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Friday, 13 July 2007

Musings on a Post-Mugabe Zimbabwe

I had a very fascinating discussion with some Zimbabwean friends this week on the precarious nature of any post Mugabe transition. In debating the key relative merits of changing the current regime - the key question is whether Zimbabwe will be stable if Mugabe leaves, and what can be done to ensure that nation holds together. Its not really an issue that has been discussed in the media at length. Everyone has focused on getting rid of "Bob" - but, will MDC be able to hold the country together?

A tricky question indeed - for one thing as several exchanges on this blog reveals the MDC faces two significant challenges that could shape the post Mugabe world. The first challenge relates to their intentions on the land question. An extract on their website says:

"The MDC will respect all legal land title deeds and ensure that the financial and legal rights of such landowners are fully respected and enforced. Existing landowners will be encouraged to resume farming as soon as possible and will be given every assistance to do so. Special Courts will be set up in all major centers to assess compensation claims for losses incurred during the “fast track” land reform operation and the State will be responsible for such claims. These Courts will also deal with disputes over land rights."

I am slowly gravitating towards the wider view that MDC plans to turn the clock black or at least will have no choice but to do so. This is likely to be dangerous for Zimbabwe. Indigenous people will not react very well to being told to give up their land while the Land Commission is doing its work. If on the other hand the MDC decide not to give the land back to previous landowners this is unlikely to go down well with the international community. Most of the people who lost their land during the "Mugabe reforms" have put heart and soul in the MDC with the view of getting their share back, although admittedly most of the white farmers have relocated to Zambia and elsewhere.

However it remains the case that MDC has large support among previous landowners. Its unlikely that these land owners would support MDC getting cold feet - in theory of course MDC can promise to give the land back and then renege on it - however that assumes that MDC is distinct from the land owners to allow such dynamic time inconsistency to take place. The current view is that MDC whilst it retains indigenous support also has a large element of backing from white Zimbabweans. And of course international pressure would ensure that they delivered where Mugabe supposedly "failed" on the land issue. So either the MDC position as stated on their website is not credible, in which case questions can be raised over their whole approach, or that it is what it says on the tin - namely turning the clock back. In which case there's a recipe for disaster in store for Zimbabwe.

The second challenge for the MDC is what to do about the military. Under MDC there will be a clear divergence between large elements of the military and the Government. Which is not the case at present. MDC must give some thought to how they will solve this situation.

Courting support from the army is going to be very difficult for the MDC. Although it is possible for one to imagine what a Zimbabwean friend calls "a scenario in which MDC's post-election policies was all-inclusive, with the carrot being extended to satiate the police and army's top lieutenants", the real challenge remains on whether MDC can achieve this "all inclusive" strategy. In other words policies that "makes everyone happy".


The reality is that a post Mugabe MDC Government would be most likely be in a no win situation. If they extend a carrot to the military generals, that will just embolden the military. In fact the carrot coming in form of more or less mean doubling their spending budgets and so forth would simply precipitate a coup. We know that the size of african countries armies strongly correlates with greater political instability. It would not be wise to pander to the military who served Mugabe with larger carrots (effectively buying them off). If on the other hand MDC reduced spending (or reducing the size of the military) and chastised the generals or tried to get rid of them, the military would have anticipated this, it could well be a recipe for disaster

Ultimately in such a game theoretic scenario, the key is the perceived weakness of the relevant players (a new Government versus the military). We have seen this in Ivory Coast and other places, where change has not happened because the generals perceived new Governments as weak. If the generals perceived that MDC is weak...a new leader may not be far off.

All of this is bleak of course, and to some extent speculative, but it also illustrates why as Africans we must constantly assess the present in light of the future. We can no longer afford to suffer from what Collier calls the syndrome of the "headless heart". So I put this question to my Zimbabwean friends to see what they thought. Their response was quite interesting.

Everyone accepted that it indeed was tricky and a real issue to consider. But in typical laid back African style one responded that it was not difficult to solve : "whoever was in charge simply needs to put relatives as generals". Good old African family ties would come to the rescue! Transparency and other things would need to be sacrificed to achieve the kind of stability that Zimbabwe may need post Mugabe - it turns out nepotism has its advantages! I am not totally convinced by the proposed solution, but I do think it carries an important lesson. Very often Western nations expect a genuine democracy to emerge out of desolation (e.g. post Iraq) but that's not always possible and sometimes unconventional approaches should be sought.


To be fair there are people in the West who understands the difficulties of political transitions in Africa. Collier's recent book the Bottom Billion is a classic example. If he was asked what would need to be done to solve this post Mugabe puzzle, he would probably say that the West needs to prepare for a relative small force to "guarantee peace" - in the same way the British intervened in Sierra Leone, they could do the same thing in Zimbabwe just to smooth things over and ensure whoever is in charge can take forward policies on a more secure platform. But I suspect, that faced with a choice between "forgoing" your sovereignty and temporary nepotism - most Zimbabweans would probably choose the latter! Our hopes and prayers must remain that they never have to make that choice.

64 comments:

  1. Most likely scenario I see post Mugabe, is others in his regime taking power - such as Mujuru or Mnangagwa

    http://news.bbc.co.uk/2/hi/africa/6506549.stm

    http://news.bbc.co.uk/2/hi/africa/6507993.stm

    And since they hold the guns, they hold the power. And what about the economy? It may limp along as a barter or informal economy.

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  2. Quote from above article:

    Another Zanu-PF official poses an interesting question when asked about Mr Mnangagwa's prospects: "You think Mugabe is bad but have you thought that whoever comes after him could be even worse?"

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  3. Kafue001,

    As always useful links!

    Do you then think it is inevitable that assuming MDC won the elections and outsted Zanu PF, it would be difficult for them to hold onto power?

    If so how can this prevented - in your opinion?

    The prospect of a post Mugabe regime much worse than Robert is terrifying. It appears the West haven't sufficiently considered this possibility because if they have, they would have tried hard to reach a deal with Mugabe.

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  4. I don't think Mugabe is the type of person who (for political reasons) would be interested in doing deals with the west despite the level of the west's efforts. He doesn't seem to care, as long as he holds power and survives. And as you can see, much of the aid Zimbabwe government receives is mismanaged or squandered, so the West would not be interested in giving aid simply because of the prospect of things being worse under a different leader - it is only a possibility and not a current fact.

    What many people miss is that there is a regime behind Mugabe. Even if Mugabe goes, the governing regime that is currently benefiting albeit in a declining manner still has to be dealt with. It is like the Saddam regime that remained in Irag after he was deposed and which then networked to give Americans problems today. So yes, MDC may face problems from certain elements in Mugabe's regime.

    How can it be prevented? Ideally African leaders should convince Mugabe and his regime to hold free elections, and losing them to step down and cooperate with the new government. But I doubt if they will. And so the current situation will continue until something dramatic happens and the regime changes course. There is no easy answer.

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  5. A depressing picture indeed.

    As you say the key lies with the regional leaders. But I doubt any of them care so much.

    For one thing Zimbabwe is landlocked. So its not like instability there actually prevents other nations from getting on with their trade.

    In the meantime the nations around them are benefiting from Zimbabwe's demise. There's really no strong incentive for these nations to act and serve the day.

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  6. Cho,

    Indigenous people will not react very well to being told to give up their land while the Land Commission is doing its work.

    Doesn't that really say everything that needs to be said, about the disconnect between the MDC and ordinary people in Zimbabwe?

    ... the key lies with the regional leaders. But I doubt any of them care so much. For one thing Zimbabwe is landlocked. So its not like instability there actually prevents other nations from getting on with their trade.

    Civil war in Zimbabwe is something everyone in the region would do well to avoid. Especially as it can spill over into neighboring countries. At least, it will make the availability of Zimbabwe's infrastructure a lot less certain. Especially as it is landlocked, a lot of roads and railways go through it. It is the shorted connection between Zambia and South Africa.

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  7. Kafue001,

    What many people miss is that there is a regime behind Mugabe. Even if Mugabe goes, the governing regime that is currently benefiting albeit in a declining manner still has to be dealt with. It is like the Saddam regime that remained in Irag after he was deposed and which then networked to give Americans problems today. So yes, MDC may face problems from certain elements in Mugabe's regime.

    A couple of issues.

    - Why do you call the Zimbabwean government a 'regime'?

    Unlike Sadam's government, the government in Zimbabwe was elected, in elections the South African delegation (for instance) initially called free and fair.

    There is no excuse for overthrowing this government. If the MDC truly believe that the people want to see them in power, all their efforts should be aimed at making sure that the next elections are completely fair and transparant.

    Unlike Iraq, there is a free press, with the opposition being allowed broadcast from within the country.

    There is a parliamentary opposition. There is universal suffrage. The MDC can stand for parliament and be elected, and is.

    The ANC in the eighties could only dream of that.

    - I don't think Mugabe is the type of person who (for political reasons) would be interested in doing deals with the west despite the level of the west's efforts. He doesn't seem to care, as long as he holds power and survives.

    Does Morgan Tsvangirai care? He and his people are calling for more sanctions, and because sanctions don't destroy the economy quickly enough, for foreign invasion.

    Mugabe does cling to power, but frankly so does everyone else in the region. Does anyone think that Morgan Tsvangirai would give power up easily?

    And wasn't Mugabe the west's darling, right up to the moment he told the IMF to take a hike?

    What no one can get around, is that sanctions have to be lifted. Unless they want to argue that the collapse of the Zimbabwean economy is a good thing, and that food riots are something that must be encouraged.

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  8. Mr. K,

    A regime is the same as a government whether democraticaly elected or not. See definition here:

    http://www.answers.com/topic/regime?cat=health

    So, by regime I mean government, I don't see any issue here.

    As to whether the last election was fair that is highly suspect, I would not trust the visiting South African electoral team since the South Africans are friends with the Zim government, many of the other teams said the election was not fair or highly suspect.

    Where in my post did I say the government should be overthrown? I said that there should be free and fair elections and no intimidation.

    You say that MDC should work to ensure free and fair elections - how can this happen under the intimidation of the governing regime? Just look at how Morgan Tsvangirai was beaten up recently. That is the reason for targeted sanctions (mainly against officials) and not general sanctions that would hurt the general population:

    http://news.bbc.co.uk/2/hi/africa/1827827.stm

    So, I don't understand your point about why sanctions should be lifted since they are targeted sanctions and not general ones. The collapse of the Zim economy is due to mismanagement and not sanctions, just look at how Ian Smith's economy survived despite sanctions.

    The main issue is the imtimidation that is happening in Zimbabwe that is preventing real democracy and free and fair elections, other countries such as Zambia did not go through such severe intimidation just to keep the President and his regime in power, and I doubt whether Morgan and the MDC would go to such an extent to keep themselves in power if they won the election.

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  9. >> Very often Western nations expect a genuine democracy to emerge out of desolation (e.g. post Iraq) but that's not always possible and sometimes unconventional approaches should be sought.


    Not necessarily. Uganda's Movement system while may not have been a "genuine democracy" (althought to be honest, I'm not exactly sure what it was!), but was deemed acceptable by Western nations (at least for a while).

    I think politics needs to be inclusive, but does inclusive mean it has to be a 'Western style democracy'?

