They were active in all aspects of the private economy: as producers; as providers of services, such as transportation; and as sources of capital investment. Public officials had certain special advantages in becoming entrepreneurs. They had the windfall income of funds afforded by corruption and the advantage of de facto immunity from prosecution provided by their official status. There was a sort of income dynamic: government salaries provided a smaller and smaller share of their income, and the income derived from corruption and investments in parallel market businesses became a larger and larger share of what they earned.
Corruption was Tanzania’s form of early capital accumulation. Although the decreasing purchasing power of public sector salaries was a major reason government officials turned to corruption, there were other factors as well. These included a governing party leadership code that forbade party members serving the government from earning second incomes and constraints on the banking system that increasingly forced the commercial banks to lend almost exclusively to state-owned enterprises. Corruption became a major source of investible wealth. Almost imperceptibly, vast numbers of Tanzanian officials underwent a socioeconomic transformation from government employee to petty capitalist.
No other factor provides as powerful an explanation of the alacrity with which the Tanzanian elite accepted the country’s rapid transition to a market economy during the 1980s. By that time, a sizable proportion of Tanzania’s political elite had become actively engaged in the country’s market economy. For many, their government positions were a mere adjunct to private sector activity. Some could use state-provided benefits, such as government houses and cars, as assets in their private sector activity. For many, a position in the government provided preferred access to foreign exchange, an especially valuable asset in an environment where hard currency was in extremely short supply. For others, it meant the ability to use state authority to leverage a covert partnership with an established private sector enterprise.
For the more successful members of Tanzania’s new class of venture capitalists, the survival of the state economic sector, however encircled by the ubiquitous expansion 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
