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Monday, 1 September 2008

Political or Economic Leadership? Which way for MMD? (Guest Blog)

We are all gripped by the goings on in MMD as the vacuum of Party President is being contested by 15 candidates. Of the 15 candidates, two seem to be the front runners. These are the Acting President Hon. Rupiah Banda and the Minister of Finance Hon. Ngandu Magande. These two candidates are both university graduate economists but are different in several ways.

Ngandu Magande is renowned for his prudent management of our nation’s finances over the last 7 years and has been hailed as the best finance minister since independence. He is the chief executive of our country’s economic reform process which has resulted in greater investor confidence and macroeconomic stability. Whilst many learned colleagues appreciate his prudence and callous approach to developing the Zambian economy, many people in the country are unconcerned with this and are more interested in the development of their welfare from a microeconomic perspective. With poverty at 68%, it is no wonder why they do not appreciate the positive effects of Magande’s policy implementation. Furthermore, Magande has no political stronghold. When he joined MMD and ditched UPND, he was castigated by his own people and branded a traitor. To this day, Magande is rejected by his people for this betrayal. As a result, he did not stand a chance at winning in a Southern Province constituency and as such, was forced to pick a constituency near Lusaka. Even there, his election victory was marred by vote buying but he was cleared of these allegations by the high court.

Rupiah Banda was a retired UNIP senior member who was not in support of turning the party into a family business. He was not in support of the idea that the sons of the party’s founder member, Dr. Keneth Kaunda, take over the presidency of the party. Like the Late Levy Mwanawasa, Banda retired from active politics and settled on his farm in Chipata before being called to service in the second highest position in government in 2006. He is renowned for his role in securing mass votes for the late president garnered from the Eastern Province. Since his appointment as vice-president of Zambia, he has helped the late president to unite people in the party and government, and has been instrumental by filling in where the late president failed due to his poor health condition following a stroke he sustained in early 2006. Banda, who is a very tolerant and calm person, brought about political harmony where the late president would rile up those against his ideas. Since the late president fell ill in Egypt, Banda has filled his shoes seamlessly and has managed to continue there on. Banda, whose political reputation is well established and whose character is non-aggressive, has been hailed by the opposition and the party for his role in maintaining peace and harmony in the political arena.

From a distance, the current controversy with regard to choosing a candidate for party presidency in MMD is that of a choice between political stability and enhanced economic development.

One major faction in the party supports a Magande driven government so that economic development is enhanced over the next three years whilst another major faction is supporting Banda who is easier to sell to the electorate and victory for MMD is eminent.

There are several angles that must be examined in order to clearly understand the contention that stands before our ruling party. The key issues are as follows:-