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  10. Mrk,

    "Civil war in Zimbabwe is something everyone in the region would do well to avoid. Especially as it can spill over into neighboring countries. At least, it will make the availability of Zimbabwe's infrastructure a lot less certain. Especially as it is landlocked, a lot of roads and railways go through it. It is the shorted connection between Zambia and South Africa."

    Good point actually. Especially the South Africa - Zambia trade route.

    It appears the incentives for stability are significant. But if that is the case, why are these regional leaders inactive?

    Is it because they do not see instability post Mugabe as a serious possibility? Because if they did they would tripple their efforts to achieve a smooth handover.

    Unless of course they have concluded that a better outcome is that Mugabe hands power directly to one of his buddies. I must say if I was in advising any regional leader I would probably say we "have two options, we back MDC and plunge the nation into chaos, or we let Mugabe consolidate more power and hand it to his deputy - with more stability".

    So actually the leaders probably do care about Zim but it makes more sense for them to see Zimbabwe gradually change without electoral competition.

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  11. Unless of course they have concluded that a better outcome is that Mugabe hands power directly to one of his buddies.

    In an ideal world, that would be Gideon Gono. However, I have learned my lesson about backing the best technocrat for the job, because a leader also needs to be a great politician.

    But if Gono would follow Mugabe in a very amicable handover of the reigns of power, that would be great, just from a developmental point of view.

    Zimbabwe's future is with ZANU-PF, not the MDC. The MDC's neoliberalism has been discredited in Iraq and everywhere else where the IMF and World Bank have seen their policies implemented.

    I must say if I was in advising any regional leader I would probably say we "have two options, we back MDC and plunge the nation into chaos, or we let Mugabe consolidate more power and hand it to his deputy - with more stability".

    I would of course support the latter.

    Sanctions should be lifted, and any notion of 'getting the land back' on behalf of the MDC's supporters should be let go of.

    After all, we are only talking about a maximum of 4,500 farmers, while 250,000 Zimabweans have been resettled. Talk about 'facts on the ground'. :)

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  12. Kafue001,

    Just look at how Morgan Tsvangirai was beaten up recently. That is the reason for targeted sanctions (mainly against officials) and not general sanctions that would hurt the general population:

    http://news.bbc.co.uk/2/hi/africa/1827827.stm

    So, I don't understand your point about why sanctions should be lifted since they are targeted sanctions and not general ones.


    With sanctions, I mean all the restrictions on Zimbabwe, not just the ones publicized by the west.

    Zimbabwe is barely able to borrow internationally, which is why this economic crisis exists in the first place.

    See the 'Zimbabwe Democracy and Economic Recovery Act' of 2001, and see all the international financial institutions that are not allowed to lend or underwrite loans to the government of Zimbabwe:

    http://www.govtrack.us/congress/billtext.xpd?bill=s107-494

    - International Bank for Reconstruction and Development
    - International Development Association
    - International Finance Corporation
    - Inter-American Development Bank
    - Asian Development Bank
    - Inter-American Investment Corporation
    - African Development Bank
    - African Development Fund
    - European Bank for Reconstruction and Development
    - Multilateral Investment Guaranty Agency

    These are not 'targeted sanctions' that only affect the top leadership of ZANU-PF.

    So what exactly are the above multilateral development banks instructed to do?




    (c) MULTILATERAL FINANCING RESTRICTION- Until the President makes the certification described in subsection (d), and except as may be required to meet basic human needs or for good governance, the Secretary of the Treasury shall instruct the United States executive director to each international financial institution to oppose and vote against--

    (1) any extension by the respective institution of any loan, credit, or guarantee to the Government of Zimbabwe; or

    (2) any cancellation or reduction of indebtedness owed by the Government of Zimbabwe to the United States or any international financial institution.


    And here we get to the heart of the matter. For the last 6 years, these institutions have not been allowed to 'extend loans, credit or guarantees', or be involved in debt reduction, with regard to the government of Zimbabwe.

    These are not measures that only hit the leadership of ZANU-PF, but hit all of the government, and by extention, the country.

    This is what should be lifted, immediately. Also see Cynthia McKinney's reaction to this Act, back in 2001.

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  13. Also, think hard about why the BBC would pretend that only 'targeted sanctions' exist?

    Could there be a correlation between the overemployment and use of the opinion of ex-Rhodesians? Like John Robertson (who is even based in Harare), of the Economist Intelligence Unit?

    The BBC really dropped the ball on their coverage of Zimbabwe. They only report negative news, and never go into the background of the present conflict, including the Zimbabwe Democracy and Economic Recovery Act of 2001.

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  14. I tend to agree that the scenario of an internal handover within the ZANU-PF party structure is most likely to be the smoothest possible under the circumstances. However, unless whatever new leadership is put forward accepts the realities of the nation's economic circumstance and adopts policies which would reverse the cannibalization of productive domestic industries of recent years, then no real recovery will take place and instability will continue or even worsen.

    The British/Rhodesian myth that farm seizures alone are responsible for triggering economic collapse is getting staler with each repetition, as is the ZANU-PF line that if only they were allowed to borrow freely from international financial institutions then their economic policy would produce prosperity. The sad fact is that neither restoration of property rights for displaced wealthy farmers nor lifting of borrowing restrictions will fix what is broken in the Zimbabwean economy. MDC plans for massive liberalization strikes me as reactionary and likely to result in otherwise valuable state assets being sold to foreign interests in an extremely skewed "buyer's market" to the long term detriment of the national interest.

    There is no quick fix solution to bring prosperity to the Zimbabwean masses, however a realistic appraisal of the scope and depth of their woes might restore predictability to the economic playing field, and thereby open avenues whereby individuals and enterprises can plan beyond next week and act accordingly to improve their long term prospects. Unified and inflation-linked foreign exchange rates are a crucial early step in that direction, as well as cessation of subsidies for parastatal corporations without proper budgetary accountability. No banker in their right mind would loan money to ZANU-PF given their policy history without risk-adjusted interest rates well in excess of average, even if the US government reverses its position, the odds of default are simply too high.

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  15. as is the ZANU-PF line that if only they were allowed to borrow freely from international financial institutions then their economic policy would produce prosperity.

    Well at least this hyperinflation wouldn't have happened.

    However, I would not underestimate ZANU-PF. There are a lot of positive things coming out about their policies, not withstanding this price fixing initiative.

    Gideon Gono is saying a lot of sensible things.

    "The lesson business must learn from the current blitz is that no business can ever thrive and make a profit in a environment of antagonism with the Government; and from Government’s side, the lesson arising from the current shortages is that no Government can hope to fulfil the aspirations of its citizens, especially labour, civil society and the generality of the populace, in an environment of serious conflict such as it has with its business community; and the lessons for labour are that when Government and business are fighting, the workers become the grass that suffers when two elephants fight."

    The recent focus on increasing production is something all African countries should do well to emulate.

    See "Farmers Undergo Training" or on the recent purchase of hundreds of tractors.

    No banker in their right mind would loan money to ZANU-PF given their policy history without risk-adjusted interest rates well in excess of average, even if the US government reverses its position, the odds of default are simply too high.


    So why does there have to be a law against it again?

    I just don't buy the whole being objective for the sake of being objective thing. ZANU-PF are no worse managers than the countries surrounding them, if you look at the bloated central government, lack of participation in the economy life of the country by their citizens, etc.

    Their weaknesses were simply exposed because of sanctions. But these are weaknesses that exist throughout the region - like massive foreign ownership of the economy, massive outflows of goods, huge influence on the budget of donor aid.

    All these undermine the countries' sovereignty.

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  16. "I just don't buy the whole being objective for the sake of being objective thing. ZANU-PF are no worse managers than the countries surrounding them, if you look at the bloated central government, lack of participation in the economy life of the country by their citizens, etc. " -MrK

    Well I am not entirely sure how to take this statement. I guess that there is nothing I can say which will convince you that objective criticism of this particular set of politicians can be intended as constructive. I am opposed to unsustainable borrowing by all governments, due to the negative impacts such policies inevitably have on their citizens. My outlook is always oriented towards making the best possible use of available resources in order to avoid a repetition of the horrors of colonialism and to mitigate the drive towards "development" with an emphasis on sustainable local control and ownership of the results. In that context I fully support the rhetoric of ZANU-PF, but I feel compelled to constructively (I hope) criticize the resulting policy formations. My heartfelt desire is that the nation can get itself to a point where the choices are better than simply status quo versus surrender to IMF "structural adjustment."

    Gideon Gono has been on record saying many reasonable things, however he is in my experience almost always rebuked and overruled by the political leadership when he does so, at least according to the Herald and other state-owned media. I do not envy him his role, and would like to believe that the unsustainable policies which he has repeatedly endorsed over the years are a result of his personal attempts to maintain his position in control over the Central Bank in the face of political pressure from his party's leadership. He has certainly been one of the few voices of economic reason within the government at least in recent months, however the publicized statements by the Reserve Bank of Zimbabwe have been seldom backed by congruent policies in effect, and there is a strong overtone of Orwellian doublespeak within the effectuated divergence between the two.

    I agree completely that sanctions have exposed and exploited weaknesses within the Zimbabwean economy which are present to varying degrees in all of the nations in the region and in fact to most nations seeking to "develop" worldwide. It is my sincere hope that ZANU-PF will internally recognize the need to empower those individuals within its organization with the technocratic skills necessary to extract themselves from their current dilemma, and thereby accept the political fallout associated with repudiation of past policy initiatives which have failed to achieve their stated goals. The apparent choices available at this point appear to be between bad and worse, and in my opinion unless ZANU-PF embraces the present bad reality wholeheartedly and honestly, then the worse options elsewhere mentioned such as neo-liberal/colonial status or military hegemony will come to pass. The current climate of stubborn insistence that any and all policy failures are the result of external factors is not apparently productive. As I have stated in previous postings on the crisis in Zimbabwe, if the only available solution is dependent on a reversal of IMF lending policy, then we can all just stop innovating, surrender now, and watch the structures being "adjusted" according to programme.

    The sad fact is that the rest of the global economy does not miss the fractional percentage of Zimbabwean contribution to the whole. The only ones truly suffering from the current circumstances are the individuals and enterprises directly engaged within the country itself. If anything the other worldwide producers of Zimbabwean traditional exports are celebrating the slight contraction in supplies of goods such as tobacco, cotton and gold in as much as it increases the value of their own exports in the face of growing international demand. Certainly there is money to be made from extraction of the nation's resources, as the MDC's economic backers know full well, however another decade or two of waiting will not inflict any real pain on any of these predatory actors with the possible exception of the lingering aspirations of Rhodesian holdovers.

    The purchase of hundreds of Chinese made tractors via loans from the Chinese government looks good on paper, but given the inablility of the current agricultural export economy to produce sufficient disposable income with which to purchase importation of enough diesel fuel to power them would tend to indicate that their full productive potential will remain unrealised over the near term. Likewise efforts to educate recently landed farmers in new tobacco growing techniques using UN donated training and equipment is certainly a positive thing on the surface, however I will cynically take a wait-and-see approach in evaluating the programme's effectiveness toward actual increases in export income and profitability of individual farmsteads.

