Realism key to Zim economic recovery

THE pattern of post-World War II (WWII) economic recovery is interesting: friends and foes alike benefitted heavily on the support of the United States for their economic recovery. Germany and Japan, two of the most prominent members of the Axis, the allies who warred against the US and its allies in WWII, owe much of their post-WWII economic resurrection to their wartime arch-enemy, the US. On the surface, it might appear ironic that two of the most stubborn and hardnosed antagonists of the allies depended on the support of their number one enemy for an economic lifeline that gave rise to what are now considered economic recoveries of all time. This apparent irony is driven by what is known as realism. An extreme form of realism is real politik which is devoid of morals.
Realism is the most dominant paradigm in international relations. At the heart of realism is the idea that a nation’s interactions with other nations are driven primarily by the desire to optimise national interest. What is of key concern to a nation driven by realism is survival and prosperity. Realism-driven nations do not overestimate their power to sway international affairs. They sober up to the reality that political clout in the arena of nations is inextricably wedded to economic power. Realism cuts through unfruitful romanticism and needless demagoguery. Realism brings with it humility, leading to pragmatic policies, even if it hurts individual and collective ego.

The Brett Chulu Column

Reform-minded realists in post-WWII Germany led by Konrad Adenauer, the first Chancellor of West Germany, and its founding Minister of Economics, Ludwig Erhard crafted a home-grown economic recovery plan with the tacit support of the occupier US. When Adolf Hitler fell from on his sword, marking the end of Axis resistance, the allies divided Germany into four administrative zones, occupied by the US, Britain, France and Russia. It is in the US-occupied zone that the Germany economic miracle, the Wirtschaftswunder, was engineered by Ludwig Erhard, an intellectual hailing from the Germany region of Bavaria. Later, the US, Britain and France joined up their zones into a single tri-zonal area. It is this tri-zonal territory that would emerge as West Germany (Federal Republic of Germany) while the Russian occupied zone would become East Germany (German Democratic Republic). The Bavarian Germans in the US-occupied territory crafted an economic recovery blueprint. The US as the political overseers bought into the plan. Erhard proposed as the mother lode of Germany’s economic recovery social market economy. This economic paradigm was at the time widely considered overly radical. Nonetheless, the US approved it. Erhard’s policy reforms that included replacing the debased currency, the reichsmark with the deutschmark in 1948 were considered drastic.
This currency reform reduced money supply by 93%, effectively arresting runaway hyperinflation. Erhard lifted price controls. He also sweepingly cut taxes, with an annual income of less than 2 400 deutschmarks attracting a marginal tax rate of 18% from an unbelievable war-time high of 85%. This cocktail of measures stimulated both demand and supply, lifting the economy of West Germany. The case of Germany bears a critical lesson. Realism forced the US to accept a radical economic proposal for the recovery of post-WWII Germany. A successful economic recovery was in the interest of the US — it would accelerate Germany’s ability to be self-sufficient thereby creating a politically stable Europe. If a radical economic recovery plan would achieve that, realism would bless it. Funding from the Marshall Plan that was initially meant to rebuild the war-ravaged economies of the US’s allies was belatedly extended to Germany. It has been argued that the Marshall Plan played a negligible role in the Germany economic miracle. Whichever side one takes on the US$1,3 billion Germany Marshall Plan funds debate, what remains indisputable is that the US was willing to pour money into the economy of a war-time enemy. This is realism in overalls.

The same applies to Japan. Japan fought WWII on Germany’s side. Unlike Germany, Japan’s economic recovery was based on a mixture of US advice and home-grown solutions such as the keiretsu system. The US opened its domestic market for imports from Japan’s keiretsu, allowing it to run up a trade deficit for geopolitical strategic reasons. The US was forced to cosy up to its erstwhile enemy, Japan, because its national interest prioritised a strong ally in the Southeast Asia region to counter the influence of Russia.

Realism too oils China’s economic policy. China’s current trade patterns tell a story of a nation whose trade is heavily dependent on the US and its allies. The US is China’s largest export destination. Of China’s US$2 trillion annual exports, 16,9% find their way to the US. Japan and South Korea, US’ allies, are in the top four of China’s exports destinations, accounting for 10,7% of China’s exports. Of China’s US$1,7 trillion annual imports, the top six sources are the US and its allies. Together with the US, South Korea, Japan, Taiwan, Germany and Australia account for 44% of China’s imports. If China, a nation our leaders look up to as a beacon of economic progress, is so heavily dependent on the US and its allies, it befuddles the mind how as a country we think we can achieve economic recovery without the support of the West.

Is there hope for Zimbabwe? Yes. Germany is our inspiration. Germany lost millions of its most able bodied men during WWII. We have only lost millions of hard-working Zimbabweans to emigration. Germany had a strong pre-WWII industrial base. Zimbabwe inherited a strong agro-based economy that turned on a thriving agricultural and manufacturing industry. Germany experienced rampant hyperinflation that debased its currency and so did we. The Germans believed in a home-grown economic solution (social market economy). On home-crafted economic solutions, we pitch our tents with the Germans. Germans are famed for their legendary hard work ethic. That’s our fame too.Germany warred directly with the West. It was directly occupied by four powerful nations. These allies pillaged Germany’s intellectual property as part of war reparations. Reform-minded and patriotic Germans exercised realism, co-operated with the victorious powers and in turn the powers supported their home-grown economic recovery. The Germans accepted the fact that after WWII they were a mouse among the elephants. They found it not strategic to be engaged in mice-elephant tussles. They knew that political clout comes from economic muscle — they chose to humbly rebuild their economic might under the watch of the occupying allied forces.

When mutual interest dictated that the US work with Russia to defeat Germany, ideological differences were set aside. In victory, the US and Russia drifted apart into the Cold War when new realism set in.

Just like the triumvirate of one-time US’ sworn enemies, China, Germany and Japan, we need realism as our mother lode. Short of that, our economic recovery will remain a mirage. Let’s swallow our pride and embrace realism.

Chulu is a management consultant and classic grounded theory researcher. He has published research in an international peer reviewed academic journal. —