Zambia`s post-independence development strategy and what went wrong in the process ?

                                                     Authour :Ranganai Chiwara 

Introduction

The concept of development emerged immediately after the Second World War and the United States was the leading figure in attempting to address of the problems of underdeveloped areas. This was highlighted in President Truman’s inaugural speech of 1949 of which he emphasize the need to advance technological and industrial progress to the undeveloped areas of the world. The notion became a theoretical position of the United States in the post-war era which resulted in the birth of key international institutions (IMF and the World Bank) to address challenges of poor states. Since then, in 1950s and 1960s major theoretical assumptions on development began to emerge as well focusing on the causes of underdevelopment and how the problems could be rectified. Human development encompasses a number of social-economic indicators such as economic growth, enhancing individual choices, education, quality of health, democratic rights, and so on. The United Nations Development Programme (UNDP) introduced the human development index to measure the living standards of people. It is based on three broad based goals which are real GDP per capita income, life expectancy and education attainments and countries are ranked on a scale of between zero (low) and 1 (highest). Endogenous development is a localized initiative sought to advance living standards; example of this can be economic empowerment drive in Zambia in the late 1960s and 1970s. Zambia`s Humanism endogenous policy was modelled on socialism and Christian ethics and the strategy managed to mobilize national recourses to build universities, schools and other infrastructure needed for development.  Sustainable development is more concerned with issues related to environment, such as climate change and its impact in relations to social-economic issues.

The essay paper is largely relying on the case study on Zambia`s two stage republic of development the first two decades of independence and the 1980s to 2000 structural adjustment. The first stage of Zambia`s development policy was deeply rooted in Christian ethics and socialism (Humanism) as its endogenous development model and then move on to the second phases of development strategy based on neo-liberal economic reforms sponsored by IMF. The case study assist in examining the effects of neoclassical model on development after Zambia decided to abort its endogenous development strategy in pursuit of free-market economy. Given that many developing countries especially those in the Sub-Saharan Africa experience decline in human development due to lack of savings and capital investments. Theoretically assumptions of the 1950s and 1960s seem to agree that Less Developed Countries are poor because of low level of return, low savings as such they failed to reach take-off stage.  To solve the problems of developing countries, extra resources were required to increase savings and investment rates either through borrowing from IMF or in the form of foreign aid. However, neoclassical or liberal model view the problems in Less Developed countries differently, it argues that under development in third world countries is caused by poor resource allocation and excessive government interventions. So the essay paper, assess the relationship between IMF`s macroeconomic stabilization policies (neoclassical model) in Zambia and development as measured by socio-economic indicators. Zambia began to implement IMF`s sponsored policies in the 1980s after the country partly aborted its Humanism programs due to worsening balance of payment deficit.

The Case for Zambia 1980-2000

Zambia`s economy was dependent on mineral wealth with very few trained citizens to govern the country. Like any other developing country, Zambia`s economy was mainly based on primary production and copper was its largest earning power. The country obtained independence from Great Britain in 1964 and Kenneth Kaunda was the first President of a newly independent state. The country faced numerous development challenges as it had no manpower to run and govern the country, there were only less than 100 natives with university graduates at the time. The country had no or little infrastructure and schools as such about 0.5% of the country’s population were illiterate making her (Zambia) perhaps the least developed British colony. So the new government embarked on both economic and social reconstruction of the country through a number of national projects under the commission for development planning. The first policy framework was aimed at improving the nation`s education system which was poorly developed, so in its early inception the government devoted much of resources on public sector to build infrastructure and the education at all levels. President Kaunda introduced free education policy which meant that almost very school going child had opportunities to progress in future. The country`s policy reforms were guided through an idea of Humanism (a policy mix of socialism and Christian ethics) national recourses were mobilized through donations and the first university was opened in 1966, there after a number of tertiary institutions were built. The massive investment in the public sector especially in education led to a sharp increase in enrolments at all level by 1970.In addition to that, the country`s economy was controlled by the companies that had linked with the colonial administration just after independence so the government instituted the second phase of development planning, this time with the intent of facilitating the acquisitions of major investments in the mining sector and other strategic sectors. The government successful nationalized all major industries and according to Lambert, (online) almost 80% of the Zambian economy was now made up of stated owned enterprises in 1980. The endogenous development strategy (Humanism) enabled the country`s transition process faster, social protection was guaranteed for low income families and the education systems began to flourish. However, Zambia`s economy relied on copper and was the major exporting commodity accounting for about 90% of the country`s total revenue in the 1970s.

