Finance Minister Maria Kiwanuka has just read the 2012/13 national budget. But what is a budget?

For starters, a budget is a financial plan that indicates how the government intends to raise revenue and spend it. A budget is therefore a tool to improve people's lives and a contract between government and its people. To understand the budget and how it works, we must appreciate the economic framework under which it operates. This framework is based on traditional macro-economic models such as GDP growth which are not only grossly inadequate but misleading in interpreting economic development. For example, Uganda is currently the third fastest growing economy in the world. The fastest is Turkey followed by China. However, despite this astronomic growth about 9 million Ugandans, out of the estimated 34 million, are living under chronic poverty. This third highest growth rate in the world is against very high inequalities. Inequality is measured by a gini-co-efficient (index of inequality), currently estimated at 0.47. This means that the disparity is so wide, which is not good for integrated development. The gap between the rich and the poor has widened. This means the benefits of such growth are enjoyed by a few. This is confirmed by the 2002 census figures which show that 68% of Ugandans live in a non-monetary economy. Majority of Ugandans live a subsistence life while only less than 6% are have a bank account. This means that out of the 34 million Ugandans, 32 million operate outside the formal financial system. It is the mobile phone that is trying to integrate them and this is a positive development. Further financial penetration has been constrained by the recent government policies which dictate that one has to reveal where they obtained the money being banked. Even those who have been keeping some money in the bank have now been forced to keep it in their bedrooms or cow horns. It is not good to have a huge subsistence and non-banked economy because economic activities are boosted by borrowing from banks. Besides, subsistence economy narrows the tax base. To enhance economic activity, we need to realise one fundamental issue; the recent shift in the knowledge industry. In the contemporary world, knowledge-based economies are the ones leading in growth and transformation. Knowledge can be classified in four categories: Tacit, the knowledge we acquire from our socialisation. Most people have excelled not on textbook knowledge but on tacit knowledge; cognitive knowledge, information that we gather throughout our education like physics, economics, geography, history and others. In Africa, cognitive knowledge is the most emphasised; psycho-motor knowledge- this means the "doing". It implies putting the acquired information into practice. Countries like China have excelled in this type of knowledge and are now leaders in the global economy. However, it is not automatic that once knowledge translates into practice it generates positive results. You may have highly trained accountants who only excel in manipulating figures and fraud. You may also have highly trained medical doctors but who never treat people properly. The most important type of knowledge is "affective knowledge". This simply means having knowledge and using it for the good of others. It implies possessing knowledge not for the sake of it but for improving your community. Napoleon Hills in his latest book, "How to sell yourself through life", says; "If there is anything worth more than giving some one knowledge

or skill that improves one's life, then I don't know what it is". This means that for knowledge or skill to have utility, it must improve people's lives. I recently undertook a course in Trans-disciplinary Thinking and Research. The course empowers one to develop a distinctive capacity unparalleled by any traditional training. Students should aim at being graduates of multiversity and not graduates of university. Think and function beyond one discipline. Don't take refuge in your qualifications alone but aim at harnessing all your abilities to deliver desirable outputs. "Do rather than boast" of what you know. Employers want outputs not potentials. What will put food on your table is not the degrees you have but what you can do and earn. Let's return to the role of economics in transformation of an economy. Traditional economics dictates that the measure of growth of a country is found in macro-economic variables such as per capita GDP. The major weakness of these variables is that they are so aggregated that one cannot easily and personally identify with them. For example, how, many Ugandans can identify themselves with Uganda's third fastest economic growth rate in the world? Obviously, majority of Ugandans are living on the wrong street of this growth. We all agree we need economic growth but mere growth is not sacrosanct. Such growth is superficial, particularly in a highly liberalised economy like Uganda. Why? Growth, particularity when led by the private sector, requires a serious regulatory framework, control of vices such as corruption and strengthening of institutions to protect consumers. That's why counterfeit goods are flooding our market because everyone wants supernormal profits. I have been working hard to change the way we measure a country's growth. We have built a team of progressive thinkers and we are focusing on a new type of economics which we have called "transformative economics". It focuses on what is called Local Economic Development (LED). It's a stark deviation from the traditional macro-economic growth models which have not improved people's livelihoods yet their present artificial picture paints a country as doing well. We need not only to popularise but to mainstream local economic development as the most relevant economic model. This concept aims at defining macro-economic variables through appropriate interpretation at household and community level. For example, foreign investors are not attracted by a country's economic growth rate but the distribution of the people's disposable income as this determines effective demand (for the investor's products) and the aggregate purchasing power across the population. Many countries have already adopted this approach and the results are phenomenal. We have had enough of traditional and inadequate economic models. We now need new and meaningful transformative economics that is relevant to the people's daily lives.