  1. Based on past experience during the 2001 and 2006 elections, it is very clear that selling the likes of Magande will be a very difficult task for the MMD and government machinery will need to be utilized in order for him to win. On the other hand, Banda hailing from the east, is tribally neutral and as such, the north, west, east and south are more than likely to support his candidature.
  2. Based on the last two years, Banda has successfully filled in for the Late President Mwanawasa and more recently he has taken over as acting president seamlessly. On the other hand, since Magande was adopted after the 2001 election, he has never deputized the late president and neither has he had any experience in the presidential political front.
  3. Magande is known by the electorate as the person responsible for the high taxes that negatively impact on their earnings. The electorate has been forced to push the opposition Patriotic Front not to allow the upward tax adjustments proposed by Magande’s ministry. Magande is seen as a tax collector as depicted in the scriptures and Zambia is predominantly Christian.
  4. Banda is just over 70 years of age and this works to his disadvantage as Magande is much younger. Never-the-less, the most prominent opposition leader is slightly older than Banda and he was a close contender to the late president during the 2006 election. It appears that the electorate is not as affected by the age of the candidates as envisaged by the party.
  5. By virtue of the fact that Banda has been Vice President of Zambia and party trustee for the last two years, he has established himself well amongst party organs. Furthermore, his ex-UNIP back ground gives him the ability to sensitize the party and foster unity within the party. MMD had lost party unity when the late president was forced on the party as its presidential candidate for the 2001 election. Banda seems to have revived this lost unity.
  6. Banda is a supporter of party structures and believes these structures need to be developed in order to strengthen political position on the ground. Magande has not shown interest in developing the party and its structures, and as such he is not supported by lower level party organs. The late president was also seen as one who did not give party organs the attention they needed in order to establish themselves at grassroots level. It was this weakness that the opposition targeted during the 2006 election that nearly cost the MMD its victory.
  7. Magande is well vested in the direction and needs of the country’s economic goals. He has been tirelessly strategizing and developing Zambians economic path to growth. He is responsible for the macroeconomic stability currently being experienced. Never-the-less, he has not received recognition from the grassroots because of the lack of microeconomic growth and development. He has repeatedly stated that economic strides will eventually trickle down and microeconomic growth will eventually foster itself. Many in the private sector are of the opinion that government needs to catalyse microeconomic growth or the nation will sit in limbo for many years before meaningful development is achieved.
  8. Banda has praised the economic direction that the MMD had adopted in 1991 and has said that he is impressed with the Late Presidents stance on corruption as well as his economic vision for Zambia. As an economist, he has also praised Magande’s strides in pushing for a better economy and has vowed to work closely with him to take Zambia to the next level. Magande has never complained about working with Banda in cabinet and has received the full support of the office of the vice-president.
  9. Magande has been in the new deal government for 6 years and has worked with the late president in developing and implementing national economic vision and policy. Magande was entrusted by the late president to take Zambia out of its economic woes and he executed this request diligently. Magande has been strategic in assuring that Zambia’s economic growth increases and exceeds levels seen over 30 years ago.
  10. Banda was a UNIP member prior to being appointed Vice President by the late President. He was also a retired politician turned peasant farmer. His political career was awaken by this appointment and as such, many believe that he was only supposed to serve as acting president and go back into retirement. Banda has instead been supported by ministers and senior party officials who feel he should succeed the late president before retiring.
  11. Magande’s loyalty is questionable as he was known to have been very close to the late Anderson Mazoka and yet he abandoned him to join MMD and become Finance Minister. Because of this, many see Magande as an opportunist who will sell out for little pieces of gold and silver. Magande has defended himself by stating that his choice to join MMD was based purely on service to the country and government. Many have accused him of jumping ship in search of greener pastures.

Then there are other circumstantial factors that need to be examined as well. These are issues that are not directly related to the candidates but have a great bearing on the leadership crisis in the party. They are as follows:-

  1. It is evident that the former first lady had strategic influence over her late husband. This is proved by the number of government appointments that were made of her direct relatives. Even when these relatives erred, the late president could not act to have them removed or punished in any way. Toward the end of his life, the late president began to disregard his own family and appoint most of her family into strategic positions. This family tree has openly supported the candidature of Magande and the former first lady has endorsed Magande as the late presidents preferred successor. Banda is known not to have supported these family appointments and as such many in the first lady’s family tree feel threatened by his successful election into the office of the president.
  2. It is also clear that the MMD are desperate to stay in office and as such they are looking for the easiest candidate to support. The party seems to be primarily concerned with winning the by-election free and fairly more than they are concerned with picking a candidate that can deliver as per the MMD manifesto on economic development. This situation can put a person into office who may not be good for the economy but is very good for the party and political arena. The upside of this situation is that both candidates have an economic back ground and are both university graduates who appreciate the importance of economic stability and development.
  3. With the threat of Patriotic Front that seems to have more support in urban areas through its campaign strategy which focuses on empowering party structures from the grassroots, it seems quite evident that if MMD does not empower its organs down to the grassroots, their exit will be eminent.

For the majority of us who have adopted neither a political nor an economic only approach to deciding the fate of our country, we hope that the MMD president, once elected into office, will continue where the late president left off. We hope that the economic stability that Magande and his team have achieved is maintained and further enhanced. We also hope that the MMD, if re-elected, will evolve in to a party that represents the majority and develops grassroots support systems so that everyone is heard. We hope that the MMD will regain the political strength it once had and that they will deliver to the people thus leaving no room for the opposition to take away their representation of the people of Zambia. We also hope the MMD will bring unity amongst all tribes and finally do away with tribal politics as a means to gain votes, as exhibited by the opposition. We hope the MMD will become what it was in 1990 when it stood for all and assured we were all given an equal opportunity to take part in the governing of this country we so love.

