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Public sector reform now on our stoep

There are lessons in history, of public reforms that fell short of intentions. After the Wall Street crush in 1929, which triggered the Great Depression, the US government, under Franklin Roosevelt, ushered in the “New Deal” economic reforms following the ideas of economist Maynard Keynes. Aspects of the New Deal included programs initiated to provide immediate aid to those in need.

Roosevelt, immediately put in place measures for government to provide relief to those in need during times of crisis; to ensure security and well-being of the society. Some of the legislation enacted in the New Deal included the National Industrial Recovery Act (Nira) and the Agricultural Adjustment Act (AAA).
With the passage of the New Deal legislation, the government began to assume the role of director, monitoring the economy and intervening when it saw fit.

Economists  criticised the New Deal noting that most of the interventions it introduced were short-term policies with no long-term consideration for America’s future. Nevertheless, the Keynesian consensus held firm with legislators until the late 1960’s.

Only in the 1970’s did legislators begin to realise the problem with the underlying principles of state intervention, prompting them to rethink. This was after the evidence of the Keynesian thinking’s crippling limitations when they could not account for the oil crisis, which started in October 1973, when the members of OAPEC proclaimed an oil embargo in retaliation to the US decision to re-supply the Israeli military during the Yom Kippur war. This void created by Keynesian thinking was filled by Milton Friedman’s monetary school.

 

The underlying thinking advocated by Friedman was that the economy could be managed through the control of the supply of money. He believed that government intervention was to be kept to a minimum ,except in cases of market failure. We have seen central bank governors around the globe printing money as if they were producing chips for an expanding casino joint, with more paper being used to print banknotes as compared to that used to print newspapers.

We may be coming out of our own great depression, economic isolation, economic crisis, economic meltdown, economic down turn; the terms that are used to describe our yesteryears are different depending on whom you are  talking to. The first systemic problem that faces us is that we do not have a common view of what just happened to us.

 

The first systemic thinking principle that helps in resolving problems is comprehension of the nature of the problem. The frank elaboration of the causes of a problem helps in identifying the appropriate solutions. Legislators and career politicians, who benefit more from rhetoric that avoids calling a spade by its name, are tasked with managing public services. Is it surprising when they often thrift with the information on the causes of problems.

Legislators have the duty to govern and to make laws. In the game of golf, every player has a chance to sink the ball. In soccer, the idea is to pass the ball forward to attack the opponent’s goal area. A soccer “team score” wins the game; on the contrary, individual scores are important in golf. One cannot help wonder if legislators do not at times behave like a group of golfers on a soccer pitch, all trying to score, thus effectively crippling their own team.

Systems thinking traces the cause and effect sequences that will emanate from an action. This calls for the holistic premising of an action in the context of all the other peripheral issues. Once this is done, the decision maker can mitigate against unintended consequences. The public services system is a system that has interacting parts, whose elements’s operations affect each other. The public service system is in turn a sub- system of the economic system of the country. Decisions made in the public service domain should be premised in both the bigger economy and localised public service sub-system.

We had interventions galore at the worst time in our land, when the legislators were relentless in getting regulation after regulation out to control the economic decline. Our economy is now re-birthing, as I have constantly said in this column. The resurgence of our land’s fortunes was arguably triggered by the reduction of interventions, particularly the stalling of the monetary intrusions when we adopted a currency that we had no power to print.

On the public transport scene, the gap left by Zupco was initially filled by private large commuter omnibuses, which were later pushed aside by the competition coming from minibuses. The minibus service has been evolving with  old vehicles  slowly  being replaced by newer vehicles.The transport system is self balanced, through the power of consumer choice. With the demise of Air Zimbabwe, the open skies policy helped in keeping flights available, thus enabling the air travel system to re-balance itself.

Interventions in the transport system including regulations to ban the import of cars older than five years into Zimbabwe sent panic among consumers. The customs clearing traffic at Beitbridge increased and our roads became more cluttered in the interim period towards the deadline date. The ban was later lifted. 

Every system has inputs and leakages. The road transportation system’s leakages are the vehicles that are turned into chicken runs due to their old age and lack of maintenance. The inputs are the vehicles introduced into the system. How then can we stifle the importation of “old cars” when our economy cannot inject enough cars into the transport system.

There are questions we may need to answer. At what rate does our economy produce vehicles? At what rate does our economy provide the financial means for a common citizen to buy/import an expensive vehicle that is under five years of age? What then will be the fate of a common citizen who is hopeful of getting a vehicle after the eventual implementation of the ban? Travelling is arguably much better and quicker post the demise of the monopoly of state-owned public transport. More people now own cars, not because it is a luxury but because it is a necessity.

On the clothing scene, our textile industry is but a ghost of itself, yet we have more clothes on the market than before. We produce a handful of shoes yet the feet of our people are shoed in better style than before. Is it then not accurate to say that the textile and shoe industries as sub-systems of the economy struck their own balances and are now self-governing within the bigger international trade system?

No single country is fully sustainable without inputs from the global economic system –– that is Economics 101. Countries are better off  producing goods for which they have a competitive advantage, and then get the rest through international trade. Protracted protectionism will take real competition out of the system, resulting in a country’s industries losing their viability in the global context. Protectionism was scarcely successful before, it made our state-owned enterprises dinosaurs. The definition of insanity according to Albert Einstein is doing the same thing repeatedly, expecting different results.

Reviving an industry calls for investment. If such investment is not attractive without protectionism, then it may not be worth it in the long run, as the economy may not possess a competitive advantage in the intended economic activity. Protected economic development zones within Zimbabwe where industries get rebates and tax incentives could be a worthwhile alternative to import bans and excessive import tariffs on goods that we do not produce.

For the ordinary citizen these tariffs and regulations meant to protect industries may actually be another form of tax.  It would be obvious that consumers’ view could be correct if there are no other options given the scarcity of locally made products, forcing them to continue to consume imports at higher prices loaded with tariffs and regulatory penalties. Who actually gets hurt by tariffs in a barren economy?

Is it the local consumer or the foreign producer? The foreign producer has the rest of the world to sell to; the local consumer has little option but to consume imports when the local industries produce next to nothing. Check the customs duties and tariffs on shoes, blankets and electronic goods. Who feels the pinch of these penalties?

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