Is Hatred of Mugabe Enough?
As the elections in Zimbabwe approach, the battle lines are very clearly being drawn between Zimbabwe President Robert Mugabe’s ZANU-PF party and Morgan Tsvangirai’s Movement for Democratic Change (MDC). On one side sits the ZANU-PF party that is making a nationalist appeal to the people of Zimbabwe and on the other side sits the MDC that is making the argument that Zimbabwe must gain acceptance from the international community. ZANU-PF has made the 4500 white farmers who own as much land as 8 million Blacks their key issue while the MDC has made Mugabe himself and the corruption of his government the issue. We have looked at Mugabe’s argument and some of the validity behind it in earlier writings. But now we turn to the MDC’s position and specifically parts of the economic plan it hopes to enact when and if the MDC comes to power in Zimbabwe. It is an economic plan that fits its internationalist agenda but one that raises the question of whether a Zimbabwe under MDC leadership will be better off than the Zimbabwe that has been guided by Mugabe.
Here is an excerpt of a statement written by Eddie Cross, the Secretary of Economic Affairs of the MDC opposition – it details some of the MDC’s “economic vision” for Zimbabwe. It was written on June 9th – this past Friday. My comments are in bold and italics.
If we form the government we will be faced with this mountain to climb. We have already established that our post election economic strategies are acceptable to the multilateral agencies (the IMF, WB, ADB etc). Subject to us making a firm commitment to those strategies in our first budget statement (which will come out within 30 days) and then negotiating the way forward with them, they will support the program. Then there is the support for the recovery program for education and health as well as land reform and these are expected to generate further budgetary support. The resumption of aid flows from development partners is also expected and all of these moves are expected to generate sufficient foreign exchange inflows to stabilise the dollar and to get domestic supplies of essential inputs back on track.
This reliance upon the IMF, World Bank and African Development Bank is a recipe for disaster. It is interesting that the MDC has already “established” that its economic strategies are acceptable to “the multilateral agencies”. This alone makes one wonder who will really be in control of Zimbabwe if the MDC replaces ZANU-PF. The MDC is mistaken if it thinks that an IMF planning of its economy is an “economic strategy”. It is actually a loss of sovereignty as the IMF will determine what fiscal, monetary and regulatory policies Zimbabwe must enact. There is no autonomy for Zimbabwe under such a scenario. The IMF will not give the country a dime unless it does what it asks before an agreement is even signed. This is what is happening in Nigeria right now. Nigeria is following IMF dictates just in order to qualify for an IMF loan. Nigeria’s “decision” to end fuel subsidies and raise gasoline prices was not a decision it arrived at on its own. It was persuaded to do so by the IMF. Notice how the “economic strategies” that are acceptable to the multilateral agencies are subject to the MDC making commitments in its first budget. The IMF will certainly ask Zimbabwe to cut spending in some of the very programs – health and education- mentioned as being strengthened as a result of the IMF’s involvement in the country.
These inflows will create a very substantial volume of domestic resources which must be "sanitized" if they are not to disrupt the domestic economy and cause further problems. We will use these to kick-start the economy and get some of our social programs up and running and at the same time restructure and refinance our domestic debt to get the service ratio on the debt under control.
There is no record of a single country ever having its economy kick-started by aid from the multilateral institutions. Multilateral institutions, at best help nations to survive an economic crisis, they are never engines of economic growth. Cross is also sadly mistaken if he believes that the Zimbabwe’s social programs will be “up and running” because of the multilateral institutions. Quite often the aid is accompanied by request from the IMF to cut spending on social programs. The two objectives 1) Receiving aid from the IMF and 2) Increasing resources to social programs are incompatible. The conditions demanded for the aid will undermine many of the social programs. Spending on social programs will be cut in key areas.
Getting the budget under control will not be easy - the news reaching us in recent days has been very disturbing. The government printers have printed Z$30 billion in new notes since the start of the year - borrowings are double what they were 12 months ago and rising at about Z$6 billion a month. The Congo will be a drain for at least the remainder of the year while we withdraw. The revenue side of the budget must also be a shambles. At this stage we think that it will take us two years to get the fiscal side under control and into the limits that we can sustain.