We hope MMD will be able to develop itself politically as well as develop Zambia economically so as to assure tribal divisions are eradicated and economic growth is accelerated. We hope Banda and Magande will be able to work together once the MMD NEC picks its candidate.

The author and guest blogger describes himself as a "Lusaka based current government supporter".

16 comments:

  1. Seems to me that Ngandu Magande should keep being Minister of Finances.

    Couldn't Rupiah cut such a deal ?

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  2. Interesting observations and insights. Two main points jump out:
    1. Banda clearly demonstrates wonderful leadership qualities, he has a humple disposition , non confrontational, a uniter and most notable does not seem to be power hungry with other motivations. His biggest liability and drawback is his age.
    2. Magande has proven to be a competent and brilliant economic planner, however economic planning is a far cry from governing a country accross political all other bounderies. That is the million dollar question, can Magande translate his economist/financial skills into the political presidential arena? That in essence is the challenge confronting the MMD brass, do you go with a safe choice in Banda or roll the dice on Magande?

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  3. Magande feels he has done his time as Finance Minister, and then along comes this UNIP man....

    BUt what I find fascinating is that both of these guys were all brought in by Levy....they are hardly veterans of the party...

    In terms of Anonymous's questions, i would pose the other question should MMD be looking for another unifier, a compromise candidate, given the animosity between the two camps? It appears none of them will accept leadership of the other...

    I can't see RB and his friends remaining in the MMD if Magande was in charge, unless of course large envelopes are exchanged!

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  4. Gordon brown was an excellent chancellor but has not worked well as PM.
    Why did mwanawasa surround himself with his relatives and inlaws.
    Kaunda had many faults but non of the members of the central commitee were his hard core relatives, not even chiluba. perhaps they choose people they had worked with in the journey of life.
    Why did these people prefer an out sider for VP.
    these qtns are cardinal to understanding the future of Zambia.
    A true leader who will fight corruption in zambia will be one with no nepotism issues in his pocket.
    the stress and pressure of not being able to chastise hes relatives is what caused his uncontrollable bp and of course hes death.
    nepotism and hero worshiping lead the doctors who were supposed to be treating him to spend afternoons kneeling down in the zambian oval office,nepotism lead to the entire president being treated less adequately than my father whose doctor is a frustrated physician and a member of the royal colleges but does things by the book so my 90 year old father is alive poor but well. my president was being treated by doctors who cant remember the last time they read a journal on cardiovascular diseases,
    receiving orders from the first lady.
    "why on earth do you expect my husband to eat like a poor man with no salt"
    and of course the medics would say not to worry perhaps just as he wishes.
    now coming to the present its a battle to maintain MMD which can only be possible if RB is put forward because he can sell in all lands .
    however the're many people fighting for dominion, which includes the post and "Worker boys"
    aka nchito,the underground battle of the true stories of the zambian corruption has to come to the fore and that wont sound good to those who have been eating with no realistic result.
    what is the way forward a new grass roots party has to be born in zambia which will have to rid of all the garbage that has gone on and improve on the little good weve had.
    in my opinion the next leader should be thinking ,if I died in power let it be in my land certified by my doctors, if people need to see me let the body travel on that good train from livingstone to solwezi and that would be in just a few hours and cost efficient.
    the new leader should be thinking let the diplomatic post be a career post for those who have intrests in diplomatic studies and have excelled at it, right now politics is for those like me who would have the guts to call rupiah banda and magande at the same time and tell them how i think they are the best and that i would be willing to help in any way since abc in kasama or mongu is my friend and we have sorted fridays problem sorry zambians and ba widow am finding it very hard to bask in the legacy that the people are singing about.as a human I feel sorry for the first family cause the troubles have just begun.
    and to them i send my condolences however
    God has ordered a new beginning to zambia and this is what it should be!
    we spent millions on all sorts of constitutional reviews but its still wanting
    we dont know were these politicians hale from they just land on our door steps in zambia i mean the TV
    we dont worry about the poor
    we dont worry about the widows who no one remembers
    let us Give ourselves a chance and the one we are waiting for is ourselves.

