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Thursday, 23 October 2008

The outsider versus the cobra

The Economist has done a piece on the impending elections. Nothing new or insightful here, and in many respect very simple (HH is easily dismissed when infact, how HH performs particularly in Central and Western could really be the decider on who gets the crown between RB and Sata) but thought it was worth flagging up for completeness.

Copper-rich Zambia faces uncertainty as it chooses a new president, The Economist, Commentary

Following the untimely death of President Levy Mwanawasa in August, Zambians must vote for a new leader on October 30th, just two years after their last presidential election. Four candidates are in the running. But the real contest is between Rupiah Banda, the vice-president who has acted as caretaker since Mr Mwanawasa’s death, and Michael Sata, a fiery populist who was defeated in 2006.

Zambia, a leading copper producer, has been one of southern Africa’s most stable countries. In 1991 its people voted out Kenneth Kaunda, who had run the show since independence in 1964, along with his ruling party. His successor, Frederick Chiluba, stepped down in 2002 after his own party had got fed up with him.

Bordered by troubled neighbours, such as Congo and Zimbabwe, Zambia has avoided violence or coups, even though copper riches were squandered after independence and most people are still dirt-poor. But the poll is a big test. Mr Sata, who claims the last election was stolen from him, has said he will not accept defeat. The ruling Movement for Multiparty Democracy (MMD), in power for the past 17 years, may be tempted to stack the decks in its favour. Can Zambians maintain their tradition of changing leaders peacefully?

The opposition is worried about rigging. Because the election was unexpected, the European Union has sent only a skeletal observer team. But the electoral commission’s chairman is a respected judge. This time, results will be posted outside each polling station, making it harder to fiddle results at the centre. More local observers will be on hand than before. But close or contested results may stir up Mr Sata’s people, who feel his time has come. A former MMD stalwart who broke ranks in 2001 to create his Patriotic Front, Mr Sata appealed for calm after his disputed defeat in 2006. He may not do the same if he feels victory is being stolen again.

Mr Banda, a former diplomat and minister whom Mr Mwanawasa plucked out of retirement in 2006, says he will follow in his predecessor’s footsteps. But he may lack the authority to push for unpopular reforms and steer a divided party. He faced more than a dozen rivals for the ruling party’s nomination. He is something of an outsider in the MMD; until quite recently, he was still a member of Mr Kaunda’s old party. He has also embraced several people whom Mr Mwanawasa had cast aside on suspicion of dishonesty. It is not clear whether he would keep these questionable new friends after the election.

With the friendly bias of the state media and easier access to election funds, the incumbent has a head start. It is a one-round affair, even if no one gets more than 50%. Mr Banda is a slight favourite. But King Cobra, as Mr Sata is known, cannot be written off.

He is popular in the capital, Lusaka, and in the Copperbelt, the economy’s power-house. Many voters want change. Mr Sata draws big crowds at his entertaining rallies. This time he has put more energy into campaigning in rural areas, still the MMD’s base, so that is where the election may be decided.

If Mr Sata won, it is unclear what he would do. Parliament will still be controlled by his rivals, the MMD. He tends to tell people what they want to hear, with promises of more jobs, free housing and lower taxes. In 2006 he fuelled a growing anti-Chinese mood, threatening to cut ties with China, a leading trading partner and investor in Zambia, and to expel foreign traders. Since then he has changed his mind; foreign companies should merely respect labour laws and get no better treatment than local ones. At a campaign rally he was reported to have said he would force foreign investors to have local partners, but his officials deny this is his plan. Critics say he is an autocrat; his party has never had a congress to elect its leaders. His fans say he is a man of action who gets things done.

Whoever he is, Zambia’s next president, who will be in charge only for the three years left in Mr Mwanawasa’s term, may be boxed in. Rising food and petrol prices have pushed up inflation. Zambia relies less on foreign generosity than a few years ago, but a big chunk of its budget is still funded abroad; the tap would soon run dry if economic policy became populist. The economy is more diverse than it was but still relies on copper, whose price has slumped by around 40% since early September. Cash-strapped foreign investors are likely to take a dimmer view of riskier emerging markets such as Zambia, despite its quite perky performance of the past few years. Zambians may have to tighten their belts, no matter who wins.

5 comments:

  1. I wonder what will happen to The Economist now free market theory has taken a nosedive.

    I wonder whether they will ever admit that deregulation is disastrous and generates an endless number of financial and economic crises (junk bonds, savings & loans, hedgefunds, mortgages...).

    The Economist will have to come clean about that little theory. Until that day, I don't respect anything they have to say.

    Including about Zambia.

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  2. http://news.bbc.co.uk/2/hi/business/7682669.stm

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  3. Not sure free market theory has taken a nosedive because it was always just that, a theory subject to assumptions. That said, I agree the economist magazine has always been useless. It has always had a very limited view of economics or economic principles.