    I can only hope that the recently publicized statement by the Reserve Bank that, "We need as a country to embrace and implement hard policy decisions without delay or hesitation in an environment that nurtures and protects private property rights; celebrates entrepreneurship, encouraging excellence, innovation, competition among players and good profit, guided by the spirit of economic patriotism and the principle of Zimbabwe First in whatever we do," will in fact be embodied within the actual policies forthcoming from the government.

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  17. Yakima,

    Well I am not entirely sure how to take this statement.

    I phrased this a little too strongly. Then again, this issue does tick me off to no end.

    Let me put it like this. There were no real differences between Zimbabwe and the surrounding countries before President Mugabe told the IMF to take a hike. Which he did, because their SAPs were wreaking havoc on the economy.

    Then, sanctions were imposed, but if you read the BBC, they still claim that the blanket ban on the government borrowing internationally is merely aimed against the ZANU-PF leadership.

    The BBC have consistently painted the sanctions against the government and state of Zimbabwe as sanctions againt the ZANU-PF top leadership. Why do you think that is?

    Also, blaming president Mugabe provides a convenient fig leaf for the abject failure of IMF and World Bank policy (SAPs) in Zimbabwe, in Africa and around the world.

    Here are some interesting articles on the nature of the sanctions against Zimbabwe. I find it telling that the MDC would call these sanctions (and the ZDERA of 2001) 'not economic'.

    Yakima, here are a couple of articles from a website that is generally anti-Mugabe (and well funded, which always makes me suspicious). However, the author argues forcefully that it are indeed sanctions that are to blame for Zimbabwe's economic situation (and I would argue, hyperinflation).

    Zimbabwe Sanctions: Are they political or economic?
    http://www.newzimbabwe.com/pages/sanctions36.13187.html

    That enactment empowered the US President to instruct US representatives on the multilateral lending agencies – such as the IMF, World Bank and Africa Development Bank, among others – to vote against credit facilities (in all their various forms) to Zimbabwe...

    That sounds pretty economic to me.

    Economic sanctions undermine Zimbabwe's economy
    By Tawanda Hondora

    It is often argued that the sanctions in place against Zimbabwe are not economic in nature; rather, the argument goes, there is in existence a regime of smart sanctions, which targets specific ZANU PF loyalists.

    This is not true.

    Zimbabwe’s economic woes are the direct result of a concerted and systematic campaign to effect regime change through an economic implosion.

    Zimbabwe has a critical shortage of foreign currency. However for the past four years or so, Zimbabwe has been unable to obtain finance or credit facilities from international lenders to inject into the economy. And this is a direct consequence of a sanctions regime imposed against the Zimbabwe by particularly the US, and the EU.


    I don't like this website's general anti-Mugabe slant, however, it also makes them more of an unimpeachable source when it comes to the effect of sanctions against Zimbabwe and their impact.

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  18. Sanctions, which sanctions?

    For those who still don’t believe that Britain, America and their Western allies have imposed economic sanctions on Zimbabwe, here is one such law –– the Zimbabwe Democracy and Economic Recovery Act – passed by the US Congress in December 2001. Baffour Ankomah reports.

    I would always trust Baffour Ankomah's work. His credentials in opposing racism and colonialism, and not being taken for a ride on the Zimbabwe issue are impeccable.


    On sanctions, Mugabe and the economy
    By Dr Alex T. Magaisa
    Last updated: Fri, 03 Nov 2006

    My aim was to deconstruct the concept of “smart sanctions” and suggest that if their effect is to limit the damage to the targeted persons, they have certainly failed on two grounds: Firstly, because contrary to their intended character of “smartness” their effect goes beyond these targeted persons and secondly, to the extent that the targeted persons have been able to circumvent the smart sanctions in one way or another, they have not achieved their purpose. The result however is that the common population suffers. Is this what was intended.

    It seems that many individuals among the MDC themselves recognize that the sanctions are destroying the country. After all, even if they have their way and 'inherit' Zimbabwe, this is the mess they will have to clean up.

    And I don't like the 'of course Mugabe has to go' mantra, which is repeated as if it is some kind of act of faith.

    But then again, this is an MDC leaning website.

    Also see:

    http://www.newzimbabwe.com/pages/sanctions34.13185.html
    http://www.newzimbabwe.com/pages/sanctions32.13170.html
    http://www.newzimbabwe.com/pages/sanctions36.13187.html

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  19. Outrageously, but correctly, this article concludes:

    http://www.newzimbabwe.com/pages/sanctions35.13186.html

    In conclusion , one can still point fingers at Zanu PF stating that it is their actions that triggered sanctions in the first place hence their implication in the economic mess. This is however, not to state that the Westerners who have unilaterally imposed sanctions on Zimbabwe are benevolent, uninvolved partakers.
    Khanyisela Moyo is a feminist Zimbabwean lawyer currently studying towards a PhD in Transitional Justice in Northern Ireland.


    In other words, the MDC have nothing to offer Zimbabwe except for an end to sanctions.

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  20. I'll refine that even further. The MDC have nothing to offer Zimbabwe except a return to Structural Adjustment Programmes, an end to sanctions, and a civil war over turning back land reform.

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  21. Osama, Singapore is another example where I think Western support exists for essentially a less democratic "regime" - which holds very restrictive elections and appears to transfer power between relatives.

    I guess the key is that if you are prosperous you can be our friends. Actually, thats not entirely true because in General Musharraff's case, if we need you we don't really care ahow you came to power. So you are right the application of democratic ideals is varied.

    I also agree with you that actually the style of politics is less relevant. What matters is what people regard as "development" for them and the necessary institutions to help that. Rather than the current approach of defining institutions and then believing they would lead to some "western" view of development.

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  22. MrK, Gono is an interesting alternative, but as Yakima notes we would have to hope his recent utterances and the RBZ approach is mainly due to following the "party line". Lets hope inside the man is different!

    The other point of course is how much support does Gono have within the party?

    By the way, have you noticed how American Zimbabwe is? They call the currency "dollar" and they call their central bank, the Reserve Bank? Very bizarre indeed.

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  23. Yakima, "Unified and inflation-linked foreign exchange rates are a crucial early step in that direction, as well as cessation of subsidies for parastatal corporations without proper budgetary accountability." I assume you then then agree that things will get worse for next 2-3 years AFTER these policies before they get better. Any leader (whether Mugabe or a successor) who initiates such a correction may not last that long. The correction will be very painful for a lot of people. This is why Mugabe and others appear to have chosen a more cowardly approach. They fear the consquences. They are in a train that they dare not stop.

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  24. Cho,

    The train analogy seems appropriate, as you are quite correct that restoration of sound monetary and budget practices will not be able to produce a "sudden stop" to the nation's woes. It may indeed require a great deal of political courage to confront voters with a prescription for continued hardship rather than the usual platitudes and reassurances. At the same time after so many years of deepening crisis the voting population may not be as easy to convince with "quick fix" solutions as they used to be, and could be persuaded that a long but predictable climb out is the most rational and believable approach.

    The passengers may continue to trust the engineer if he admits that the train has turned runaway on the downslope and must be diverted onto an uphill siding for a safe deceleration. The MDC solution of decoupling the freight cars will require passengers to pay first class fare for third class accomodation to fuel the engine, albeit on a lighter train more resistant to gravity. If the conductors announce that the sight out the windows of the economic landscape flashing by faster and faster is merely intended to allow passengers to reach their destination sooner, then I think an increasingly large number of them will decide to jump off now before it is too late. The passengers may also conclude that a lack of concern on the part of the conductors is to mask their own efforts to secure what little safety equipment is onboard for themselves in order to make their own jumps to safety prior to the impending derailment. The wisest course for the conductors might be to ask the passengers to choose between arriving behind schedule or paying a much higher fare as well as losing their luggage and access to the dining car, I suspect that the faction in favor of delay will be significant.

    ReplyDelete
  25. Yakima, very well put indeed! Some tough choices and the key as you say is to ask the passengers over which course to take.

    Apparently MDC are now heeding your advice. They are planning "a conference"

    http://www.voanews.com/english/Africa/2007-07-18-voa1.cfm

    ReplyDelete
  26. Gono is an interesting alternative, but as Yakima notes we would have to hope his recent utterances and the RBZ approach is mainly due to following the "party line". Lets hope inside the man is different!

    I don't doubt it at all. He is the one who keeps lobbying for a general economic program that puts an emphasis on production.

    You can't do that and be a fan of price controls and other cosmetic measures.

    Price controls are like moving the hands on a clock. You can move the hands, but you can't turn back time. There must be different approaches to what in essence is an absence foreign currency from the Zimbabwean state and the Zimbabwean economy.

    Calling for the lifting of IMF and US sanctions against Zimbabwe.

    I don't know how much support Gideon Gono has within ZANU-PF, but he was reported to be President Mugabe's choice to follow him within the party - and I hope that is true.

    ReplyDelete
  27. But it also shows that Gono is not principled. He is willing to sacrifice his values just to remain part of the club. I know a lot of competent Zimbabweans who have shunned the system. Economists who could have taken the Gono path and they haven't.

    But I agree, he is the "best of the poor bunch". Our only hope for a better Zimbabwe.

    ReplyDelete
  28. But it also shows that Gono is not principled. He is willing to sacrifice his values just to remain part of the club.

    I completely disagree. :)

    It shows he is a politician, and that he has what it takes to stay in the game.

    If he would go against his President, he would be gone in a heartbeat, and what good would that do anyone?

    I really like having a technocrat, who also has political skills and sensibilities. They really need both to survive (see the example of the great Robert Sichinga - a man who would be very gifted as President policy wise, but who keeps ending up backing the wrong factions).

    All the great and effectual politicians of our age know how and when to compromise. Tony Blair. Bill Clinton. They have made mistakes, but they have done a lot of good too.

    The thing about Gideon Gono, is that if he was president himself, he would never have initiated this price fixing policy - and that is good enough for me.

    I wouldn't say he is the best of a bad bunch at all, I would say he is pretty exceptional. He, I think, is the key to a non-violent recovery of the Zimbabwean economy.

    ReplyDelete
  29. "It shows he is a politician"

    Okay...he an unprincipled politician :)

    It would be unfair to other more principled politicians to say he is just a politician.

    Unless your point is that principles don't apply to politicians?

    "I wouldn't say he is the best of a bad bunch at all, I would say he is pretty exceptional. He, I think, is the key to a non-violent recovery of the Zimbabwean economy."

    So he does not belong to the bunch :) May be Gono is so good that he makes everyone look bad...lol!!!

    On a serious note...I think we can agree that change can only come from within ZANU PF. It wont certainly come from Archibishop Ncube!! He is too busy to focus on changing Zimbabwe...!!!

    ReplyDelete
  30. It would be unfair to other more principled politicians to say he is just a politician.

    Didn't someone say that 'politics is the art of the possible'?

    Gono's career has taken him very close to the top, and if he doesn't screw anything up, he may inherit it all. And that's a great politician.

    ReplyDelete
  31. So in politics the end always justifies the means....?

    ReplyDelete
  32. Cho,

    Of course not. However, there is a very close correlation between the ends and the means.

    If Gideon Gono wants to be the next president of Zimbabwe, he will need all of Robert Mugabe's support he can use.