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  5. Both RB and Magande are opportunists. Magande came from UPND and never really got interested in MMD politics. So is Banda. Worse still nobody knows if Banda has even joined MMD. Before being appointed as VP he boasted of being a UNIPIST. No wonder MMD guys are calling him an outsider.

    The point here is - Levy disregarded MMD procedures to carry out his wishes. That is not how you build democracy. And those invited they don't care, for all they need is money and positions. On this score, the Southeners label on Magande is probably truthful.

    Banda may have more wider appeal across Zambia, but to earn the VPship because of campaigning against SATA on a tribal basis is not a good credential for a genuine president. Easterners would like to be allowed being vocal as Easterners. But would not like other provinces to do likewise. If NProv campaigned on the same basis - the country would be up in smokes. On the other hand Magande is rejected by his people because he did not behave as Tonga sufficiently. For them he rebelled when he went to Mwanawasa.

    Perhaps the biggest drawback on Magande from the Zambians point of view - is not only because of taxes, but because he has presided over the largest copper boom. During this period, in the name of attracting investors, he has allowed an enormous amount of capital resources to leave Zambia. Billions of Kwacha has left Zambia without it being taken advantage of. That is there is no policy to circulate copper or other revenues in Zambia. Companies bank abroad and are not required to use their Zambain accounts. This is in addition to Magande's reluctance in adjusting upwards the mineral royalties from a meagre .06% to 3%. Mwanawasa had to dream of this change by himself.

    So although Magande is a hard core economist, but he lacks the comittment as to why economic growth is all about. Economic growth must be translated into reducing peoples poverty, and not allow it to be taken advantage of by foreigners.

    Finally, Maureen must be reminded that Zambia is not a monarch. Whether Levy left a will or not,leadership must be democratic and competitive. It cannot be wished to somebody even if that support comes from the likes of Post.

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  6. Anonymous,

    Why did these people prefer an out sider for VP.

    Because VP's are usually chosen for their inability to succeed the president. :)

    Remember how Nevers Mumba made policy pronouncements when Levy Mwanawasa was away abroad. He lost his job very quickly after that.

    What I am interested in, is when will these parties stop running their leader into the grave?

    First Anderson Mazoka, who was in terrible health and should have stepped down, in his personal interest as well as the party's.

    Now, we have Levy Mwanawasa, who was in a very bad state after a terrible traffic accident, when he first became president. He was also massively overweight, and working in a very stressful job. What was healthy in the days of agriculture is not healthy or executives and professionals.

    But when are the parties going to become serious about having succession procedures in place that at the same time protect the power and position of the president against anyone who wants to abuse the process for political reasons, but at the same time ensures a smooth succession that does not depend on the party leader dying or losing an election?

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  7. Kaela,

    "Perhaps the biggest drawback on Magande from the Zambians point of view - is not only because of taxes, but because he has presided over the largest copper boom. During this period, in the name of attracting investors, he has allowed an enormous amount of capital resources to leave Zambia. Billions of Kwacha has left Zambia without it being taken advantage of. That is there is no policy to circulate copper or other revenues in Zambia. Companies bank abroad and are not required to use their Zambain accounts."

    Mining companies will never invest anywhere unless they can get their investment back. They are in the business of mining and need to invest in mining projects in any country where they can maximize their returns. Zambia did not have the capital resources to invest in mining and this is where the mining investors stepped in. Without them there would be many fewer mining jobs. Requiring companies to just use Zambian bank accounts is just another obstacle to attracting foreign investors, many countries have realized this and that is why they do not have this regulation. If one wants more investment and thus more jobs, one should think from the point of view of business and do everything to facilitate them, that is how economically successful countries operate e.g. Singapore, Malaysia, China, Botswana.

