According to Collin dictionary government is the group of people who are responsible to govern country. Christian council of Tanzania and Tanzania Episcopal conference define government as the chief agency for organizing and in the end of controlling both development and order in the society. Also it is an organized body of persons and institutions that form an agency or machinery of the state which formulates, expresses and realizes the will of state. Therefore, government consists of the activities, methods and principles involved in the governing a country or other political unit. Government failure is the public sector analogy to market failure and occurs when a government intervention causes a more inefficient allocation of goods and resources than would occur without that intervention. Likewise, the government’s failure to intervene in a market failure that would result in socially preferable mix of output is referred to as passive government failure (Weimer and Vining, 2004). The failure is an outcome of policies enacted to regulate trade which create systemic inefficiencies and economic cost that adversely affect a product‘s manufacture and sales. This arises when government has created some inefficiency because it would not have solved a given problem or a set of problems more efficiently. The government supply side failures largely result from principal/agent problems. Market failure - occurs when the supply of a good or service insufficient to meet a demand. A market failure result when prices cannot achieve equilibrium because of some distortions for example, the limits on specific goods and services. In other words, government regulations implemented to promote social wellbeing inevitably result in a degree of market failure. Structural Adjustment Programme are economic policies which countries must follow in order to qualify for new World Bank (WB) and International Monetary Fund (IMF) loans and help them make debts repayments on the older dept owed to commercial banks, governments and World Bank, (Whirled Bank Group, 2003).
THE CONDITION OF THE COUNTRY BEFORE STRUCTURAL ADJUSTMENT
After independence in 1961, the new government adopted the colonial style of economic structure. Between 1960 and 1962, for example agriculture contributed more than 50% to gross national product (GNP), and sisal, coffee, cotton and tea contributed 60% to the total foreign exchange earnings (Taube 1992). Tanzania neglected not only to satisfy its own national food requirements, but also to diversify its export products and promote light manufacturing. Politicians were soon overtaken by the reality of severe deficiencies in the supply of food products, energy, housing, manufactured goods, health and educational services, as well as intermediate inputs and implement for the agricultural sector. Between 1961and 1966 Tanzania economy operated primarily under free market conditions and the government adopted the World Bank’s transformation approach to agricultural development as a component of its first five year plan (Wenzel and Wiedemann 1989). In 1963 Tanzania implemented the Agriculture Product Board Act, which was the government’s marketing board for scheduled crops. This board managed maize, wheat, rice, cashew nuts and oil seeds through market purchase, price regulation, and regulation of storage, transport and processing (Bryceson 1993).
DURING ARUSHA DECLARATION
In 1967, the ruling party (TANU) which nowadays is Chama Cha Mapinduzi (CCM) passed the first national economic declaration establishing Tanzania’s era of economic socialism. This was the Arusha Declaration. This clearly meant to address the deficiencies in Tanzania’s economic development, but it explicitly enclosed socialism and a planned economy, which the country’s new leaders thought appropriate at the time. Ujamaa (familyhood and relationship) became the expression for Tanzanian‘s social economic system and a synonym for Tanzania socialism....