Cross is correct here. He accurately depicts the problem of inflation and the dangers it poses to the budget process and generating tax revenues.
The inflows of foreign exchange will help us get the social side back on track - we should be able to overcome the shortages of essential drugs and paying a few suppliers will encourage them to resume supplies to hospitals and schools. The huge amounts of Zimbabwe dollars that will be generated plus the slow down in borrowings will cause a liquidity crisis on the local markets - too much money. This should lower interest rates and encourage the banks to look after their customers but it will also enable us to fund a whole heap of projects that are on hold - the Tokwe Makorsi Dam, the Gwaai Shangani Dam and the related pipelines and canals. These will create 100 000 jobs in the next two years and increase output in marginal areas with low and erratic rainfall. We can build large numbers of new houses and begin the task of reducing the backlog of housing in urban areas where we have 2 million homeless. We can tackle the urgent need for infrastructure rehabilitation following the cyclone and Zanu. These measures will put our professionals back to work and get the construction industry moving. The multiplier effect will give the whole economy a kick-start.
This may be the worst part of Cross' “economic strategy”. First he is counting on an influx of foreign exchange but says nothing about solving the country’s currency crisis. Without bringing stability to the value of the Zimbabwe Dollar the country will attract very little foreign exchange. Actually, the opposite will occur, foreign exchange will flee the country. No investor desires to park their money in a country that is experiencing sharp increases in its rate of inflation or whose currency is fluctuating wildly as is the Zimbabwe Dollar. Foreign exchange will enter the country when investors believe the central bank of Zimbabwe is successfully able to create an environment for currency stability; when they believe the central bank is managing the supply of dollars properly in relation to the demand for those dollars. Cross, nowhere in his articulation describes a plan of action to stop Zimbabwe’s inflationary track. Hopefully, Cross is not referring to the aid package from abroad when he speaks of “inflows of foreign exchange”. The aid will be miniscule in comparison to the social needs of Zimbabwe. We also notice that Cross is now praising inflation in this portion of his writing when he previously had denounced it. How he arrives at a new positive view of inflation is anyone’s guess. His belief that inflation will allow the country to fund public works projects (dams, canals and pipelines) and have a positive effect on the economy is flawed. If the projects are paid for in inflated dollars, workers will demand increased wages in order to compensate for their decreased spending power. This would cause the government to print even more money which would further generate inflation. So the 100,000 new jobs that Cross and the MDC see as a result of the building of infrastructure like dams, canals, and pipelines look good only on paper. They would not feel good in the pockets of workers hired to work these projects. It is clear that Cross believes that the people of Zimbabwe are in a position analogous to that of America in the 1930s, in the depression. He is emulating the economic strategies of Franklin Delano Roosevelt. But his analogy is misguided as it is impossible to compare the two countries whose economies are so different in nature. Cross’ dependence on the multiplier effect (whereby government becomes the leading purchaser of goods and services that starts a ripple effect whereby employees buy more goods and services with the wages that they receive) is misplaced as the government in Zimbabwe will be paying its workers in inflated dollars these workers will then be buying goods and services in inflated dollars and paying the government taxes in inflated dollars. In fact, because of the inflation, workers will be forced to pay higher taxes as the inflation will cause them to rise into higher income brackets (As the MDC has already promised to raise taxes and stiffen enforcement of the collection of taxes.)
My note: Wanting Mugabe out of power because his leadership has been ineffective is one thing, but improving upon his shortcomings is another. It is evident that the MDC’s strategy is to ride dissatisfaction of Mugabe right into power in Zimbabwe. They hope to win the support of those in Zimbabwe who do not like the job that Mugabe and ZANU-PF have done and they hope to curry favor with the West (who also has grown tired of Mugabe) by blindly adhering to the demands of the IMF, the World Bank among others. This strategy may win the MDC an election and earn it a few billion in aid but it will not stabilize the country or improve its economy. In fact we believe that it will worsen it.
While the MDC does good to point out the flaws of Mugabe’s government they more than cancel that benefit by championing an inept economic strategy that really is noting more than warmed over colonialism. The people of Zimbabwe deserve better. Dissatisfaction with Mugabe is not an agenda. And it certainly is no way to run an economy.
Tuesday, June 13, 2000