Wednesday, 27 May 2009

Hope for Zimbabwe?

A new report on the state of the economy and society in Zimbabwe along with a program for reform has been released by 9 think-tanks from throughout Africa. The report, The Zimbabwe Papers: A Positive Agenda for Zimbabwean Renewal , is written by members of think-tanks from Zimbabwe, Ghana, Nigeria, Guinea, South Africa, Burkina Faso and Zambia.

The report is clear about what the main driver of Zimbabwe's problems is
The suffering of the Zimbabwean people is not the consequence of historical or external factors. It is entirely due to policies adopted, decisions made, and actions taken by the government of Zimbabwe. Many people have been the victims of violence perpetrated by the government, the institution that was supposed to protect them and provide them with an institutional environment in which they could lead happy and productive lives.
The reports notes that
Zimbabwe's hyperinflation has crippled the country, led to political unrest, a massive "brain drain" to other countries, and produced an 80 percent decline in living standards over the last 10 years.
Is there anywhere else in the world where living standards have drop by so much in such a short time? The report explains that while nearly every country in the world has over the pasted decade experienced at least some economic growth, people in Zimbabwe have seen their per capita incomes decline by more than two-thirds. By the standard of conventional economic indicators Zimbabwe has had the worst economic performance of all countries for which comparable data exists. This drop in income has resulted in tremendous suffering.
For example, since 1998, the average life expectancy for Zimbabweans declined from 55 years to 35 years. More than 80 percent of the adult population is unemployed. Nearly half of all Zimbabweans are at risk of malnutrition and starvation. Compared to sub-Saharan African averages, Zimbabwe's children face higher rates of mortality, suffer more malnourishment, and experience the worst from stunted growth. The children who make it to adulthood are more likely to suffer from disease and face constant threats of politically motivated, State-sponsored violence.
And, to be fair, sub-Saharan African averages are not the highest standards in the world to met.

The report goes on to say,
While many claim that Zimbabwe's faltering economy is the result of sanctions imposed on Zimbabwe by Western governments, there is little evidence for this claim. In fact, the claim is patently false: Zimbabwe's economic decline and corrupt rule preceded sanctions by several years, which suggests that sanctions could not have possibly caused the crisis. Rather than point fingers at the West, we think Zimbabwe's leadership needs to look in the mirror and accept that most of their problems are the result of misguided internal policies. Reversing bad policies and the perverse incentives created by these policies therefore requires looking inward and finding ways to reform the domestic economy.
Clearly much reform is much needed, Zimbabwe needs to rediscover the rule of law, constrain government, and grant their citizens important economic and political rights. The report sets out a blueprint for reform based on the idea,
[...] that for Zimbabwean renewal to occur, reformers must be committed to reduce government intervention, so that individuals have greater economic, personal, and political freedom.
The report goes on to discuss
[...] the key economic reforms needed in monetary policy, fiscal policy, and trade. Zimbabwe's inflation has arguably been the single biggest contributory factor in Zimbabwe's collapse; we argue that Zimbabwe's government needs to cut spending and quit printing money. Zimbabwe's taxes are high and opaque; we recommend a flat tax and argue for reducing the total number of different taxes. Zimbabwe's trade barriers are also high, and customs processes hamper trade flows.

As the country moves towards Free Trade Areas (FTAs), we recommend lowering trade barriers and improving incentives for customs officials.
The important the role that property rights can play in Zimbabwe's recovery are discussed. The report argues for widespread privatisation of de facto rights as a way to empower the poor. It is also argued that lower taxation on mineral rights and the elimination of the Indigenisation and Empowerment Act could encourage greater foreign direct investment in mining. And I'm guessing that there isn't much in the way of foreign direct investment going on right now.

The report also considers water markets and the health care sector. Zimbabwe's water shortages could be eliminated if ownership rights to water were assigned and prices deregulated. Zimbabwe's health care system could be improved by reducing import taxes on pharmaceuticals and cutting regulation. It is also explained how deregulation of labour markets, business, and communications are needed for the recovery of Zimbabwean economy.
Costly labour laws cause unemployment and raise employer costs; we argue that many of the laws are unnecessary and should be eliminated. In terms of regulatory delays and licensing processes, Zimbabwe is one of the worst places to start a business; we recommend a streamlining of business regulations and the establishment of a one-stop business start-up office. Zimbabwe's communications systems are out of date and highly centralized; they should be privatised and foreign entrants should be granted access to Zimbabwe's markets in order to generate efficiency-inducing competition.
The last sections of the report look at political and legal reforms. Obviously the power of the state must be limited by the upholding of the rule of law. Violence must be reduced via more state transparency and by allowing more personal self-protection. Free speech must be guaranteed to all as a powerful check on the excesses of the government.

Its a bold program but then the problems are huge.

The report should be required reading for those at The Standard who believe that Zimbabwe's problems are due to Mugabe’s government following the IMF and World Bank’s neo liberal plan for their economy to the letter!

No comments: