AS Treasury reviewed upwards its ambitious 2021 Gross Domestic Product (GDP) growth projections from 7,4% to 7,8% in its mid-term budget statement and review, many economic experts see the growth projections as unrealistic given the challenges facing the economy.
The impact of the COVID-19 pandemic has caused havoc in an economy that was already suffering from several challenges. Treasury, however, anchored its projections mainly on the rebound of the tourism sector. Many economists feel that the projections are not only unrealistic but unachievable. Expecting a 6,4% growth in a sector that has been devastated by the impact of the COVID-19 pandemic is not only unrealistic but a joke. We need to be realistic ourselves rather than being too ambitious.
There seems to be something sinister with these projections the world over. The world over governments and economists seem to celebrate the news of these GDP growth projections. But, do men and women on the street have anything to celebrate when these numbers are announced?
We have seen conflicting figures most of the time between the IMF and Treasury when it comes to these projections. Do these figures tell a story that we don’t understand? One thing we know is that these numbers come from econometric models in which a lot of assumptions are at play. Maybe the issue is, who does have the most reliable and complex model that accurately projects the figures?
A lot of questions need to be answered when it comes to these projections. Questions such as; Does GDP growth translate into wealth creation for the general populace? Does it translate to poverty reduction?
As long as these figures won’t reduce poverty, then it’s high time we started to look for other measures that translate to poverty reduction.
These GDP projections seem to be manipulated to portray an economic picture that doesn’t reflect the reality on the ground.
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But can GDP growth benefit a few people in an economy, called the elite? John Perkins author of the New York Times best-selling book, Confessions of an economic hit man, argues that it is possible. Perkins elaborates how this is done and how economic models are used to portray economic growth that will end up in the hands of a few people called the elite.
This sounds very true because despite all these positive GDP projections the poverty gap seems to widen each day.
The economy is producing many poor people who can’t make ends meet. Maybe it’s due to the government’s misplaced priorities.
Year-in-year-out, Treasury projects economic growth but the populace doesn’t see any growth. What they see is increased poverty.
Is it because there is a positive correlation between GDP growth and an increase in poverty?
The Chinese model seems to be a good one in which they can calculate the number of people they have uplifted from poverty, the number of people who were made millionaires and billionaires and their target going forward.
This sounds more realistic and measurable. I think we once tried this with the two million jobs mantra which never came to fruition. Objectives must be smart, period.
Maybe it’s the right time to follow the Bhutan government’s philosophical guide, the gross national happiness (GNH).
The philosophy includes an index that is used to measure the collective happiness and well-being of a population. The term gross national happiness was coined in 1972 during an interview by a British journalist for the Financial Times at Bombay Airport when the then king of Bhutan, Jigme Singye Wangchuck, said: “Gross national happiness is more important than gross national product.”
In 2011, The UN General Assembly passed resolution “Happiness: towards a holistic approach to development” urging member nations to follow the example of Bhutan and measure happiness and well-being and calling happiness a “fundamental human goal.”
GNH is distinguishable from GDP by valuing collective happiness as the goal of governance, by emphasising harmony with nature and traditional values as expressed in the nine domains of happiness and four pillars of GNH.
The four pillars of GNH are: sustainable and equitable socio-economic development, environmental conservation, preservation and promotion of culture, and good governance.
The nine domains of GNH are psychological well-being, health, time use, education, cultural diversity and resilience, good governance, community vitality, ecological diversity and resilience, and living standards. Each domain is composed of subjective (survey-based) and objective indicators.
Another similar model is the World Happiness Report model, though critics argue it’s not the best model. According to its 2018 Happiness Index, Finland was the happiest country in the world.
Norway, Denmark, Iceland and Switzerland hold the next top positions. The report was published on March 14, 2018 by the UN.
Zimbabwe ranked 144 out of 156, a decline from 138 in 2017 (The World Happiness Report, 2018).
But surprisingly, GDP growth (annual %) during that period, according to the World Development Indicators (2019), was 0,75% in 2016, 4,7% in 2017, and 6,1% in 2018.
What a contrast? If we go by this trend certainly, the projected 7,8% GDP annual growth rate will not at all benefit the populace if it’s achieved.
The Happiness Index ranked countries according to the weighted average score of variables measured on a scale running from 0 to 10 that is tracked over time and compared against other countries.
The variables include real GDP per capita, social support, health, life expectancy, freedom to make life choices, generosity, and perceptions of corruption.