    As you have said before, it is questionable how much support he has within the party itself.

    If there is a power struggle in the party, there is no telling who will be the next president.

    It would be much worse if someone who didn't have his skills and insight would rise to the top. Or someone so unelectable that they would present a victory to the MDC.

    So supporting a bad policy that is going to be pushed through anyway is not such a high price to pay.

    Because I 100% doubt that this price fixing program is his idea. It goes against everything else he believes on. Increasing production, fully supporting agriculture, etc.

    It is also a glaring generational conflict. Gono's approach is much more modern, while these price controls are old school communist, coming either from Mugabe or someone else very close to him. But most likely from Mugabe himself.

    ReplyDelete
  33. Any guesses who will be named Mugabe's successor?

    http://news.yahoo.com/s/nm/20070723/wl_nm/zimbabwe_parliament_dc

    ReplyDelete
  34. Corrected link:

    http://news.yahoo.com/s/nm/20070723/wl_nm/zimbabwe_parliament_dc

    ReplyDelete
  35. And trying again:

    http://www.reuters.com/article/worldNews/idUSL2368241920070723


    I give up if it doesn't work

    ReplyDelete
  36. Kafue001,

    You got it first time actually :)

    The MDC move towards state monopoly is a true step backwards. I mean these are policies that got Zambia in a mess. Also as the article points out, the problem is that the Government has created real mess by keeping an artificial exchange rates.

    I have no idea what that Government is doing. This is new territory in the real of mismanagement. Yes they have sanctions but Iran has sanctions. North Korea has sanctions.
    Lots of countries have sanctions.

    In terms of the next leader - thats a hard one. MrK points out that Gono is desirable but I am not sure how close he is to Mugabe. Some say very close, others say - Mugabe does not like, but respects his intellect.

    ReplyDelete
  37. An interesting article in the FT notes:

    “Only the Joint Operations Command [the security and intelligence chiefs who regularly brief the president] could go to him and tell him to stand down,” said Mr Moyo. “And they think the status quo is the safest at the moment.”

    The chiefs were worried that without a clear succession strategy, Zanu-PF might fall apart once Mr Mugabe steps down, he said. “There is one thing that Mugabe says that is true: he is afraid that change will lead to the disintegration of Zanu-PF. That’s why the military prefers the status quo.”


    http://www.ft.com/cms/s/1b769178-3c5e-11dc-b067-0000779fd2ac.html

    It does seem that we may not see much change post Mugabe with a more stable transition.

    ReplyDelete
  38. It does seem that we may not see much change post Mugabe with a more stable transition.

    An MDC government will see a return to the discredited SAPs from the IMF.

    The only modern and progressive way forward is through Gideon Gono, or the agriculture minister, Joseph Made.

    ReplyDelete
  39. Let us be clear here what do sanctions have to do with:-

    1. Fiscal Irresponsibility that has led to Budget deficits that are about 20 percent of GDP

    2. Micro economic policies that have driven any right minded businessman into the informal sector

    3. Massive corruption that has made multi-millionaires of chefs of ZANU-PF

    4. Complete erosion of investor confidence to the point where no-one even Zimbabweans are investing in the economy

    5. Lawlessness and brutal savagery that has led to people fearing the government

    6. Blowing up blatantly the presses of the Daily News using govenrment issue land mines only available to the army

    7. Murdering an estimated 30 000 ndebeles in 1982-6 in the name of counter insurgency

    8. Printing money to the point where the currency is completely worthless

    9. Implelementing the craziest economic policies that have failed everywhere else

    Sudan, Iran, Cuba, Mynammar, Syria have far more stringent economic sanctions in place yet they have not descended into economic chaos.

    They do not have:-

    7 years continous contraction
    9 years of inflation of over 30% including 3 years of extremely high and hyperinflation
    Severe food shortages
    Chronic foreign exchange shortages
    Breakdown in law and order

    Mugabe and his cronies have done more damege with thei crazy economic policies than any sanctions

    ReplyDelete
  40. That is an interesting diatribe but it doesn't get to the heart of the cause of hyperinflation in Zimbabwe. Several of these issues are either 20 years old, or they occur in countries around Zimbabwe, like the IMF decreed high taxation of businesses. In Zambia, Malawi etc. formal businesses are also driven into the formal sector by taxation. So that is not the reason why.

    The reason why, is that through the Zimbabwe Democracy and Economic Recovery Act of 2001, the government of Zimbabwe is not allowed to borrow abroad, leading to an acute lack of foreign currency.

    And this is what you see in the pricing of goods. There is a huge inflation in Zimbabwe Dollar terms, but if you look at the same goods in US dollar terms, the prices are very similar to the rest of the world.

    However much they like to try, inflation in Zimbabwe cannot be reduced to an absence of goods, because white farmers were thrown off their 'farms' (really, estates).

    ReplyDelete
  41. Driven into the informal sector by taxation.

    ReplyDelete
  42. I am soory to say this Mr. K but your reasoning is very flawed and it is also very apparent you have swallowed the Mugabe regime propaganda.

    The hyperinflation is a result of Zimbabwe's profligate government spending as well as a very real forex shortage.

    Zimbabawe used to earn over $3 billion a year in exports in 1997 latest figures have this as alow as $1.4 billion a year. Half of this was in agricultural exports.

    Agricultural exports are now almost non-existent. The gap produced by this disappearing of a whole commercial farming industry has result in a loss of half the foreign exchange supply.

    In fact things could have been worse if mineral prices had not shot up during the same period.

    Industry lost half the necessary foreign currency to import inputs, spare and capital equipment. The result gradual capacity run down.

    The so-called land reforms produced a ripple effect of:-

    1. Foreign exchange shortage hence a increased demand because of a collapse on the supply side resulting a higher price i.e. devaluation of the Zim dollar

    2. Lack of foreign exchange meant lower availability of spares, inputs and hence lower production. This meant goods became scarcer. With lower forex earning importscould not cover the gap.

    3. Loss of investor confidence meant less investment and re-capitalization feeding through once again to lower production

    4. Governemnt fiscal irresposibility meant lost of Zim dollars printed thus exacerbating demand for scarce forex as well goods the classic case of too much money chasing few goods thus bidding their price up i.e. inflation

    5. Due to poor investment opportunities money flowed into liquid short term investments or tangible assets like Houses. This meant availability of funds for productive activities was reduced one again hitting production.

    6. Policies that defied economic logic have meant the Zim governemnt is now locked into an inflationary spiral and the gradual contraction and destruction of the economy.

    How the IMF figures in this I do not know. Zimbabwe singlehandedly imposed sanction on itself with short sighted policies like so called land reform as well spending billions on foreign wars as well as paying so called war veterans.

    Mugabe can not manaufacture foreign exchange nor can he break the law of economics. The Far East is not imposing sanctions on him and their is a swimming pool full of cash available for anyone in the Far East. China has foreign reserves of 1.2 trillion dollars. They however will not spend it in Zimbabwe unless sanity prevails. India has billions on hand. So has Malaysia.

    Right now New Zealand is suffering over valuation of its currency and this is exacarbated by the availability of cheap cash. New Zealnad has interest rates of 9% while Japan has rates of 0.5%. Every speculator is borrowing in Japan, US, England aywhere with interest significantly lower and is busy buying New Zealand government bonds. It is a self fulfilling one way bet.

    No one is queing up to invest in Zimbabwe.

    Lunatic economic policies drive away business. So Mr. K please, please, do not rewite the economics text books. Every single country that has tried always ends up in a mess.

    In Zimbabwe's case the lunatic policies have been extreme and the results are there for everyone to see.

    Prudent financial managemnt, carefully planned land reform as well as proper micro-econic policies would have saved Zimbabwe.

    Let us not lie to ourselves Cuba has not imploded to the extent Zimbabwe has. Yet Cuba has suffered more severe sytemic shocks as well as more comprehensive sanctions. Syria, Iran, Mynammar etc ave all gone through worse economic persecution than this. However they have all been far better economic managers than Mugabe.

    Let us call a spade a spade Zimbabwe's economy is a clear case of the lunaics taking over the mental asylum.

    ReplyDelete
  43. Anonymous,

    I'm sorry, but it is you who have fallen for the MDC/Neoliberal propaganda.

    The hyperinflation is a result of Zimbabwe's profligate government spending as well as a very real forex shortage.

    If Zimbabwe's hyperinflation was driven by government spending, why is there no hyperinflation in Zambia, where government spending is just as bad?

    When looking at something as extraordinary as the highest inflation in the world, one has to look at what makes Zimbabwe diffferent from any of it's neighboring countries, not it's similarities.

    If government spending was the cause of hyperinflation, why doesn't Zambia have hyperinflation, when it too has 29 or so ministries, political posts, spent $398 million of it's $1735 million 2004 budget on 'personal emoluments' alone, $131 million on 'recurrent department charges', etc.

    If the IMF created the same conditions in Zambia as it had in Zimbabwe, the 2004 budget would have gone from $1735 million to $997 million overnight by making 'donor aid' dry up, causing the government to no longer be able to meet most of it's payments.

    This is what happened in Zimbabwe, and this is the original cause of hyperinflation in Zimbabwe.

    ReplyDelete
  44. Another possible leader, post-Mugabe:

    http://www.zimbabwejournalists.com/story.php?art_id=2666&cat=1

    ReplyDelete
  45. Sorry to say this once again but Mr. K your knowledge of macro-economics is very faulty.

    Zimbabwe consistently ran budget deficits of 10% of GDP and more for 10 years up to 2000.

    This was clearly causing increased inflation. Zimbabwe was already experiencing inflation of rates as high as 40% or more from the early 90s.

    foreign aid or not, if you print money you will pay the price. I challenge you to show me a country that ran consistent unsustainable budget deficit that did not eventually suffer chronic inflation.

    Mugabe on his own wiped out an industry that produced half the country's foreign exchange.

    Zimbabawe survived very well without foreign aid in the UDI period. It could have easily done so with prudent financial managemnt.

    The mulilateral sanctions you keep harping are not hte major factor you make them out to be. yes they can be an impediment but then Zimbabwe survived for 16 years in UDI without them.

    Zimbabwe had a vibrant manufacturing industry which was ably supported by an extensive agricultural sector which in its own right was basically the lynchpin of Zimbabwe's economy.

    The collapse of the agricultural sector has had ripple effects far beyond Zimbabwe itself.

    How much foreign aid does cuba get ? Cuba is not suffering hyperinflation. Nor is mynammar nor is Syria or Iran.

    Mr. K once you try to suspend economic logic you get economic chaos.

    running a budget deficit of higher than 4 or 5% of Gdp is a recipe for inflation.

    Zimbabwe has been printing money for at least 10 years now. The results are self evident. ask any economist.

    Foreign aid is not the problem. Unsustainable and idiotic policies are.

    China could have bought all of Zimbabwe tobacco. However very little is being produced. it could have bought all the chrome and manganese. It could have bought all the coal from wankie.

    Zambia has not ran up crazy budget deficits nor has it printed money like crazy. Neither has botswana nor Malawi nor mozambique.

    Mr. K. please do some research. please read any basic macro-econic text book. Zimbabwe has simply not done anything right on the financial management side.

