Without equivocation, economic and financial matters are the most dominant and pressing issues across the globe.
Report by Joseph Mverecha
In many countries and throughout history, economists’ views on the economy are greatly distrusted by policy makers and perhaps not without some cause, particularly over the past decade where, across the globe, major disruptive economic developments have appeared to take economists by surprise, just like any other citizens.
The truth though is that economists are no prophets and very few (even Nobel laureates) are far-sighted, perhaps with the notable exception of the venerated John Maynard Keynes, whose voice continues to speak for decades beyond his grave.
The current US quantitative easing, the trillion stimulus packages under implementation from Washington to Beijing, are all vintage Keynesian macroeconomics, so lucidly detailed in his epochal work published in 1936, in the aftermath of the Great Depression.
But I am digressing – Britain, then as now, faces enormous economic and financial challenges, but these pale in comparison to the kind of challenges we face in Zimbabwe.
The economic situation for millions of Zimbabweans is decidedly desperate – everywhere the struggle for survival is most palpable from the sprawling urban populace to the wind-swept plains of our villages across the country.
It is impossible to ignore the titanic battle to make ends meet. Ordinary men and women in Zimbabwe are struggling and there is little respite with 2013 beckoning.
Travelling across the length and breadth of the country – from Dotito to Dzoro; from Zvipani to Zvamapere, from Chapwanya to Chavhanga, from Gandachibvuwa to Gandavaroyi – there is endemic structural poverty everywhere. In the south and south-west of the country, more than half the villages are empty of the under-29s, who have crossed the border, mainly to South Africa and Botswana, where most eke a living under particularly difficult conditions.
The age-old question that occupies one’s mind as one travels from district to district is, “what exactly needs to be done at the macro and micro levels to transform the lives of ordinary Zimbabweans?”
Estimates vary, but nearly 70% of the population is poor and about 46% live in chronic poverty. Our per capita income tells the same story and all the social and human indicators confirm the same.
Income disparities have widened over the past decade and continue to widen. Job losses are increasing in an already very high unemployment situation.
Statistics are by their nature very dry, whether in respect of the magnitude of joblessness, those living below the poverty datum line and so on. Yet these statistics refer to people – men and women across the length and breadth of our country who wake up every day facing very difficult decisions, about day-to-day issues – food on the table for their families, school fees for children and health/medicare for their loved ones.
Commendably, there has been some recovery since 2009, which has greatly ameliorated conditions as compared to the meltdown. But the gains are too marginal, the steps too few and the progress too narrowly defined to make significant impact.
Large swathes of the economy continue to struggle to gain capacity recovery and the second economy; the informal sector, remains dominant – an underground web of survival activities, like a swirling swollen river just beneath the labyrinth, quite seemingly unaffected by the marginal progress within the small nascent formal sector.
How do we get paradise restored?
The task facing our generation is to confront these challenges headlong, steady the ship, regain paradise and take Zimbabweans into the promised land flowing with milk, honey and opportunity for all.
That is the mission. The promised land is defined in economic and social terms:
- A doubling of gross domestic product (GDP) every seven years
- 16 times growth in per capita income in three decades
- Three million new jobs
- Five million people out of poverty
- Doubling of investment in infrastructure, education and health, every four years
- Reducing unemployment to below 30% in three decades
- Youth and gender mainstreaming.
- Single digit under-five year malnutrition rates
- Single digit maternal and infant mortality rates
- 24-hour availability of electricity and clean water.
Such a rapid acceleration in growth in economic activity is sure to massively improve the living standards of the people of Zimbabwe, sustain poverty reduction and achieve balanced and broad-based transformation.
In early 1861, Abraham Lincoln bade farewell to a small group of family friends as he headed for Washington to take up the Presidency, and he told the small group of well-wishers at the train station that he was not sure whether they would meet again with the task before him to unite the country greater than the task before George Washington, who was battling for independence against the British four-score years earlier.
Perhaps the task of rebuilding Zimbabwe’s economy may yet prove just as intractable and difficult as the war of Independence. Our founding fathers fought valiantly and courageously against colonialism.
They faced an entrenched and vicious enemy, baneful and brazen, but the terrain was defined, the battle strategy clear and battle tactics replicable.
The task of rebuilding our economy is intractable and complex. The structure of the economy has mutated and changed considerably over the past decade. This means there are threads we clearly see about the economy, but there are also threads we see imperfectly and there are threads completely hidden beneath the labyrinth, quite unobservable.
Then there is the global (and regional) context and its implications for Zimbabwe.
We can see clearly that the economy is on a recovery path, but that recovery is still fragile. Capacity recovery is uneven across sectors. Aggregate demand growth is slowing and so are fiscal revenue flows and deposits growth. We can see the current account balance is worsening unsustainably. There are vulnerabilities across critical segments of the economy and the vicissitudes of intertemporal Budget constraints impacting on spending behaviour and aggregate demand.
We know in part, the economy’s multilayered interactions in the goods markets, the labour markets and the financial markets. Partly to reflect the soft data limitations and short data series, our understanding of key relationships hits a dry patch – the long-run steady State conditions, the dynamics of adjustment, the pace of adjustment, the impact of nominal and real rigidities and which sectors of the economy respond to what stimuli. For instance, just as a single example, our knowledge is stretched in respect of the long-run steady State production level and how this has evolved over the past decade and how this will evolve under multicurrency.
Yet, the above notwithstanding, we can still make visible progress towards sustaining economic growth and poverty alleviation, provided a step by step approach is adopted. We must examine both pillars and principles for an effective roadmap towards the promised land.
What are the pillars of an effective roadmap towards economic recovery?
Below is a list of some key considerations, going forward:
- An objective assessment of our present (reality check)
- A clear diagnosis of the current challenges and what must be done
- A commitment to address the underlying structural challenges (not symptoms)
- A unifying national theme – that which unites us as Zimbabweans
- Understanding the global context.
- What are the principles for an enduring roadmap to the promised land?
- Macro and political stability
- Access to international capital markets (the case for foreign direct investment)
- Creating the middle class
- GDP growth and employment (job creation)
- Re-engineering taxation
- Make taxation simple
- Support for small-to-medium enterprises and ICT sectors
- Opportunity for all (youth and gender mainstreaming)
- Domestic stakeholder engagement (social contract)
- External stakeholder engagement
- Focus on the long-term country competitiveness.
- Tomorrow he will focus on the current economic challenges and what needs to be done.