    By the way, just having mineral resources does not automatically mean wealth for a country's people. It also depends on the size of the country's population. That is why the Gulf Arab countries population are better off, because the wealth is spread over a much smaller population than say Nigeria or Zambia where the population is much bigger. True wealth is created when the population acquires the skills needed in a modern economy and the government creates the infrastructure and policies needed in a successful economy. Zambia is currently on the right path and will reach that level eventually, economic success is achieved over decades, not a few years, look at South Korea for example.

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  8. Kafue001,

    The South Korea example is perhaps misleading.
    All things being equal Zambia should develop quicker because you would hope it had learnt from all other nations' tsuccess and failures after up to now, which South Korea did not. Basically, Zambia's knowledge should be more superior to what Korea had at the same stage of its development.

    Its therefore a failure of leadership (and of course the people who elect them).

    ReplyDelete
  9. Kafue001,

    Mining companies will never invest anywhere unless they can get their investment back.

    There is no country in the west where they can avoid being taxed on their profits.

    These are mining company talking points.

    They are in the business of mining and need to invest in mining projects in any country where they can maximize their returns.

    They are restricted by the fact that they have to go where the minerals are. Only Chile can rival Zambia in its' copper deposits, during a time when copper prices are making all time highs.

    They are not going to leave Zambiab because they will be heavily taxed.

    Remember all the lies that were told about the disastrous impact of 'violating' the development agreements would have on 'Zambia's reputation'. Garbage.

    The mining companies talk a good game, but in the end the mines are the mines and copper is where it is - Chile, Zambia, the DRC.

    ReplyDelete
  10. Kafue001,
    Mining companies will never invest anywhere unless they can get their investment back.
    Mr K,
    "There is no country in the west where they can avoid being taxed on their profits"

    We are talking here about repatriation of capital. Of course we already know that mining companies are taxed on their profits.

    Mr K,

    "They are restricted by the fact that they have to go where the minerals are. Only Chile can rival Zambia in its' copper deposits, during a time when copper prices are making all time highs."

    Actually there are plenty of copper deposits all over the world, in Mongolia, Australia, Indonesia, USA, Canada, Afghanistan, Poland, Russia - and in huge quantities as well.

    http://www.indexmundi.com/en/commodities/minerals/copper/copper_t20.html

    http://www.timesonline.co.uk/tol/news/world/asia/article3941656.ece

    http://www.mining-technology.com/projects/oyu-tolgio/

    Mr K,
    "Remember all the lies that were told about the disastrous impact of 'violating' the development agreements would have on 'Zambia's reputation'. Garbage"

    Not lies - It is because many countries have been raising their taxes as well, not necessarily outside mining agreements, and copper prices have remained high, that they are staying. I would venture to say that if this changes, then mining companies would recalculate their investment returns and decide if it would be worthwhile to continue mining in Zambia. Just as Anglo American did in 2002. Also many are considering whether they should expand operations under the new tax regime.

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  11. So let the Zambian government mine copper itself.

    So what if they leave? ZCCM should be mining all the copper itself anyway, the way they used to.

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  12. The point I was trying to make is that – routing copper revenues through the Zambian economy, even if for a day or two would benefit the country enormously. In economics there is a concept known as opportunity cost. Just imagine what the huge copper earnings would do to a country if they were banked in Zambia even for six hours? Interest rate alone would be equivalent to a World Bank loan. But this can’t happen unless there was a deliberate policy.

    Why would you let someone come and use your resources to make abnormal profits? When we say, make policies to attract investors, we are not saying give the resources away. [See the attached expansion on this].

    There is no country in EU, North America or else where which allows the transfer in or out of $10,000 or more without government regulation or knowledge. This is one of the tools designed to control the movements of resources. Then why should we allow billions of Kwachas’ worth resources to be banked outside without our knowledge? How do you charge correct taxes if you don't know how much was paid to the investors? Or do you take their word for it? Trusting a foreign investor on this is the beginning of trouble for us. This generosity must be discouraged.

    Please digest this issue before giving a rushed feedback. If those of Magande worked hard to prepare packages attractive enough to investors, it is now time they prepared new ones in favor of Zambians. The ones where all loop holes would be sealed and true earnings from our products accrue to us not them. As the owners of the resources, we deserve a lion’s share not the other way round. Thanks!