    Let us refresh ourselves with the basic background to the Zimbabwe crisis

    1. At Independence in 1980 ZANU-PF took over an economy battered by 15 years of armed conflict, mandatory UN sanctions and political isolation. Debt was small – about US$700 million or 17 per cent of GDP. The Zimbabwe dollar bought you two US dollars.

    2. In the first two years of Independence the economy grew 24 per cent, this was followed by 15 years of steady growth – about 5 per cent per annum. Inflation was held at about 9 to 12 per cent per annum. The budget deficit was large at 8 to 9 per cent of GDP and by the year 1995 the national debt had reached US$5 billion or 60 per cent of GDP.

    3. In 1997 the economy peaked at US$8,5 billion, exports at US$3,4 billion and employment at 1,4 million. At that stage Zimbabwe was: -

    a. The largest exporter of tobacco in the world after the USA.

    b. The sixth largest producer of gold.

    c. The biggest market for South Africa in Africa.

    d. The second largest economy in the region and with the third highest GDP per capita.

    e. Life expectancy was about 60 years and a literacy rate of 85 per cent with 95 per cent of all children of school going age in school.

    f. Inflation was 12 per cent.

    g. The exchange rate was 12 to 1 against the US dollar.

    4. In 1997 Zimbabwe made several serious errors of judgment: -

    a. They paid the war veterans nearly 300 million US dollars in war service gratuities without budgetary approval.

    b. They sent 11 000 troops to the Congo where they spent 4 years and used nearly US$2 billion in scarce resources fighting a war to keep Kabila in power.

    c. They pushed the budget deficit over 10 per cent of GDP and lost the support of the multilaterals.

    5. In 2000 they began the farm invasions and in the process reduced commercial farm output by 90 per cent – with still no sign of recovery. These led to a loss of international standing and increased isolation. There was a near total collapse of confidence.

    Today, Zimbabwe today has an economy that has shrunk by half to just over US$4 billion, exports by two thirds to US$1,4 billion. Employment has declined by 45 per cent and industry by 60 per cent. Agricultural output this year will be 70 per cent down on the level achieved in 1997. Mining output is down and falling rapidly. Tourist arrivals have fallen from over 1,2 million in 1997 to less than 300 000 this year.

    Life expectancy has halved, income per capita has also declined substantially. National population has fallen from an anticipated 16 or 17 million to just over 10 million today with 4 million Zimbabweans outside the country and some 2 to 3 million incremental deaths over and above normal mortality. 60 per cent of all children are not in school and all State controlled institutions are in dire straights.

    For a country not at war or under sanctions, these are the most precipitous declines in economic and social welfare ever witnessed. They represent a calamitous state of affairs with no sign of any resumption of either stability or recovery. In fact the decline has accelerated in recent months very dramatically.

    The US dollar is now trading at 250 000 Zimbabwe dollars to one in the open market compared to 1 to 2 in 1980 and 12 to 1 in 1997. Nothing tells you more about the collapse in the economy than that single statistic.

    Why has this happened?

    1. The Zimbabwe government has abandoned any pretext of fiscal and monetary discipline as the budget deficit is now at an astonishing 50 per cent of GDP. Sustainable deficits are thought to be about 3 per cent.

    2. The government has abandoned the rule of law and has thrown caution to the winds in its delinquent behavior.

    3. There has been a total collapse of confidence in the government and in the economy. Capital flight has reached unprecedented proportions of nearly 10 per cent of GDP per annum.

    4. All sectors of the economy are in steep decline with no turn around in sight.

    5. All the key State institutions are basically bankrupt and unable to undertake their roles as service providers.

    6. Corruption has reached monumental proportions with the State and its agents consuming anything up to a third of total GDP on corrupt activities and expenditure including massive transfers of funds to external accounts.

    7. A total loss of credibility as a State and a Government. Zimbabwe has become a regional embarrassment and an international pariah.

    The final consequence of this series of events is that inflation is now over 5000 per cent per annum and the risk of Zimbabwe becoming another failed African State is increasing daily.

    How Mr. K do you an economy to perform creditably when you wipe out in six months an industry that supplies 50% of foreign exchange, employs 40% of the employed workforce.

    The effects of the farm invasions on Zimbabwe economy has been as severe as a major war which Zimbabwe lost. A major industry was just wiped out.

    Land reform was necessary however Zimbabwe's approach can be likend to you cuting off your head to cure a migrane. i.e the solution has been drastic, poorly thought out and has delivered a mortal blow to the economy of Zimbabwe.

    Logic and common sense were suspended in favour of expediency and populism.

    Zimbabwe has sank to depths no country not at war or recovering from a war has ever sunk to.

    The lack of logic or careful planiing is evidenced by the price control fiasco that has now pushed all goods of supermarket shelves and onto the black market.

    Mugabe's economic incompetence will cost him dear. The Zimbabwean government has consistently made basic economic errors and have actually created their own economic misery.

    ReplyDelete
  46. Kafue001,

    Thanks for that.

    Maybe not presidential material, but I'd put her in charge of renegotiating the mine deals any day. :)

    Speaking of which...

    Cho,

    How is Bernard Ross' book on negotiation going? I like the way he writes, illustrating his points with real world examples.

    ReplyDelete
  47. Anonymous,

    What do you think of the MDC's intent to get back to the IMF policy prescriptions, Structural Adjustment Programs and what do you think of their stated intent to turn back land reform?

    ReplyDelete
  48. Simba Makoni. He maybe ZANU-PF but he is a skilled operator with excellent credentials and remains in good standing in the business community and with the much vaunted donor community.

    He has been a ZANU PF member from the 1970s hence his struggle credentials are good enough.

    He is not a thug unlike some of the other candidates being touted.

    He however has some cons which to make are really pros:

    1. He has no grassroots base
    2. He is not a toe the line party cadre
    3. He is not a party insider like Mujuru and Munangagwa etc.
    4. He owes everything to Mugabe who appointed him a Minister at 30.
    5. He is not liked or trusted by the crusty old guards at the top of ZANU-PF

    To me these are positives. Zimbabwe needs to move on from the liberation struggle. Most of Zimbabwe's population were borna fter the liberation ansd realy the liberation should be consigned to were it belongs in the museums and history books.

    The flawed and disastrous land reforms have actualy cleared away the remaining issues from the war. it is time for the old soldiers to go back to the land they have now acquired.

    The post independence generation should now take over and run things.

    Simba Makoni is one of the struggle generation albeit so young he bridges the struggle politicians and post struggle generation.

    The fact that he owes Mugabe everything should make him ideal for transition purposes. he would ensure Uncle Bob retires for a well deserved and urgent rest. He would also ensure there are no ructions.

    The fact that he has no grassroots organisation in place will allow him to start afresh and would also ensure he is not tied down by the competting demands of the cadres.

    The fact that he is not a boot licker and does not toe the ZANU PF line will allow him room to maneuver freely.

    He is ZANU-PF's chance to become a modern political party and not an old fashioned liberation , Marxist style organisation.

    SImba Makoni mark my words he is a man to watch

    ReplyDelete
  49. Mr. K you need to move from your left wing conspiracy theory views of the IMF. A lot of what the IMF preaches is standard economic orthodoxy. Some of it is some times too monetarist however it is orthodox economics.

    The IMF prescriptions make a lot more economic sense than the crazy populist stuff that passes for economic policy in Zimbabwe nowadays.

    The IMF policies have never led to hyper-inflation. IMF policies have been aimed at making economies more market oriented and restructuring them to this model.

    These have emphasized balanced budgets, free interest rates, free floating currency and tight monetary policies.

    This does have consequences which are unpleasant. Balanced budget means slashing spending including education, health etc. Free interst rates means high interst rates. Tight monetary policies mean less money sloashing around the economy.

    This means these policies hurt however they are better than:-

    1. Runaway government spending
    2. Price controls
    3. Exchange controls and overvalued currencies
    4. Lax monetary policies

    These result in inflation eventually hyper inflation if not corrected.

    IMF polcies do not lead to inflation. However implementation must be done in the right sequence and must take note of individual characteristics in each economy.

    For instance freeing exchange rates in a time of a loose monetay and fiscal policy can result in inflations as all the cash floating aroud can be used to bid up the foreign exchange.

    Now Zimbabwe never whole heartedly implemented IMF policies. It always ran big budget deficits and it always modified things to suits its political and economic needs. Zimbabwe then went economically insane. Wild spending, loose monetary policy, exchange controls, price controls etc. All the wrong things at the wrong time.

    Mr. K ask any economist he will tell you that is a recipe for disaster.

    IF Zimbabwe had rigidly followed IMF policies hyper-inflation would nothave resulted.

    Back to the situation at hand. Zimbabwe needs to immediately slash money supply to manageable levels. Zimbabwe will need to issue a new currency or even adopt the rand maybe as its new currency. The adoption of the rand to me seems a viable policy. It would immediately remove monetary policy out of the incompetent hands of the reserve bank of zimbabwe. Furthermore it would remove the power to print money from the government.

    Immediate liberalization of the foreign exchange market would bring sanity to prevail in this area.

    Government Expenditure needs to be brought under control immediately. The Government should be put immediately on a cash budget. The Domestic debt supplier should be securitized and converted into long term interest free instrument i.e 10 year bonds. I know this would mean people in effect would give the government an interest free long term loan but it would also mean the government would not need to print money to meet its past bills.

    So to summarize:-

    1. Immediately put the government on a cash budget basis

    2. Convert government obligations into long term interest free loans.

    3. Issue a new currency or use the Rand as Zimbabwe's currency

    4. If issuing a new currency use a currency board and link the money in circulation to foreign exchange holdings

    5. Let the market set the foreign exchange rate

    6. Liberalize Interest rates

    As for Land reform, the botched, poorly thought out and econmically catastrophic land reforms have already been done. These are now undeniable facts on the ground.

    The job now is to turn them into a victory for Zimbabwe.

    First, the new land owners need land tenure. This means title deeds. The land should be carefully demarcated and everybody should get unshakeable title. Unfortunately in the crazy state of affairs pertaining in Zimbabwe land tenure is not so clear cut. Any party boss can show up with thugs and grab whatever land he fancies.

    This has happened repeatedly during this os called land reform. People have occupied land only for other people to show up and throw them off the land.

    The return of land to the white farmers would result in even more legal battle total confusion.

    Zimabawe should return to rule of law but I think the land reform should not be reversed. Instead it should be deepened and used as a spring base for a renaissance of the Zimbabwean economy.

    1. Proper Land Tenure
    2. Clear legal process should be restored for acquiring and selling land.
    3. re-capaitalization of the agricultural economy should be top priority.
    4. 4500 large farms have been replaced by 200 000 small holdings. This is means large commercial farming ventures have been replaced by small subsistence or emergent commercial farms. The highly mechanised frming of thepast is not possible on the small scale it can only happen by consolidation. This can be done bycreating co-operative who can own the combine harveesters etc the big ticket equipment which can then be hired by the small farms.

    ReplyDelete
  50. Anonymous,

    Even though I disagree with you 90% about politics and economics, I appreciate your candor about your political views. At least you do not run away from answering tough questions, like so many do.