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  4. Kafue001,

    Capitalism is alive and well

    BBC News is running a series of commentaries this week by economists on the challenges facing the global financial system. Today, Jagdish Bhagwati considers the implications for capitalism.


    First of all, it is cowardly of the writer to hide the failure of neoliberalism behind the much broader term of 'capitalism'. Implicity, it creates a dichotomy of supporters of either 'capitalism' or 'socialism'. It also falsely implies that capitalism is now and has always been about deregulation, privatisation and (unregulated) free markets. It identifies capitalism with neoliberalism.

    The truth is that there is no such thing as a free market without rules, therefore the failure of neoliberalism - deregulation, privatisation and 'free market' (unregulated market) theory should be acknowledged.

    The current financial crisis poses little risk of a meltdown like the Great Crash in 1929.

    Actually, left to the likes of John McCain, a Great Depression is exactly what you are going to see. Remember that during the Great Depression, much of the damage to the economy was caused by the theoretically based objection to intervention in the economy.

    Left to itself, it certainly would.

    But the governments are wide awake, and a flood of interventions to kill the crisis is in evidence.


    And exactly what are these interventions?

    * Nationalisation
    * Issuing debt to make good on the banks' bad debts and speculation
    * Generating inflation in the future for the whole economy by doing so

    This violates neoliberal theory on so many ways, that it isn't even funny.

    - Remember all the governments in the developing world who were told to let their industries and banks go bust, because the market knew best and if they couldn't make it on their own, they should not be supported by state.

    - Remember that Grover Norquist famously boasted that government should be reduced to such a small size, that it could be drowned in a bathtub. And pray tell, who is bailing out the banks again? The government, or what is left of it.

    Is there any developed country out there that does not have a government, or has a government that is only engaged in warfare and law enforcement? Where is the nation where government is absent from the economy or social services?

    - Issueing debt to bail out the banks is in direct violation of 'sound money' theory, the theory that ordained that Zambia would develop and and attract 'foreign investment' if only they brought inflation down to single digits. Obviously, development has not followed. Nor has the wealth aggregated by the elite 'trickled down'.

    Will it, however, destroy "capitalism" and undermine "globalisation"? I find such claims fanciful.

    The interventions are surely temporary. There is no intention, nor necessity, to keep the bailed-out government ownership.


    Ok, now I am really confused. Government bailouts are ok and not a violation of free market theory, when it is temporary?? Milton Friedman left that little caveat out, didn't he? Government intervention is ok, if it is only temporary.

    The real difference of course, is that developing world governments are vulnerable to the demands placed on them by the IMF and the West. In contrast, developed countries have electorates which will not stand for any kind of longtime hardship and will vote out of office any government which visits such treatment upon them.

    That is the difference.

    But then, neoliberalism was always merely a theoretical underpinning of boundless selfinterest and greed.

    The writer of the BBC article is trying to do damage control. There is no theoretical basis for anything he says, when it comes to the orthodoxies that have been foisted upon the economies of Zambia and so many other countries. There is no 'out' of the fact that government intervention was strongly discouraged by the IMF and WB.


    Cho,

    Not sure free market theory has taken a nosedive because it was always just that, a theory subject to assumptions.

    It has been applied to numerous economies though. As such, it is more than just any theory. It has destroyed economic sectors across the globe, in a quest for international capital to be allocated to any place in the world.

    That said, I agree the economist magazine has always been useless. It has always had a very limited view of economics or economic principles.

    They are staunch neoliberals, as if that is the only economic theory out there.

    How about protecting infant industries? Or creating a well educated and healthy workforce by introducing universal education and healthcare?

    How about nationalizing only one section of the economy, so it can spur growth in other sections of the economy?

    There are a lot of different ways to fill in what 'capitalism' means.

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  5. Even longtime neoliberal freemarketeer Alan Greenspan (personal friend of Ayn Rand) is joining in. I guess Greenspan and all the neoliberals must be feeling the same way Kremlinologists did the day the Berlin Wall came down.

    We're certainly living in interesting times. :)

    Greenspan Concedes Error on Regulation
    Doug Mills/The New York Times

    Alan Greenspan, former Federal Reserve chairman, with John Snow, former Secretary of the Treasury, at a hearing on Capitol Hill on Thursday.

    By EDMUND L. ANDREWS
    Published: October 23, 2008

    WASHINGTON — For years, a Congressional hearing with Alan Greenspan was a marquee event. Lawmakers doted on him as an economic sage. Markets jumped up or down depending on what he said. Politicians in both parties wanted the maestro on their side.

    Greenspan Prepared RemarksBut on Thursday, almost three years after stepping down as chairman of the Federal Reserve, a humbled Mr. Greenspan admitted that he had put too much faith in the self-correcting power of free markets and had failed to anticipate the self-destructive power of wanton mortgage lending.

    “Those of us who have looked to the self-interest of lending institutions to protect shareholders’ equity, myself included, are in a state of shocked disbelief,” he told the House Committee on Oversight and Government Reform.

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