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  13. Kaela,

    "Why would you let someone come and use your resources to make abnormal profits? When we say, make policies to attract investors, we are not saying give the resources away."

    The concept of "abnormal profits" is not valid. Profits fluctuate depending on market prices for products. It may be above average at certain times and below average at others . Above average profits will increase entrants into the field increasing supply and eventually bringing down profits. Below average profits will have some producers exiting the field decreasing supply and eventually increasing profits.

    Kaela,

    "There is no country in EU, North America or else where which allows the transfer in or out of $10,000 or more without government regulation or knowledge. This is one of the tools designed to control the movements of resources"

    The above is done to track sources of possible money laundering and thus to reduce crime, also for statistical tracking purposes, not to regulate the movement of resources.

    Kaela,

    "Just imagine what the huge copper earnings would do to a country if they were banked in Zambia even for six hours?"

    One could argue that without such suggestions as the above, even more foreign investment would come to Zambia. One of the things that business hates is red tape and bureaucracy. Helping businesses maximize their profits in Zambia will make it a more attractive investment destination creating more jobs and tax revenues. And after all, if the money being sent overseas belongs to the owners of the money, they can do what they wish with it. The government has no right telling someone what to do with their money (property rights).

    Kaela,
    "Then why should we allow billions of Kwachas’ worth resources to be banked outside without our knowledge?"

    If you are referring above to foreign investors money overseas, it is their money and they can do what they wish with it. If it is Zambians money, then they would have a valid reason for knowing where it is (for tax purposes for example).

    Kaela,

    "How do you charge correct taxes if you don't know how much was paid to the investors? Or do you take their word for it? Trusting a foreign investor on this is the beginning of trouble for us. "

    Many companies have their financial statements independently audited, that is one of the purposes of an independent audit, so that entities such as the government can trust their figures.

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  14. Kafue001,

    "The concept of "abnormal profits" is not valid. Profits fluctuate depending on market prices for products. It may be above average at certain times and below average at others . Above average profits will increase entrants into the field increasing supply and eventually bringing down profits. Below average profits will have some producers exiting the field decreasing supply and eventually increasing profits."

    Your model sounds perfectly competitive :)

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  15. Kafue,

    Good! Now we are locked in fruitful arguments. But some of the points you’ve raised are only good for passing an intro-course in economic theory – but don’t measure up in ‘applied economics’ or the real world.

    Let me remind you that – generally, markets are very imperfect and often fail to function as they should. If they did function well, then those new entrants would continue streaming in so long as there was still room to make a buck – kicking out those who can’t survive and compete. But this is only true in theory.

    Again, if markets were perfect – no firm would have been given a chance by others on the sideline or within to make such exorbitant profits. Over crowding would have occurred, due to the huge profits companies are making in Zambia. Then we would have no cause to complain since things would have been leveled out (level playing field). In practice this doesn’t usually happen.

    Because markets are imperfect and because the playing field is not level (for various reasons among them – (market dominance, monopoly, unequal access to resources, political interference, protectionism, etc., etc.) – that is why the concept of ‘abnormal profits’ exists. This is very common in LDCs (less developed countries) such as Zambia.

    Above all, be reminded that the neo-con (Washington consensus or the free enterprise believers) or advocates of the power of markets have now been discredited. That is, more and more the tool being used when things in the market go hey-wire is “intervention” (minimum or severe).

    Due to blind belief in markets, that is why US housing market exploded into a world-wide crisis. Yet those players involved in it were following standard market rules. In short, capitalism premise has been considerably weakened. These are not my personal observations. I do not particularly subscribe to excessive government regulation – but I am in favor of limited, smart government “economic policing”. It is for this reason why I am one of the few pundits who have given credit to the shake-up Chiluba gave to our economy.

