In this chapter we look at some of the dilemmas inherent in a poor country’s structural adjustment efforts. In the 1960s Uganda was a promising African economy. Beginning with the mid-1970s, however, it has undergone a long period of economic regression and civil strife. Efficiency in the public service fell drastically as key institutions of government were crippled by mounting financial and administrative difficulties. At the end of the 1970s the modern sector verged on collapse, while peasants, faced with declining income from commodity production, switched to mainly growing food for subsistence. Like most of Sub-Saharan Africa, since the early 1980s the country has embarked on adjustment programmes in a bid to combat the macroeconomic disequilibria.
On the basis of the relatively low urban-sector wages in Africa and, in contrast, the ability of rural dwellers to grow their own food, it has been argued (see, for instance, Jamal and Weeks 1988) that the rural/urban dichotomy, long the basis of the development debate in Africa, has lost its significance. What we now have are two areas, each with a pool of desperately poor people and a sprinkling of rich ones. Policies to redress this new situation would thus be different from those, such as increased producer prices or expansion of rural infrastructure, that were advocated earlier to close the rural/urban gap.
This line of argument has some element of truth. Modern sector and, by implication, urban earnings have fallen in the bulk of Sub-Saharan African countries. However, when assessing the relative impacts on welfare one should take into consideration the shifts in overall income generation that have followed the erosion of the formal sectors. In urban areas informal sectors have flourished, compensating somewhat for the decline of the wage sector, while rural sectors have fallen back to subsistence production.