Economic growth and development has traditionally been subject of economics since Adam Smith and it is still focused by theoretical, methodological practical experts as well. Despite our increasing knowledge, the international community emphasise and point to the importance of research into this field. The relation between the economic growth and the development of a nation is excessively debated among the economists and the international development agencies. In the case of Zambia it has even become a political football with a number of opposition politicians refusing to accept the fact that Zambia's economy has experienced strong growth in recent years, with real GDP growth in 2005-08 about 6% per year. This performance has been lauded by many independent international observers and Zambia has been dubbed by the Economist magazine as ‘the lion kings’ putting Zambia alongside the Asian tigers.
In fact according to the forecasts of the IMF, published in the latest issue of the Economist, Zambia will be amongst the top ten fastest growing economies in the world in the period 2011 to 2015. Please see table below:
Every Zambian should be proud of this achievement as it is a testimony of our resolve as a nation to reform our economy and provide an enabling environment for growth. Zambia has been pursuing economic reform policies under the IMF and World Bank supported structural adjustment programmes since 1991 under the MMD Government. As with most structural adjustment programmes, the Zambian model is premised on a simple neo-classical model that views free markets as the key to economic growth. The assumption behind this model is that liberalization allows markets to set the right price, hence promoting efficiency and increasing income, in turn leading to economic growth.
Economics is notorious for its divergent schools of thought, academic in-fights, stubborn fads and fanciful fashions. Development economics is no exception. Take the battle lines drawn between the protagonists of economic growth on the one hand and explicit poverty reduction on the other. In the last decade, the former group insisted that growth in itself would eventually lead to rising incomes, including among the poor. Not so, said the latter side, and emphasised the pattern of growth instead. For Harvard economist Dani Rodrik, writing in 2000, the discussion raging in workshops and research papers was little more than a “hollow debate” which distracted attention from serious questions about what actually works in development and how.
While economic growth is considered essential for poverty reduction, it is also recognized that growth may not automatically trickle down to the poor. Accordingly, it is essential that the new emphasis on poverty alleviation be founded on a careful and frank independent assessment of the effects of macroeconomic and structural adjustment policies on growth, distribution and poverty. Such an examination is all the more necessary in view of the fact that Zambia has seen the one of the most intense and recurrent application of structural adjustment programmes over the past two decades without making much progress in either poverty alleviation or development.
Thus, the key now for the Government in Zambia is to follow an approach that emphasizes policies that facilitate the access of the poor to human, physical and financial assets to improve their earning capacity over the next five year period. In this respect particular attention should be paid to public provision of education and health services and the implementation of the Fifth national development plan must be intensified particularly in the rural areas. While macroeconomic stability and structural reforms will continue to be considered to hold the key to sustained and rapid growth, it is also recognized that stabilization and structural adjustment policies may exert a temporary adverse impact on the poor.
Thus, it is advocated that such policies should be accompanied by safety nets and targeted spending programmes to mitigate their possible adverse consequences for poverty. The Government of Zambia is already implementing aspects of these policies through the Ministry of Community Development through the Zambia Social Protection Programme. Consequently, the recommended approach emphasizes improvements in the allocation of resources both over the short- and long-term to areas which can have a direct impact on the well-being of the poor. However, any such reallocation can only be sustained under conditions of rapid economic growth. While it is generally agreed that poverty reduction strategies cannot succeed if they are not accompanied by policies to sustain rapid growth and improve income distribution, it is precisely the content and nature of those policies that are at the heart of the debate.
Little wonder development authorities have become anxious. So has the tax-paying public: enough of the debate, they say, tell us what must be done for aid to work and poverty to fall! Is the hollow debate finally over and are those stovepipes finally coming down? It may be too early to call. For now, the pendulum seems to have swung to a more pragmatic centre. Private sector development, infrastructure and agriculture are high on the development agenda, while the role social policies play in growth, particularly in reducing poverty reduction and improving human capital, can no longer be overlooked. The policies that promote growth are probably not that different from those that target the poor directly, for the reasons just discussed.
These policies are likely to vary considerably depending on institutional context, making it difficult to generalize. The debate on growth versus poverty reduction is a meaningless debate for our nation that diverts attention from the questions that should be our real focus: what works, how, and under what circumstances? The MMD Government has every right to claim the current success as they are the architects of the reform programme which has been ably supported by donor agencies and so President Rupiah Banda is well within his rights to campaign on the record of the MMD for the past 20 years and he should not allow himself to be distracted by half baked arguments from the opposition who have failed to articulate an alternative economic policy vision for Zambia except to downplay the success of the economy.
The guest author is an international trade economist currently based in the United Kingdom
(The Zambian Economist encourages guest contributions from leading Zambian thinkers on matters relevant to national development. The purpose of these notes is to stimulate discussion and ensure logic and impartial critique plays a leading role in shaping public debate. See the guest authors page for more information).