    But even so, in an exchange like we are having, I did caution Chiluba crowd that we had to be careful. Nobody listened and the rest is history. You see, Chiluba after reading a chapter on market economics sent by his Lecturer from Warwick University (in UK) – he went ballistic. He thought that he had now learnt economics. With that, he went ahead and gave away our mines. Those who bought them simply cleverly dictated the price by telling him that it was a market price. He curved in thinking that nobody would challenge him since he was getting a market price. This is how you could be misled by this market ideology.

    You see, for those who believe in markets, the tendency for them is to fold up their arms hoping that when they wake up in the morning – the market magic would have performed its miracles. My friend, welcome to the Lalaland economics. This just doesn’t happen in the real world.

    And finally, ask those who work in NY Stock Exchange to get a glimpse of what happens in the real world. Criminals (also known as Brokers, Agents, Fund Managers, CEOs, and Accountants), large players and greedy marketers do manipulate the functioning of the markets – creating an outcome completely opposite to what we teach in economic schools. With the help of modern technology (computers), accounting systems, and other loopholes, these people paralyze market efficiency.

    So, given this information, why would any body at the Ministry of Finance or BOZ be naïve? There are other small points you made, but let’s end here fore now. [KBM]

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  16. Kaela,

    "Due to blind belief in markets, that is why US housing market exploded into a world-wide crisis. Yet those players involved in it were following standard market rules. In short, capitalism premise has been considerably weakened. These are not my personal observations."

    Capitalism is not perfect, but it is better than other systems. The U.S. had lenders who lent for more risky sub-prime mortgages than they should have, and borrowers who took mortgages that they could not afford. All based on the incorrect premise that real estate prices would keep rising. So who should pay for those mistakes? Why those lenders and borrowers of course. What the US government is trying to do now is to prevent the whole mortgage system from collapsing by keeping lenders from being afraid to lend and mortgages from being unaffordable due to the high interest rates now being demanded by lenders as a risk premium. Meanwhile lenders have learnt a lesson that it is too risky to lend so much for sub-prime mortgages.

    Kaela,
    "You see, Chiluba after reading a chapter on market economics sent by his Lecturer from Warwick University (in UK) – he went ballistic. He thought that he had now learnt economics. With that, he went ahead and gave away our mines. Those who bought them simply cleverly dictated the price by telling him that it was a market price. "

    What happened is that the government operated mines had been run down due to lack of investment. This together with the low copper prices meant that government had to subsidize mine operating costs to the tune of one million dollars a day. A situation that clearly could not continue in the long run. So they had to privatize them to get the mines rehabilitated and profitable again.

    http://query.nytimes.com/gst/fullpage.html?res=9B02EFD71738F933A25752C1A9669C8B63&sec=&spon=&pagewanted=1

    Kaela,
    "And finally, ask those who work in NY Stock Exchange to get a glimpse of what happens in the real world. Criminals (also known as Brokers, Agents, Fund Managers, CEOs, and Accountants), large players and greedy marketers do manipulate the functioning of the markets – creating an outcome completely opposite to what we teach in economic schools. With the help of modern technology (computers), accounting systems, and other loopholes, these people paralyze market efficiency."

    There are no doubt scandals in the NY Stock Exchange, but they are relatively few in number and it would be incorrect to paint brush the whole exchange and its many companies as being corrupt. Crime is always evolving and the exchange is always developing its policing mechanism to cope with them. The stock exchanges are still the best source of attracting capital for many companies and providing liquidity for investors.

    Kaela,
    "You see, for those who believe in markets, the tendency for them is to fold up their arms hoping that when they wake up in the morning – the market magic would have performed its miracles. My friend, welcome to the Lalaland economics. This just doesn’t happen in the real world."

    I would say that the markets provide the best solution in the long run. Shutting down the mines would have meant the loss of thousands of jobs and loss of foreign exchange to import fuel and medicines. Also keep in mind, whether privatizing or not, falling copper prices may make mining unprofitable regardless, as Anglo American decided in 2002. Even with the higher current mining taxes, about $650 million will be raised this year, less than $65 per Zambian. And suppose taxes were doubled again, only $130 per Zambian. True wealth will come when Zambians have the same skills and earning power as in the developed economies. So Zambia should focus on creating an environment and incentives for business development.

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