    However, there are real and concrete reasons why we disagree. If I was only driven by leftwing conspiracy theories, our discussion would be very brief indeed. So let me go into why I believe what I believe about the IMF.

    A lot of what the IMF preaches is standard economic orthodoxy. Some of it is some times too monetarist however it is orthodox economics. The IMF prescriptions make a lot more economic sense than the crazy populist stuff that passes for economic policy in Zimbabwe nowadays.

    Even Zambia's neoliberal finance minister Patel called the IMF prescriptions 'recessionary'.

    Here is why. Most of our economies are massively underdeveloped. In such a situation, there are clear historic examples that can be followed. For instance, the United States came out of the Great Depression following the policies of Franklin Delano Roosevelt. Europe came out of the ravages of WWII through the Marshall Plan. There are concrete policy prescriptions in both their approaches Zambia could adopt right now.

    However, none of those have anything to do with the IMF's ideologically driven structural adjustment programmes.

    A few points.

    - In a growing economy, a little inflation is not a bad thing. It means that even though production is expanding, demand is only barely being met, and by implication, production has room to expand more. Even double digit inflation is not that bad of a thing, if there is massive potential for growth. On the other hand, Japan, an economy that was clearly stagnating in the 1990s, at one point not only had low inflation, it had negative inflation. The banks were practically paying you to borrow their money. Clearly, low inflation is not desirable in and of itself. Yes, it creates stability and predictability, but what if that stability is merely representative of the calm of an economic graveyard?

    So the point is that low inflation should not be the goal, but instead, increased production should be. For instance, in Zambia, 1 tonne of maize is sold for $200 US. To half that price to $100,-, the best way would be to double (roughly speaking) the production of maize. It would create jobs, stimulate agriculture, and make food more affordable for the poor, all in one go.

    We know the ZANU-PF prescription - manipulate prices. Obviously, this does not make food more available. But we also know the IMF prescription - reduce demand, so prices come down. In other words, The IMF instead of stimulating growth and production, simply reduce spending. They also demand high taxation, which further decreases production. Reduce government spending on education and healthcare (they never bother to check with the UN on whether this would be 'bad' in a situation of an alleged runaway epidemic of HIV/AIDS).

    If economic growth is the goal, we should have more children in education, not fewer. If a healthy workforce is the goal, we should have universal access to healthcare, not raise barriers.

    The IMF policies have never led to hyper-inflation.

    Leaving Zimbabwe alone for a second, this is correct, but they usually lead to economicy meltdowns. Argentina, Russia, Malaysia, Indonesia, the litany of destroyed economies goes whereever the IMF goes.

    Internationally, the IMF is being abandoned left and right, by clients who will have nothing further to do with them. That doesn't sound like your average well run bank or business, now does it?

    This is because their prescriptions lead to the destruction of domestic economies, as can be witnessed in the documentary Life And Debt, on the impact of the IMF's policy prescriptions on the economy of Jamaica. In a democracy, no government can implement SAPs and be re-elected, which is why we see a huge shift to the left all over South America. And in Nicaragua, subject of US efforts at 'regime change' and massive support for the 'contra rebels'... Daniel Ortega has been re-elected into office. :) Such is the popularity of the IMF in South America and the Caribbean.

    I don't like the highhanded and patronizing noises toward the population coming out of the MDC. Land reform 'is an emotional issue but...'. Here is the lesson for the MDC - if you ignore the interests of the people in a democracy, you will be voted out of office at the earliest opportunity.


    Jamaica choked to death by IMF loans 1
    http://www.youtube.com/watch?v=1_PaBrKI5oU

    Argentina And IMF "The Take"
    http://www.youtube.com/watch?v=cUon5ic1tsU


    IMF policies have been aimed at making economies more market oriented and restructuring them to this model. These have emphasized balanced budgets, free interest rates, free floating currency and tight monetary policies.

    None of which lead to real, domestic, economic growth.

    For instance, open borders for foreign companies simply means that what was produced domestically, and what could potentially be produced domestically, is now supplied by a foreign corporation. Without Zimbabwean ownership, this does not only not stimulate the domestic economy, it prevents it from stepping in where demand is clear. And when these foreign companies supply goods that have been massively subsidized by European or American taxpayers to way below the cost of production, they simply cannot compete. This is how American corporations can ship potatoes across the Caribbean and South America, and still offer a lower price than the producer down the road.

    To be completely un-capitalist, to this unfair advantage are added tax holidays, the right to carry forward costs so profits do not need to be properly declared, etc. All of this we have seen in Zambia, and Zimbabwe should closely study and learn from Zambia's experience.


    This does have consequences which are unpleasant.

    Which you will have plenty of time to explain to the electorate, in the election after next. :)

    Balanced budget means slashing spending including education, health etc. Free interst rates means high interst rates. Tight monetary policies mean less money sloashing around the economy.

    The last of which are desirable - in a developed economy. With most of it's arable land unused and most of it's people living on less than a dollar per day, Zimbabwe is not there.

    *This is where neoliberalism fails - there are real barriers to entry into the economy, and these do not disappear by themselves.*

    Land reform was intended to address one of those barriers - access to land.

    We can both disagree with price controls, marketing boards, etc. which are old style, statist tools that falsely manipulate the market.

    However, a lot of the policies now being projected by people within ZANU-PF are extremely sensible, and should have been the focus since independence (which would preferrably have been in 1964, not 1979/1980).

    The renewed emphasis on production is extremely positive.

    The effort put behind tractorisation and mechanisation of agriculture is extremely positive.

    One thing on free interest rates being high interest rates. In a functioning and developed state, interest rates follow and reflect inflation. However, as we have seen in Zambia, even when inflation goes down into single digits, it doesn't mean that interest rates follow them there. The reason is the absence of proper legislation that makes it safer for banks to lend money. The absence of fixed addresses of borrowers, lack of collateral etc. are also impediments to lending. This means that banks cannot spread out their risk over millions of borrowers, which increases uncertaintly, which is then again reflected in higher rates for those who do get to borrow.

    Again, there are more barriers to the proper functioning of an economy than just 'sound' macro-economic policies.

    And a proper developmental attitude in government would focus on taking away the barriers to entry, not simply fixing the macro-economic picture. And certainly not internationalising the economy.

    This means these policies hurt however they are better than:-

    1. Runaway government spending
    2. Price controls
    3. Exchange controls and overvalued currencies
    4. Lax monetary policies

    These result in inflation eventually hyper inflation if not corrected.


    You forgot:

    5. International economic sanctions that make state borrowing impossible
    6. A bloated central government and an absence of full funding for Local Government


    IMF polcies do not lead to inflation. However implementation must be done in the right sequence and must take note of individual characteristics in each economy.

    The fact that since 2001 the government has found it very difficult to borrow internationally absolutely is at the basis of hyperinflation, which is unique to Zimbabwe.

    And on taking note of the unique characteristics of each economy - this is precisely what IMF policy prescriptions do not do. This is why SAP is exactly the same in Russia, Argentina, Zimbabwe, Zambia, etc.

    - Privatisation (corporatisation)
    - Less government spending
    - Low interest rates
    - High taxation

    This is not capitalism. This is some kind of utopian ideal of a world run by corporations, where money can be relocated from Alaska to Lagos to Novosibirsk in the blink of an eye. Where corporations pay no taxes, pay no import or export duties, and are not required to share profits.

    Because of their secrecy and lack of respect for the people and their right to be informed, the government of Zambia still has not made public the circumstances under which the Development Agreements were signed, or why the deal terms were so disadvantageous to the people and their interests.

    This is not how I understand 'capitalism'.

    This is how I understand proper, real capitalism. Capitalism that is not something that 'happens to' people, but it part and parcel of their lifestyles and aspirations.

    1) Create an economy that everyone in the country, who chooses to, can participate in
    2) Create a huge middle class, comprising of 90% of the population or more

    How do you do that? By making sure that everyone in the country owns either a piece of land, a home, or a (semi-) skilled profession.

    This means that there must be a redistribution of land, that there should be the possibility to outright own the land (though not necessarily to sell it, certainly not at the first opportunity). There should be some connection between land ownership and land use - in other words, you cannot indefinitely own land designated as arable land without putting it under cultivation, etc.

    You make sure that everyone can have a (semi-) skilled profession, by increasing the emphasis on vocational and technical training, as opposed to university and college. If the country is to grow, the country is going to need construction workers, car mechanics, etc. Give these people management and business training when they are learning their vocation, and you are training future business owners, who will retain wealth and create jobs.

    You make sure that every child can go to school, irrespective of whether their parents can pay. You make sure that everyone in the country has access to basic healthcare, so future generations of employees are not plagued by lifetimes of bad health.

    You make the government spend half their income at local government level, so services (education, healthcare, policing, public amenities, administration) can be delivered locally, and is locally accountable. Move away from an emphasis on the ministries and central government.

    The other half of the state's money is invested in the country's infrastructure.

    That is investing in the future.

    Here is some context for the IMF's policies and especially, their impact on local economies.

    Jamaica choked to death by IMF loans 1
    http://www.youtube.com/watch?v=1_PaBrKI5oU

    Argentina And IMF "The Take"
    http://www.youtube.com/watch?v=cUon5ic1tsU


    I have put together most of what I believe on the issue here:

    My Manifesto for Economic Development
    http://maravi.blogspot.com/2007/06/my-manifesto-for-economic.html

    ReplyDelete
  51. Anonymous,

    Even though I disagree with you 100% about politics and economics, I appreciate your candor about your political views. At least you do not run away from answering tough questions, like so many do.

    However, there are real and concrete reasons why we disagree. If I was only driven by leftwing conspiracy theories, our discussion would be very brief indeed. So let me go into why I believe what I believe about the IMF.



    A lot of what the IMF preaches is standard economic orthodoxy. Some of it is some times too monetarist however it is orthodox economics. The IMF prescriptions make a lot more economic sense than the crazy populist stuff that passes for economic policy in Zimbabwe nowadays.

    Even Zambia's neoliberal finance minister Patel called the IMF prescriptions 'recessionary'.

    Here is why. Most of our economies are massively underdeveloped. In such a situation, there are clear historic examples that can be followed. For instance, the United States came out of the Great Depression following the policies of Franklin Delano Roosevelt. Europe came out of the ravages of WWII through the Marshall Plan. There are concrete policy prescriptions in both their approaches Zambia could adopt right now.

    However, none of those have anything to do with the IMF's ideologically driven structural adjustment programmes.

    A few points.

    - In a growing economy, a little inflation is not a bad thing. It means that even though production is expanding, demand is only barely being met, and by implication, production has room to expand more. Even double digit inflation is not that bad of a thing, if there is massive potential for growth. On the other hand, Japan, an economy that was clearly stagnating in the 1990s, at one point not only had low inflation, it had negative inflation. The banks were practically paying you to borrow their money. Clearly, low inflation is not desirable in and of itself. Yes, it creates stability and predictability, but what if that stability is merely representative of the calm of an economic graveyard?

    So the point is that low inflation should not be the goal, but instead, increased production should be. For instance, in Zambia, 1 tonne of maize is sold for $200 US. To half that price to $100,-, the best way would be to double (roughly speaking) the production of maize. It would create jobs, stimulate agriculture, and make food more affordable for the poor, all in one go.