Outline of neoclassical policies

•         Privatisation of state enterprises came into being

•         Deregulation

•         Government cuts on public service

•         Ease of Exchange control

•         Subsidies were abolished

•         Tight monetary policy

•         Trade liberalism

In trying to solve its economic crisis as the price of copper continued to decline in the 1980s, Zambia merely abandoned its humanistic philosophy and policies that were inline with the neoclassical model as its long-term economic planning .The structural reforms were to be carried and implemented under the sponsorship of the International Monetary Fund in exchange for budgetary and balance of payment support. In the 1980s a wide range of reforms were carried out  these include but on all, privatisation of state enterprises, deregulation, reduction in government expenditure , ease of exchange control, subsidies were abolished, tight monetary policy, trade liberalism among others. The  reforms were implemented in all sectors and in agriculture, price fixation were removed, producer and consumer subsidies were reduced and state monopoly on agricultural marketing rights were demolished as well as allowing foreign agribusiness participation in the economy.  According to Wood and Kean, (1992), 1980 subsidy on maize meal was about 70% of the retail price, so reduction in subsidies coupled with other reforms such as the easing of price control, accelerated inflation .Also studies by Shawa, (1993) indicate real GDP in Zambia slummed from 1980 to 19887 and that real per capital declined remarkable   maybe due to depreciation of the value of the national currency by the late 1980s. Furthermore, cuts in public services and retrenchments of workers invoked riots and strikes around the country and leadership of President Kenneth Kaunda came into serious opposition from churches and labor groups. In 1987 Zambia temporarily aborted the IMF`s sponsored neoliberal reforms and the government introduced its own program called New Economic Recovery Programme (NERP). Under the New Economic Recovery Programme, the government returned control over all economic activities and spending. This resulted in slowing down of inflation as economic performance increased which recorded a growth rate of nearly 7% in 1988 compared to less than 3% in the previous years.

However, in 1991 a new government came in office and immediately implemented radical economic reforms (neoclassical model) which immediately eased food subsidies completely, child mortality rate in the country increased steadily in the 1990s due to deteriorating   social-economic indicators. Garenne and Gakusi (2006), child mortality increase suddenly from 1990 to 2000 and was higher than the previous decades, this was chiefly caused by decrease in real per capita income and austerity measures in the health sector. Also, the years of neo-classical reforms in Zambia witness unprecedented decline in life expectancy 1990 to 2000 when compared to preceding decades, (http://www.zamstats.gov.zm/media/chapter_8_mortality-_final.pdf). The decline in life expectancy and the subsequent increase in child mortality rate during the inter years of structural reforms had been attributed by diminishing of living standards for majority of Zambians. Nevertheless, there are other factors independent from economic reforms that were carried out during this period, epidemic diseases such as HIV/AIDS and related sicknesses are some of the great challenges that continue to drag the country backwards. In addition to that, Zambia is prone to droughts and apparently, the higher cases of malnutrition were recorded between 1990 and 2000 and at the same period the country’s agricultural production plummeted. Although natural disasters might have contributed to rapid decline in human development, empirical evidence which seem to suggest that reform in the agricultural sector prompted a shortfall in maize production in the 1990s.For example, Zambia’s agricultural production is dominated by small-scale farmers and poorly equipped so liberalism of the sector and elimination of subsidies forced the cost of farming to increase. It can be argued that the neoclassical model pursued in Zambia from 1980 to 2000 negatively affected the general life expectancy and mortality rate due to poor nutrition.

Industry and Manufacturing

In an effort to restore economic recovery, President Frederick Chiluba decided to abandon the policy of 'humanism' altogether and pursued neoliberal economic reforms in full. All markets were deregulated, trade was liberalized and exchange control we demolished and public enterprises sold, in year 2000 almost 70% of the Zambian economy were now in the private sector (Lambert, T).However, privatization did not encourage growth as it was intended to do because the whole industry in particular manufacturing had already suffered due to years failed structural reforms. It is very likely that, most privatized   industries we left empty as investors flee the economy for competitive markets elsewhere. During the 1990s there were many incidence of capital flight as investors sought to protect their assets, a study by  Muuka,(1997), found that  majority of multinational firms operating in Zambia between 1990 to 2000 decided to either relocate or forced to downsizing their production operation due to worsen economic climate which they were operating in. A lot of firm closed their business sighting government policy failure to protect their operations and hence decided to relocate to countries like Zimbabwe, Tanzania, Uganda and other countries. The result was high unemployment and shrinking in manufacturing had nock off effects on the country`s national output (GDP).As such, there is no or little evidence to suggest that neo-liberal economic policies improved the country`s development ranking instead the economy registered the worst economic performance in the 1990s where it was implemented in full. The negative outcome of reforms in Zambia overshadows free-market arguments which imply that the problems of underdevelopment in poor countries were caused by too much government interventions. In this regard, the neoclassical model pursued by two successive governments in Zambia have exacerbated economic crisis than solving it as indicated by following GDP growth rates over the period of reforms. The country is human development index (HDI) can also tell us a lot about the impact of free-market policy reforms assumed by Zambia from 1980 to 2000.

