HomeBusiness DigestOf Boom and Bust: Zim’s economic growth in danger

Muckraker: Hawkins called it like it is

The authorities themselves must take their fair share of the blame for lulling the country into a false sense of complacency. Not many months back, strong growth of 9,4% was officially predicted for 2012 based upon anticipated vigorous expansion in local mining, agriculture and tourism. This was notwithstanding that even then tell-tale signs of deep-seated weaknesses were already manifest both within the domestic and, particularly, in the international, economies. Now, it seems, failure to meet diamond revenue targets will frustrate our attempts to resolve our external debt and arrears problems and lead to a budget crisis.

Insofar as the international issues are concerned, failure to appreciate the full extent of their threat to the world economic situation may owe its origins to overexposure rather than underexposure to the flood of media world news. Most human beings are capable of absorbing only a finite amount of fact or information before becoming saturated or intellectually constipated by it, particularly if it is served at speed in highly large helpings.

 

The constantly repetitious nature of most media presentations also tends to promote resistance to assimilating the full meaning and import of the continuous flow of information or appreciation of the significance of each turn of events as they occur. Presentation of the so called ‘Euro Crisis’ has been with us long enough now to have generated a sense of weariness or ‘déjà vu’, as a result of which our senses have become dulled to the real problem and our urge to do something positive to understand, if we can, its adverse  effects upon ourselves has been undermined. We have simply become mesmerised by the apparently endless succession of heads of state, government, finance ministers and other representatives of the 27 countries’ meetings, which never seem to achieve any lasting progress, still less avert the necessity for further meetings.

The key issue for the EuroZone, as was pointed out on the adoption of the single currency in the 1990s, is, and remains, a political one. It is whether each of the 27 governments is also prepared to adopt the unitary fiscal policy in framing its budgets and setting borrowing and inflationary targets as well as interest rates. More lately, major differences have also arisen over common welfare objectives. Unless the European Union moves much closer to a political union more like that of the United States of America, stresses and strains between members will be an interminable source of disagreement.

As bad luck would have it, virtually the entire developed world, not excluding the power centres of the USA, the Far East and Europe, is currently afflicted by a major downturn in the business, or trade cycle. That much is blindingly obvious from recent external events. What is not at all clear is what kind of business cycle we now have to contend with.

Economists identify four broadly different kinds of cycles according to their length, or duration, ranging from the short, or Kitchen cycle of 3-5 years, to the very long, or Kondratiev wave or cycle of 45-60 years or more. But the subject is one of great controversy, not least because of the difficulties in identifying when cycles begin and when they end, points which in many cases only become apparent a considerable number of years later.

When, or if they think about the subject at all, most run-of-the mill economists probably have in mind the Juglar, or 7-11 year cycle. But more illustrious men obviously have greater ideas. Paul Samuelson of MIT fame, a very clever man and Nobel Economics prize winner who predicted that the business cycle was doomed because of government’s spending powers, is said to have, rather unkindly, referred to Joseph Schumpeter’s (a long standing Harvard professor of economics)  description in his 1939 book of the very long trade cycle as nothing more than ‘Pythagorean Moonshine’.

 

Gordon Brown, as Chancellor of the Exchequer, went one better  in boasting that he intended to free Britain from the old cycle of ‘boom and bust’. History records that when he was subsequently leader of the Government, Mr Brown had to suffer the indignity of presiding over a full blown recession and  ‘the worst housing slump in living memory, if not ever.’ Such things make lesser mortals more than a little wary of predicting ‘busts’ if not ‘booms’. Nevertheless, the omens for Zimbabwe’s economy for the next year or so may be fairly confidently described as far from promising, given the conjunction of uncertain prospects at home and the momentous adversities abroad.

What can a small, pretty insignificant would- be independent country in Southern Africa do in such circumstances? Probably first take on board Winston Churchill’s famous promise to the British people at the start of the Second World War to the effect that: ‘I offer you nothing but blood sweat and tears’. At least with that to begin with there is no risk of feeling let down whatever might subsequently happen.

Second, the plan should be, surely, to stop digging ourselves ever further into self-imposed trouble and debt. We need to mend fences with our friends, especially those who are able to offer us concrete assistance and support. In this hostile environment we do not need any more enemies.

Third, we need to take a long hard honest look at ourselves, acknowledge where things have gone wrong, and why, and take every possible step that we can to put things to right as far as others are concerned . In this way we will get credit for our positive attitude and the physical and financial assistance to follow it up. Finally, we should demonstrate that we are prepared to accept advice and guidance on the best way forward not greeting every suggestion we don’t like with accusations of base motives and bad faith. Countries, like people, can be favourably surprised by the effects on others of a signal change in attitude. Should we feel that this is all too much to ask, we could sit down quietly and  consider whether there is really any viable alternative on offer.

Jimmy Girdlestone is a consultant economist with the Tetrad Group and writes in his personal capacity.

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