Whose Zimbabwe economy?
For the country’s first post-Mugabe government, perhaps as early as next March if elite deal-making unfolds as promised, job number two, after restoring a semblance of democracy, is economic.
Given the meltdown of Robert Mugabe’s version of crony-statist-capitalism, a system hostile to the country’s poor and working people, the new model chosen will reverberate across the world.
On the one hand, the Economist spells out why Zimbabwe should take the advice of the “Washington Consensus” (a set of orthodox economic policy prescriptions devised by the World Bank and International Monetary Fund, or IMF): “Nowhere has withdrawn so swiftly from the global economy, nor seen such a thorough reversal of neo-liberal policies. The results—an economy that has contracted by 35% in five years, and half the population in need of food aid—are hard to paper over.”
On the other hand, countries such as Argentina, Venezuela, Brazil, Turkey, Indonesia, and the Philippines are throwing off the IMF yoke, repaying loans early and thus pushing the institution into serious financial crisis.
With several Latin American countries veering sharply leftwards, out of Washington’s orbit, little Zimbabwe could become the IMF’s next big ideological battle ground.
To illustrate, South African Communist Party leader Blade Nzimande last month attacked the “superficial” analysis dominant in the African National Congress: “During the first decade of Zimbabwe’s freedom [1980-1990], the government legitimately spent vast amounts of money on social services [health, education, welfare and so forth], but without due regard to the fiscus and therefore the sustainability of such spending, [hence] government was forced to turn to the IMF.”
Such analysis is indeed incorrect, for Mugabe adopted structural adjustment at a time of relative economic health, and by 1995 received the World Bank’s highest possible rating for following the Washington Consensus: “highly satisfactory”.
Mugabe’s spin doctors typically blame the 2000-2007 economic crisis on Western states and institutions angry about land reform, or mythical “sanctions”.
In fact, per person GDP has been falling since 1974, due to the constraints of a racially biased small economy that under anti-Rhodesian sanctions overproduced beyond local buying power.
In contrast, the United States State Department blames “poor fiscal policies and rampant government spending [and] an illegal and chaotic ‘fast track’ land-reform programme”.
Local economist Rob Davies mainly blames the crisis on wealth accumulation—“a peculiarly rampant form of absolute extraction”—by the ruling party.
Though the majority MDC faction, guided by former labour leader Morgan Tsvangirai, has declared itself social democratic, not neoliberal, suspicions remain that it may revert to the Washington Consensus.
Mugabe, meanwhile, painfully and wastefully spent $190-million to clear IMF arrears partially in 2005/06 (leaving $130-million still to repay plus $4-billion-plus in other foreign credits). But there is no hint of any fresh loans until he departs—and then the searing strings attached to an IMF programme might generate new riots.
According to the last IMF statement on Zimbabwe, in December: “Going forward, the key will be first to ensure that sharp cuts are made in real terms in fiscal spending â€¦ Strong fiscal adjustment will need to be supported by moving a unified exchange rate towards market-determined levels, removing restrictions on current account payments and transfers, liberalising price controls and imposing hard budget constraints on public enterprises.”
The last time the IMF exerted real power over Zimbabwe was when it lent $53-million in 1999, which was meant to release another $800-million from other creditors. According to leading IMF negotiator Michael Nowak: “We want the government to reduce the tariffs slapped on luxury goods last September, and second, we also want the government to give us a clear timetable as to when and how they will remove the price controls they have imposed on some goods.”
Five months later, the IMF agreed to increase the loan amount to $200-million, but more conditions were reportedly added: access to classified Democratic Republic of Congo war information and a commitment to pay new war expenditure from the existing budget.
This meant the IMF encouraged Mugabe to penalise health, education and other badly defended sectors on behalf of military adventures and business cronies, and ordered Mugabe to reverse immediately the only redistributive policies he had adopted in a long time: a ban on holding foreign-exchange accounts in local banks; a 100% customs tax on imported luxury goods; and price controls on staple foods in the wake of several urban riots.
That deal quickly fell apart, however, when fiscal targets were missed. Harare was, quite simply, broke. The previous year, Mugabe had spent a historically unprecedented 38% of export earnings on servicing foreign loans, exceeded that year only by Brazil and Burundi.
Last December’s IMF statement also called for social security protections, but the IMF’s most essential medicine—“sharp cuts” in an already broken state—will not cure this wretched patient.
In contrast, the last time civil society generated an economic diagnosis and prescription was in 2000, alongside a progressive team within the United Nations Development Programme. Its strategy was developmental, basic-needs driven and patriotic—and now needs urgent fleshing out by organisations such as the Zimbabwe Social Forum, trade unions, Women of Zimbabwe Arise and churches.
South Africa’s mass democratic movement rose to a similar challenge in 1993, producing the Reconstruction and Development Programme. Then the really tough job looms: ensuring accountability of the state to the people.
Patrick Bond is director of the University of KwaZulu-Natal Centre for Civil Society and coauthor of Zimbabwe’s Plunge: Exhausted Nationalism, Neoliberalism and the Search for Social Justice (UKZN Press)