Table.1Zambia GDP annual growth (% ) 1980-2000

 Source: World Bank data.

Social welfare and economic crisis 

During the first decade of independence, Zambia adopted a policy of (Humanism) and that guaranteed social protection for majority low or middle income families. Government expenditure on pubic services such as education and health care is paramount to economic prosperity of a given country. Excellent education system and health provisions are key to a nation`s labor market conditions. For example, empirical studies by Jung and Thorbecke (2003) found that the size and efficiency of public expenditure are vital in improving socioeconomic indicators. Also other empirical studies establish that government expenditure on public sector is positively and significantly correlated to economic growth. For instance   Bose, Haque and Osborn (2007) studies concluded that government expenditure on education has long-lasting effects on economic development. These findings highlight the role and the importance of government involvement in economic activities a given country. This could be the reason why many developing countries including Zambia invested heavily in public sector after independence. In this view, social protection was guaranteed for low and middle income family in Zambia before structural adjustments. It was difficult to measure the success of government expenditure on social welfare between 1960s and 1970s due unavailable data. However, based on number empirical studies which confirms that there is a positive correlation between expansionary fiscal policy and economic growth; one might conclude that Humanism (Christianity ethics-socialism) was positively related to economic development in Zambia. Therefore the collapse of socialism and subsequent implementation of neoclassical policies in Zambia between 1980 and 2000 had a huge effects the country`s long-term economic development planning. Expenditure on public services declined steadily from 1980 to the year 2000 and this had a nock on effect on social welfare provision especially for a country like Zambia where majority of people live in poverty. Therefore, Zambia`s inter years of economic reforms coupled with natural disasters such as draught might have exacerbated the country`s socioeconomic indicators and in year 2000 the country was listed under the Highly Indebted Country (HIC). If free-market policies provide the adequately address the problems in Less Developed Countries (LDCs) then, a constant decline of  GDP per capita and socioeconomic indicators between1980 and 2000 might emphasize inconsistency of the neoliberal model. 

Discussion

Zambia `s neoclassical reforms sponsored by IMF over the period of two years failed to promote economic development as various social-economic indicators  deteriorated in the years of adjustment programs. There was rapid decline real GDP per capita income, dilapidation of education facilities, a sharp decline in taxable bases and poor health care provisions between 1980 and 2000. Also two decades of structural adjustments in Zambia did not to create formal employment as people end up working in the informal sector. For example, almost 70% of the country`s labor market was dominated primarily by the informal sector. Moreover, economic hardship among Zambians continued throughout the structural adjustment years, inflation rocketing and companies close or relocated elsewhere coupled with poor public service delivery. Therefore, economic and social conditions prevailed in Zambia between 1980 and 2000; appear to go against neoliberal model as mode for development. The macroeconomic stabilization policies implemented in the early 1980s did not improve Zambia`s balance of payment deficit although, some empirical evidence indicate a positive relationship between economic reforms and improve in balance of payments. For example, Kim and Evrensel (2006) found that countries improve both their fiscal and balance of payments discrepancies during programs years. As part of improving Zambia`s deficits IMF `s macroeconomic stabilization problem discourage imports of goods , given that, the  country required capital goods for production in agriculture and the mining sectors, restricting imports can adversely affect national output (GDP).Therefore, the marginal benefits of economic reform in Zambia are somehow very slim and perhaps  it is possible to believe that the neoclassical model  pursued in Zambia for a period of two decades was harmful and depressives to  the country`s economic development. As austerity continued in years of structural adjustments, human development remained vulnerable to recurring economic and social crisis throughout the years of adjustments in 1980 to 2000. For example, reduction in government expenditures on public services such as health care, education, and coupled removal of subsidies further exacerbated the situation. Given that most households were either unemployed or engaged in informal employment with low return, adopting austerity measures on both fiscal and monetary policy had negative repercussions on human development.