    We know the ZANU-PF prescription - manipulate prices. Obviously, this does not make food more available. But we also know the IMF prescription - reduce demand, so prices come down. In other words, The IMF instead of stimulating growth and production, simply reduce spending. They also demand high taxation, which further decreases production. Reduce government spending on education and healthcare (they never bother to check with the UN on whether this would be 'bad' in a situation of an alleged runaway epidemic of HIV/AIDS).

    If economic growth is the goal, we should have more children in education, not fewer. If a healthy workforce is the goal, we should have universal access to healthcare, not raise barriers.

    The IMF policies have never led to hyper-inflation.

    Leaving Zimbabwe alone for a second, this is correct, but they usually lead to economicy meltdowns. Argentina, Russia, Malaysia, Indonesia, the litany of destroyed economies goes whereever the IMF goes.

    Internationally, the IMF is being abandoned left and right, by clients who will have nothing further to do with them. That doesn't sound like your average well run bank or business, now does it?

    This is because their prescriptions lead to the destruction of domestic economies, as can be witnessed in the documentary Life And Debt, on the impact of the IMF's policy prescriptions on the economy of Jamaica. In a democracy, no government can implement SAPs and be re-elected, which is why we see a huge shift to the left all over South America. And in Nicaragua, subject of US efforts at 'regime change' and massive support for the 'contra rebels'... Daniel Ortega has been re-elected into office. :) Such is the popularity of the IMF in South America and the Caribbean.

    I don't like the highhanded and patronizing noises toward the population coming out of the MDC. Land reform 'is an emotional issue but...'. Here is the lesson for the MDC - if you ignore the interests of the people in a democracy, you will be voted out of office at the earliest opportunity.

    ReplyDelete
  52. IMF policies have been aimed at making economies more market oriented and restructuring them to this model. These have emphasized balanced budgets, free interest rates, free floating currency and tight monetary policies.

    None of which lead to real, domestic, economic growth.

    For instance, open borders for foreign companies simply means that what was produced domestically, and what could potentially be produced domestically, is now supplied by a foreign corporation. Without Zimbabwean ownership, this does not only not stimulate the domestic economy, it prevents it from stepping in where demand is clear. And when these foreign companies supply goods that have been massively subsidized by European or American taxpayers to way below the cost of production, they simply cannot compete. This is how American corporations can ship potatoes across the Caribbean and South America, and still offer a lower price than the producer down the road.

    To be completely un-capitalist, to this unfair advantage are added tax holidays, the right to carry forward costs so profits do not need to be properly declared, etc. All of this we have seen in Zambia, and Zimbabwe should closely study and learn from Zambia's experience.


    This does have consequences which are unpleasant.

    Which you will have plenty of time to explain to the electorate, in the election after next. :)

    Balanced budget means slashing spending including education, health etc. Free interst rates means high interst rates. Tight monetary policies mean less money sloashing around the economy.

    The last of which are desirable - in a developed economy. With most of it's arable land unused and most of it's people living on less than a dollar per day, Zimbabwe is not there.

    *This is where neoliberalism fails - there are real barriers to entry into the economy, and these do not disappear by themselves.*

    Land reform was intended to address one of those barriers - access to land.

    We can both disagree with price controls, marketing boards, etc. which are old style, statist tools that falsely manipulate the market.

    However, a lot of the policies now being projected by people within ZANU-PF are extremely sensible, and should have been the focus since independence (which would preferrably have been in 1964, not 1979/1980).

    The renewed emphasis on production is extremely positive.

    The effort put behind tractorisation and mechanisation of agriculture is extremely positive.

    One thing on free interest rates being high interest rates. In a functioning and developed state, interest rates follow and reflect inflation. However, as we have seen in Zambia, even when inflation goes down into single digits, it doesn't mean that interest rates follow them there. The reason is the absence of proper legislation that makes it safer for banks to lend money. The absence of fixed addresses of borrowers, lack of collateral etc. are also impediments to lending. This means that banks cannot spread out their risk over millions of borrowers, which increases uncertaintly, which is then again reflected in higher rates for those who do get to borrow.

    Again, there are more barriers to the proper functioning of an economy than just 'sound' macro-economic policies.

    And a proper developmental attitude in government would focus on taking away the barriers to entry, not simply fixing the macro-economic picture. And certainly not internationalising the economy.

    This means these policies hurt however they are better than:-

    1. Runaway government spending
    2. Price controls
    3. Exchange controls and overvalued currencies
    4. Lax monetary policies

    These result in inflation eventually hyper inflation if not corrected.


    You forgot:

    5. International economic sanctions that make state borrowing impossible
    6. A bloated central government and an absence of full funding for Local Government


    IMF polcies do not lead to inflation. However implementation must be done in the right sequence and must take note of individual characteristics in each economy.

    The fact that since 2001 the government has found it very difficult to borrow internationally absolutely is at the basis of hyperinflation, which is unique to Zimbabwe.

    And on taking note of the unique characteristics of each economy - this is precisely what IMF policy prescriptions do not do. This is why SAP is exactly the same in Russia, Argentina, Zimbabwe, Zambia, etc.

    - Privatisation (corporatisation)
    - Less government spending
    - Low interest rates
    - High taxation

    This is not capitalism. This is some kind of utopian ideal of a world run by corporations, where money can be relocated from Alaska to Lagos to Novosibirsk in the blink of an eye. Where corporations pay no taxes, pay no import or export duties, and are not required to share profits.

    Because of their secrecy and lack of respect for the people and their right to be informed, the government of Zambia still has not made public the circumstances under which the Development Agreements were signed, or why the deal terms were so disadvantageous to the people and their interests.

    This is not how I understand 'capitalism'.

    This is how I understand proper, real capitalism. Capitalism that is not something that 'happens to' people, but it part and parcel of their lifestyles and aspirations.

    1) Create an economy that everyone in the country, who chooses to, can participate in
    2) Create a huge middle class, comprising of 90% of the population or more

    How do you do that? By making sure that everyone in the country owns either a piece of land, a home, or a (semi-) skilled profession.

    This means that there must be a redistribution of land, that there should be the possibility to outright own the land (though not necessarily to sell it, certainly not at the first opportunity). There should be some connection between land ownership and land use - in other words, you cannot indefinitely own land designated as arable land without putting it under cultivation, etc.

    You make sure that everyone can have a (semi-) skilled profession, by increasing the emphasis on vocational and technical training, as opposed to university and college. If the country is to grow, the country is going to need construction workers, car mechanics, etc. Give these people management and business training when they are learning their vocation, and you are training future business owners, who will retain wealth and create jobs.

    You make sure that every child can go to school, irrespective of whether their parents can pay. You make sure that everyone in the country has access to basic healthcare, so future generations of employees are not plagued by lifetimes of bad health.

    You make the government spend half their income at local government level, so services (education, healthcare, policing, public amenities, administration) can be delivered locally, and is locally accountable. Move away from an emphasis on the ministries and central government.

    The other half of the state's money is invested in the country's infrastructure.

    That is investing in the future.

    Here is some context for the IMF's policies and especially, their impact on local economies.

    Jamaica choked to death by IMF loans 1
    http://www.youtube.com/watch?v=1_PaBrKI5oU

    Argentina And IMF "The Take"
    http://www.youtube.com/watch?v=cUon5ic1tsU

    I have put together most of what I believe on the issue here:

    My Manifesto for Economic Development
    http://maravi.blogspot.com/2007/06/my-manifesto-for-economic.html

    ReplyDelete
  53. Zimabawe should return to rule of law but I think the land reform should not be reversed. Instead it should be deepened and used as a spring base for a renaissance of the Zimbabwean economy.

    Well I completely agree with that, of course. :)

    1. Proper Land Tenure
    2. Clear legal process should be restored for acquiring and selling land.
    3. re-capaitalization of the agricultural economy should be top priority.
    4. 4500 large farms have been replaced by 200 000 small holdings. This is means large commercial farming ventures have been replaced by small subsistence or emergent commercial farms. The highly mechanised frming of thepast is not possible on the small scale it can only happen by consolidation. This can be done bycreating co-operative who can own the combine harveesters etc the big ticket equipment which can then be hired by the small farms.


    All those are good ideas, but they even more is needed if you want Zimbabwe as a country and society, not just an economy, to have a new start.

    I guess what I'm saying is that in Africa, there is a need for the integration of the economy and society. The economy can no longer be foreign owned mines, and white owned farms/estates. It has to include ordinary people. In the US, 2/3 of it's $10 trillion GDP comes from consumers. 80% of GDP comes from domestic economic activity, not international trade. In Japan, it is very difficult for a foreign company to set up shop and manufacture anything - they keep that privilege for their own nationals. This is what we should be aiming for.

    Right, now, it is possible for the economy to do well, while the majority of the population live on less than a dollar per day. This should not be possible.

    People must have to tools, of education and money and infrastructure, to be able to be part of the economy. This would also include local and central government creating the infrastructure that makes commerce possible.

    Check out my blog:

    What Is A Free Market?
    http://maravi.blogspot.com/2007/06/my-take-what-is-free-market.html

    ReplyDelete
  54. The highly mechanised frming of thepast is not possible on the small scale it can only happen by consolidation. This can be done bycreating co-operative who can own the combine harveesters etc the big ticket equipment which can then be hired by the small farms.

    And I completely agree with that.

    However, if you look at the example of Japan, mechanization is even possible on very small pieces of land.

    Did you know that rice farmers in Japan use hand tractors,also known as 'walk behind tractors'? Talk about miniaturisation, but it works for them and the country. http://www.earthtoolsbcs.com/html/walk-behind_tractors.html

    You know, one more remark.

    If white farmers in Zimbabwe hadn't been as racist and shortsighted as they have been, they could have both developed all of agriculture, and made a huge amount of money. If they had taken all that arable land they don't use, and allowed African farmers 100 hectares, and received only 20% of their harvest or produce as payment, they would have collected huge amounts of money, while developing and modernizing African agriculture.

    Instead, they simply hoarded the best land in the country, and didn't even use most of that, and pay their hundreds of 'employees' dirt. They would have been everybody's friend, integrated into society and they'd still be where they were ten years ago.

    They haven't, which is why they are in the predicament they are in today.

    ReplyDelete
  55. Very interesting debate!


    ”IMF polices do not lead to inflation. However implementation must be done in the right sequence and must take note of individual characteristics in each economy”. - Anonymous

    IMF policies and “conditionalities” can be detrimental for growth as MrK points out.
    They have been very recessionally in the past, pursuing low inflation at all costs. The SAP was a key example of what went role. The Russian Experiment was also a disaster.


    ”Back to the situation at hand. Zimbabwe needs to immediately slash money supply to manageable levels. Zimbabwe will need to issue a new currency or even adopt the rand maybe as its new currency. The adoption of the rand to me seems a viable policy. It would immediately remove monetary policy out of the incompetent hands of the reserve bank of zimbabwe. Furthermore it would remove the power to print money from the government.”- Anonymous

    I think the Central Bank has not been incompetent.
    It has simply been asked to perform a fiscal role. The recent IMF papers which are on this blog points this out very clearly and recommends that the way forward is simply to restore the RBZ to its normal role. Zimbabwe is not the first country to experience this, and neither is it the worst in terms of inflation rates. Its situation is not beyond redemption and does not require a new currency.