Other critics argue that the World Happiness Report model uses a limited subset of indicators used by other models and does not use an index function like peer-econometric models such as Gross National Well-being Index 2005, Sustainable Society Index of 2008, OECD Better Life Index of 2011, Bhutan Gross National Happiness Index of 2012, and Social Progress Index of 2013. All these models are very critical because they measure poverty reduction in an economy.
Many developing countries have celebrated the completion of many projects or loans from IMF or World Bank in which the populace is told of how these projects or money will translate to economic growth and poverty reduction. But certainly, do these projects result in poverty reduction? In many cases, it’s a big NO. Why? The answer was clearly stated by John Perkins in his books. These projections as much as they might sound true they benefit the elite given the nature and structure of the deals.
If one follows closely the war between the USA and China with regards to development especially in Africa, the tone that is coming out of these wars are accusations of resource looting. Each country is projecting itself as a good partner than the other. That must tell us how these big countries are once again scrambling for resources, if not for Africa. But how do nations really develop? The 2021 Legatum Report clearly states that nations that have developed, developed themselves. Professor Paul Collier, British economist states that the West cannot save them, the poor, that is the great delusion of a lot of Western thinking we are the saviours who will save them from their menace.
Going back to our issue, for example, Zimbabwe has signed several deals but surely are these projects reducing poverty levels? Let’s take Harare, for instance, can one explain how the government or whoever is responsible has failed to provide clean water to every household, which is a basic need given the natural resources, especially minerals which the country is proud of having. Where is the money going? Who is benefiting from these shortages? Something is not right somewhere? It is high time people started to ask these questions. Maybe it’s due to climate change. We always have the answer.
Are our priorities right as a country? We used to know boreholes as for the rural areas, now they have followed us in the cities. Other countries are talking of 5G and 6G while we are struggling to provide clean water. Where are these projections taking us and who is fooling who here? What kind of legacy are we leaving for our grandchildren?
Are all these projects given to the right people and the right companies or are our tender processes flawed? Maybe that could be our starting point in trying to fix some of these challenges.
Can these projections be realised with the current structure of our central bank (CB)? Why have we allowed the CB to allocate foreign currency in the first place? Is it not supposed to be the regulator and supervisor of the banking sector? We need to allow a certain level of capitalism to prevail in our economy. China, for example, is a deep capitalist country portrayed outside as a communist country. Some of our policies seem to be retrogressive.
The CB must return to its constitutional mandate. Chapter 17 subsection 6(317) of the Constitution states that: (1) there is a central bank, to be known as the Reserve Bank of Zimbabwe, whose objects are:
l to regulate the monetary system;
l to protect the currency of Zimbabwe in the interest of balanced and sustainable economic growth; and
l to formulate and implement monetary policy.
(2) An Act of Parliament may provide for the structure and organisation of the Reserve Bank of Zimbabwe and confer or impose additional functions on it.
The CB needs to be restructured to ensure political, operational, financial, and legal independence.
The populace has lost confidence in the financial services system so much that they prefer doing business outside the formal market.
Who is benefiting from the system that even the person on the streets sees not working? It is fun enough that people are still contributing towards pension schemes when history has taught us otherwise. It would make sense for one to keep gold as a life insurance rather than contributing towards pension schemes if given a choice. It’s unfortunate that currently it’s illegal to own gold in Zimbabwe. Ask those who have contributed towards these pension schemes, for example, they have sad stories. Another sad story is with the medical aid scheme. The experience is not pleasant at all. Maybe the funeral services are doing a good job, some of them. All these challenges show us that previous generations were better. Their financial acumen was better. They knew how to preserve their wealth through acquiring real assets, that is, land, gold, grain, and cattle etc. To me these provide better insurance than the ones we currently have. No wonder why gold was for the kings and queens. It was called the kings and queens money. Individuals are being milked dry by these institutions under the pretext of insurance and no one seems to care.
As long as these GDP growth projections don’t address the plight of the public, they remain naked, meaningless figures.
In conclusion, the former CB governor in an interview with Trevor Ncube admitted that we have an elephant in the room and as long as that elephant still exists we are doomed as a nation.
Our problems if not all of them are as a result of us keeping the elephant in the room.
Alexander Maune is a Talmudic scholar, researcher, and consultant as well as a member of IoDZ. To comment on this article, contact him at firstname.lastname@example.org