Moreover, Zambia found many of its parastatals just after independence from Britain in the 1960s through collective efforts under "Humanism" and some of these state-owned firms were part of the country`s long-term development strategy. The fact that majority of Zambian needed state support in accessing  education, healthcare and jobs so some of these state owned enterprises were not intended for profit making but to maintain or improve human life. For example, healthcare, education and transport were in some cases accessed free of charge or at low-cost as part of the wider social welfare scheme system. The disappearance of state enterprises from 1980 to 2000 as a result of privatization made and some of the basic services were no longer available or were offered at a higher cost. Given that, majority of citizens had little or no income, so privatization and liberalization of the domestic economy which turned to inflationary had serious implications on peoples’ living standards as some basic goods and services were no longer affordable. Furthermore, during the reform years in Zambia trade barriers were relaxed and corporate taxes lowered to attract foreign direct investments in the country, but instead foreign business participation condensed sharply in the 1990s according to Muuka, (1997).It can be argued that all government initiatives of adopting such business friendly policies did not yield to the intended expectations. In the years of structural adjustments programs Zambia`s formal business sector declined whilst black market activities sprung across the country resulting in huge loss of taxable income. Poverty worsened in the 1980s and 1990s than the first decade of post-independence Zambia, the country built its own institutions without outside help.

Furthermore, there were incidences companies closing down or relocating outside Zambia and also capital flight was a major economic as investors sought to shield their assets against rising inflation. In addition to that, the cost of borrowing and loan repayments were increasingly becoming too costly for business and individuals. As the crisis and growing opposition from religious and trade union movements continue the Zambian government decided to temporarily abandon the neoliberal model and commenced its own program known as the New Economic Recovery Programme (NERP).In 1988 the country registered positive economic growth and slow down of inflation under the new program. According to UNDP data Zambia`s human development index declined since 1980 to 2000 and also growth rates plummeted during the same decades of adjustment (World Bank data). Given that advocates of neoclassical model like the IMF claim that poverty in developing countries is primarily an internal issue caused by state interference in markets. Neoliberal reforms failed to promote growth and to reduce poverty in Zambia, a number of empirical studies indicate the shortfall of neoclassical policies wherever it is adopted. For in the 1980s and 1990s Latin America adopted the neoclassical model and it failed empirical evidence by Pastor, (1987) found that programs in Latin America experienced high inflation, disappearing of the formal sector, capital flights and recurring economic crisis similar to the outcome of Zambian reforms. Also other studies suggest that neoclassical economics is unsuitable for developing especially those within the Sub-Saharan region Gore,(1992) noted that economic performance of  countries which adopted free-market policies had disappointing as growth rates. Furthermore, Mary, Sanders, and Bijlmakers, (1997), examined the impact of structural adjustment programs on health delivery in Zimbabwe during the late 1990s and the outcome was almost similar that of Zambia. For this reason, given that a number of countries were unsuccessful in reforming their economies signifying that  macroeconomic stabilization based on neoclassical are detrimental to a country`s welfare. Zambia is just one of the cases proving the negative impact of adopting neoliberal policies without effective measures in place to cushion the burden of reforms away from ordinary people.  

However, analyzing IMF`s sponsored neoliberal economic policies in Zambia needs to into consideration a number of factors such as corruption, lack of citizenry support and  poor governance. For example, Zambia did nit meet the minimum standards of a democratic state in the 1980s when it adopted the neoclassical model as its long-term economic strategy. President Kenneth Kaunda imposed one party State thereby suppressing potential debate on the future of governance and accountability in the country. Since neoclassical economics is based on free markets, the failure of reform might have been contributed by such oppressive regimes in the 1980s.Also corruption became a major issue in the 1990s under President Chiluba`s democratically elected government and it cost the Zambian economy to the extent that many foreign investors decided to relocate their businesses causing a lot of hardship to ordinary citizens. Furthermore, there was a huge emphasis on copper production and other important sectors such as agriculture were neglected. It can be argued that, Zambia`s social-economic indicators worsened in the inter-years of economic reform than any other period of the country`s history and there are a number of factors attributed to decline in living standards. Though neoliberal economic approach failed to promote sustainable economic development in Zambia we can not dismiss it altogether but transitional policy measures are needed to cushion away the burden of reforms from ordinary people. These measures may be in the form of adopting a transitional policy which combine socio-liberal model with an endogenous development focus, such policy framework are likely to succeed because almost every citizen will be involved in developing their country.

Policy recommendation and conclusion

The endogenous development strategies introduced by President Kaunda in the first years of independence were successful mainly because it had the support of the people. There is no evidence to suggest that neoclassical policies were successful in Zambia as all economic and social indicators such as growth per capita, living standard, healthcare and education plummeted, In light of this, neoclassical economic policies are likely to fail if measures are not in place to cushion away the cost away from ordinary people. Therefore, y policy reforms in Zambia might have been successful if they were accompanied by some kind of social-liberal strategies to moderate the effects of the economic transformations. Having said that, I have come to the conclusion that neoclassical failed to promote development in Zambia mainly because there was no visible citizen support of reforms.

Reference

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