    ”In a growing economy, a little inflation is not a bad thing." - MrK

    Yes!! Yes!! Crucially we must avoid negative real interest rates (interests rates less inflation).

    ”So the point is that low inflation should not be the goal, but instead, increased production should be." - MrK

    The issue here now is how low is low?
    And the key here is to have positive but LOW real interest rates – so may inflation about 5% and interest rates above that….


    However, as we have seen in Zambia, even when inflation goes down into single digits, it doesn't mean that interest rates follow them there. The reason is the absence of proper legislation that makes it safer for banks to lend money. - MrK

    Good point MrK!
    I like your emphasis on the legislative side! These are things the IMF used to miss in the old days but I think they are learning now thanks to World Bank influences!

    But there other factors as well :)

    Competition! Competition in the banking / financial sector is critical to allow the emergence of competitive rates!!

    Also, large Government domestic debt could lead to higher rates, since the banks find it more attractive to lend Government and hence they make only little money available for the common man – who they charge at extortionate rates.

    ReplyDelete
  56. Zimbabwe is suffering from a serious crisis of confidence.

    The worst of it all is noone trusts the government and the government does not trust anyone.

    The use of state security agencies to for policing exchnage rates and prices simply mean a poverty of ideas and a reliance on decrees and repression to manage the economy rather than sensible policies.

    Economies are a balancing act and one of the isues that can tip an economy into free fall is a total loss of confidence in the state.

    Failed states usually result in economic chaos. Mainly because no one trusts the requisite state institutions to manage the economy competently.

    Zimbabwe is in this condition. The irrational economic policies the government has promulgated have resulted in confusion and have actually sped the country further into chaos.

    It is a testament to the general public's general displine, tolerance and patriotism that Zimbabwe has not collapsed into general disorder.

    The pillars a functioning economy rest on are a properly functioning judiciary, a competent monetary authority and the rule of law.

    As pointed out Zimbabwe has a judiciary that is ordered to hand down the decisions ZANU-PF wants or is ignored. The monetary authority the RBZ has been turned in effect inot the government's piggy bank and the rule of law has been replaced by the rule of the mighty elite of ZANU-PF.

    The institutions need to be re-built. Zimbabwe up to about 1995 had these institutions however the survival instinct of ZANU-PF has damaged all these.

    This is why I think people would have more confidence in a new currency lets call it a Monomtapa for argument's sake.

    This currency would be backed by the Rand. In other words link it to the Rand.

    Why the Rand. Well SA is Zimbabwe's biggest trading partner. The Rand is already widely available in Zimbabwe. SA's Reserve bank has shown it has good inflation fighting credentials.

    Secondly SA has an economy large enough and strong enough to absorb the Zimbabwean financial markets.

    Thirdly Zimbabwean have great confidence in SA right now.

    ReplyDelete
  57. Anonymous,

    The pillars a functioning economy rest on are a properly functioning judiciary, a competent monetary authority and the rule of law.

    The full participation of the citizenry in the economy is far more important, and seems to be constantly overlooked.

    There is no point in replacing a present political elite with another political elite.

    Full participation by the citizens in the economic life of the country is the basis of both economic flexibility and social stability.

    All of us should be striving for economies that have hundreds of thousansd of SMEs and hundreds of thousands of medium sized farms.



    Cho,

    ”So the point is that low inflation should not be the goal, but instead, increased production should be." - MrK

    The issue here now is how low is low? And the key here is to have positive but LOW real interest rates – so may inflation about 5% and interest rates above that….


    I think that inflation should be used as a tool, an indication of the match or mismatch of supply and demand. And government should then take away these barriers that keep supply and demand from being in balance.

    What I think the IMF's lesson should be, is that there are more factors affecting inflation than interest rates or monitary and fiscal policies.

    They should look at the real economy, and where barriers to education, job creation, business creation, business processes like transportation, human resources, energy, etc. really are.

    That would give a huge stimulus to real economic development.

    ReplyDelete
  58. Read the comments below reminds me of some the exchanges here


    http://www.whythawk.com/analysis/zimbabwe-recovering-the-irrecoverable.html

    Some of the craziness obtaing in Zimbabwe

    http://www.queensu.ca/samp/migrationnews/article.php?Mig_News_ID=3689&Mig_News_Issue=20&Mig_News_Cat=11

    More of the same

    http://www.nytimes.com/2007/08/03/world/africa/03zimbabwe.html?_r=1&em&ex=1186286400&en=2e5210094365505f&ei=5087%0A&oref=slogin

    What crazy policies have achieved

    http://www.nytimes.com/2007/08/02/world/africa/02zimbabwe.html?fta=y

    ReplyDelete
  59. for me inflation is a value in an equation that most people don't understand. i might be wrong but so far i have found it to be irrelevant.

    most of the knowledge that we have is based on the british system of managing an economy, what we need is knowledge of how to manage our economies.

    economy is simple when you know what the goals are.

    i will try and start from the bottom.

    1.a family should be able to afford the basics.that is paying for service at a price that is profitable to providers.

    2.the service providers should be able to make a profit and be able to expand.eg land rates should be able to cover the costs involved with maintenance of suroundings.

    3.the companies that employ these family people should be able to make a profit to be able to pay living wages and still make a profit for expansion.

    4.farmers should be able to make profits from their produce to sustain them for the next production season.

    5.every individual should be able to contribute to the local facilities to run smoothly.eg an amount towards hospital,fire brigade,ambulance service,local council,etc.

    6.companies should be protected by gov. in providing a competitive environment where no one is able to produce at low cost and gain unaffiar advantage.

    7.gov. should ensure each individual is contributing to enjoy the good life.

    every person should contribute to gov. and they should also contribute to have a good health system.

    we are currently encouraging a very poor atitude or poverty where people can go and sleep arround and go to hospitals with TB/AIDS that is costly to cure without spending a ngwee.

    MR ECONOMIST i have a few questions.

    1.how much can we tax each individual to meet our budget costs?considering we have 11million people/6million taxable adults.

    2.whats the benefit of only taxing the employees instead of company tax.this can encourage more companies to set up camp and people will have alot of money in their pockets,thus increasing their spending power.that means gov. will have a minimum wage.

    what is best a rich gov. or rich citizens.

    ReplyDelete
  60. Anonymous,

    - What is the MDC's view of local government?

    - What if the MDC intent to turn back land reform, as they have stated on their website?

    - What will the benefits of SAP (the IMF's Structural Adjustment Programmes) be to Zimbabwe and it's economy?

    ReplyDelete
  61. Anonymous (the person posting on 04 August 2007 10:19),

    I am not certain that I understand your proposal that, "Government Expenditure needs to be brought under control immediately. The Government should be put immediately on a cash budget. The Domestic debt supplier should be securitized and converted into long term interest free instrument i.e 10 year bonds. I know this would mean people in effect would give the government an interest free long term loan but it would also mean the government would not need to print money to meet its past bills."

    I get the bit about reigning in expenditures, however recapitalization of crucial public infrastructure projects already underway or stalled, such as water projects for urban residential areas and agricultural irrigation, or electric power generation sufficient to run the pumps once the leaks are plugged, is almost certainly going to require some degree of borrowing for timely implementation.

    I am more perplexed by the zero-interest long term bond part of your proposal. Who exactly is supposed to exchange the existing government debt obligations for these bonds? Is the remaining capitalization of the domestic lending pool sufficient to be self-sustaining without interest earnings on outstanding loans to the government? Wouldn't the increased pressure on domestic lenders lead to higher interest rates on new loans to domestic businesses, and thus hamper recovery and/or render domestic lenders uncompetitive versus international lenders?

    Presumably existing international debt obligations would remain unchanged, and would have to be incorporated into the cash budget unless exchanged for yet more domestic debt instruments, further depleting the domestic lending pool available to businesses.

    I am not certain that the government retains sufficient foreign exchange holdings to adequately guarantee a new currency, which could result in a currency shortage, stifling economic activity.

    I am equally uncertain as to the desirability of switching to the Rand, for any of nations involved. If the economy is going to be recapitalized without continued borrowing, then export earnings will be vital, and adoption of a strong currency is not necessarily the best strategy for establishing export growth.

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  62. Zimbabwe's Domestic Supplier debt has soared to unprecednted levels and is actually part of the inflationary cycle. The governmet buys more stuff and pay for it witrh printed money. The cycle has to be broken. However the supplier still ahve to get paid.

    I am actually asking the suppliers to eschew their payment in worthless Zim dolars and instead get long term promissory note so to speak.

    Someone has to make a sacrifice and maybe the suppliers can. 10 years is an arbitrary figure. 3 years is more likely. This would spread the payments to suppliers over a longish period and relieve the burden from the government.

    my propsal for establishing the rand as Zimbabwe;s curency has is a two pronged approach.

    1. Replace the currency with one whihc people have more confidence in.

    2. Take monetary policy out of the hands of the Zimbabwean government and the Reserve Bank. In effect substitute completely undiscplined expansionary monetary policy with adiscplined and stringent one outside internal political interference.

    3. Re-capitalization can not be immediate. The patient must suffer before being cured. The country will have to make do for a transitional period while the economy settles at a new equilibrium and works inflation out of the system.

    I think Zimbabwe can not have soft landing. Hard, quick shiock therapy will have a quicker result and will be less debilitaing it is like ukutina icipute (lancing an abcess) you either chose a short period of extremee agony or long lingering pain and debiltating fever for a long period.

    Lancing the abcess normally works better than waiting for it to burst, the patient can even expire before it bursts.

    The same goes for the Zimbabwean economy short sharp decisve action rather than half measures have a better chance of success in my opinion.

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  63. People! We must always remember that the West is only interested in peace in Zim so they can make money. If they are behind the MDC it is because they seem like a bunch of folks who can be manipulated into curbing the land issue. MDC has tons of support from the white farmers who have been making a fortune on stolen land.
    When they come to power the west will stop the sanctions Zimbabweans will have food and the land issue will be pushed aside for another 10 to 20 years. Everyone will be happy because the illusion of stability will be in place. But, in the long run another generation of Africans will be forced to wonder why they were let down by those who came before them who chose to take bread for the day instead of land for the generations to come.

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  64. Anonymous (25 August 2007 19:43),

    People! We must always remember that the West is only interested in peace in Zim so they can make money. If they are behind the MDC it is because they seem like a bunch of folks who can be manipulated into curbing the land issue.

    And not only the land issue (which I think can lead to civil war), but they want to privatise (sell off) the Zimbabwean state's assets.

    The one company that has set up a fund to 'make investments' in Zimbabwe is the late Tiny Rowland's LonRho, with it's $100 million (or more) fund called LonZim.

    They are not just planning on doing cashflow analyses and invest for the future. :) They have a history of backing both sides in a conflict, and my guess is that Morgan Tsvangirai's 'sensitive negotiations' in the UK were with LonRho. My bet is that they are backing the MDC, so the MDC can privatise Zimbabwe's parastatals and mines, the way Frederick Chiluba and the MMD did in the 1990s.

    Collusion and treason seem to be appropriate words to use.

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