel marketplace made the goods they had to obtain there unaffordable. Since price inflation in these markets was inevitable, the tendency for them to substitute for official markets as the source of many of the goods actually consumed on a daily basis accentuated the economic differences between the country’s haves and have-nots. Attempts to gauge the extent of these differences are notoriously difficult because the prices in parallel markets tend to escape official detection and reporting. By their very nature, informal market prices fluctuate greatly over time and by location; because so many involve gray market activities, they do not appear in systematic form in official surveys. The government figures tended to understate price inflation because they used official posted prices rather than parallel market prices for essential goods.
The magnitude and importance of the parallel marketplace imparted an element of unreality to Tanzania’s economic life. The prices set and recorded by the National Price Commission reflected an illusory world of affordability in which even poor Tanzanians could obtain food and other necessary goods. However, the reality was that essential goods were rarely available at the prices set by the government. In the legitimate marketplace, consumers often had to wait in line for endless hours for a trickle of basic items and, even then, went away empty-handed. Those who could afford to do so then made their way to the parallel markets that made those goods available at higher prices that went unrecorded. The most visible feature of the economy during this period was that goods scarcities were an omnipresent feature of daily life. The informal marketplace that arose to remedy these scarcities was a constant and painful reminder of the shortcomings of the government’s economic policy.
Corruption
The emergence and growth of the parallel marketplace changed the lives of Tanzania’s public officials in two ways. The first was that it provided an incentive for corruption. Public officials had a special advantage over ordinary Tanzanians in that they could more easily augment their incomes by becoming corrupt. This provides the best starting point for an understanding of Tanzania’s endemic problem of corruption: it arose as a coping mechanism that enabled public officials, in contrast with ordinary Tanzanians, to augment their incomes. Tanzanian political scientist Gelase Mutahaba has shown the extent of Tanzania’s public sector wage problem.
The period 1975–1985 was a period of uninterrupted real wage decline. Although the situation was not very different in most of Sub-Saharan Africa, with most countries experiencing double-digit real wage declines on an annual basis, Tanzania’s decline was more drastic than most other countries apart from those experiencing political instability. Average basic salaries in the public service provided only one-fifth of the purchasing power of equivalent salaries in the 1970s.11
Civil servants who could find ways to extract rents from the citizens they were expected to serve—and this was practically everyone from primary school teachers and police officers to high ranking customs officials—began to seek bribes for their services.
The more consequential outcome of parallel markets was their tendency to transform public officials from advantaged consumers to parallel market entrepreneurs. It did not take long for the more entrepreneurial officials to realize that they could earn generous profits by participating on the supply side in the parallel marketplace and that their status as public officials afforded special advantages. One was that the gains from corruption provided a source of start-up capital; another was that the mantle of a government position provided a measure of security from official detection and sanction. These advantages made it possible for public officials to leverage their way into a wide variety of business arrangements with the parallel market entrepreneurs who actually bought and sold goods. The mechanisms for their participation in the parallel marketplace ranged from hidden partnerships with business owners who needed official protection to various forms of economic straddling by close family members. Whatever the mechanism for involvement, the outcome was the same: a certain portion of Tanzanian officialdom began to evolve in the direction of becoming a profit-seeking as well as rentseeking class.
For large numbers of public officials, rent-seeking behavior was only the first step in a longer and more far-reaching process of social mutation. What began to emerge in Tanzania during the 1960s and 1970s was a stratum of public sector officials who not only were able to augment their incomes by engaging in corruption but were becoming parallel market entrepreneurs in their own right. This transformation, at first gradual and then more rapid, is fundamental to understanding the Tanzanian political economy since the 1980s. The country was moving steadily toward a tipping point in its economic history. The first step was rent seeking, in itself the use of official position as a basis for income-maximizing behavior. The next and larger step in the process was for a portion of Tanzanian officialdom to wedge its way into the parallel economy as a full-scale entrepreneurial element.
This metamorphosis is fundamental to understanding Tanzania’s peaceful transition to a market economy. Once it became apparent that high-ranking officials could augment their incomes, sometimes greatly, by functioning as entrepreneurs in the parallel economy, Tanzania’s scarcity problem and the vast parallel marketplace to which it gave rise underwent a mutation. It is not possible to fix a precise date for this mutation. Its result, however, was that, at a certain point, a growing portion of Tanzanian officialdom had a deeper economic interest in preserving and even expanding the parallel marketplace than in resolving the conditions that caused it. Because of their rent-seeking skills, the most entrepreneurial officials were never much affected by the failings of the statist system. Indeed, so long as an important portion of their income derived from their ability to rent-seek in the statist economy so that they could profiteer in the parallel economy,
