Command economy model unsustainable

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Government plans to extend the command economy model to other sectors such as mining.

ZIMBABWE’S plan to expand the command agriculture concept into a wider undertaking known as the command economy has been received with mixed feelings, with some analysts saying the project will fail due to corruption and leadership failure.

By Taurai Mangudhla

Government plans to extend the command economy model to other sectors such as mining.

Government plans to extend the command economy model to other sectors such as mining.

In a command economy, government, rather than the free market, determines what goods must be produced, how much should be produced, and the price at which the goods must be sold. In other words, the state and not the market determines the production and distribution of goods. Industry and business are largely publicly-owned; it’s a key feature of socialist or communist societies.

The US$500 million command agriculture project, whose aim is to ensure food self-sufficiency by providing farmers with inputs for the production of cereals across the country, is a feature of a planned or command economy.

Success of the project remains debatable because the crop is yet to be harvested, while loans are yet to be paid to input suppliers. However, the project has been evidently chaotic amid corruption allegations and a lack of accountability in the distribution of inputs.

One of the critical challenges has been delays in the distribution of inputs to farmers.

Despite complications of command agriculture, whose results are yet to be seen, government is already flirting with the possibility of entrenching the model — which will extend to other sectors of the economy such as mining, infrastructure, industry and social services.

State media reported this week government plans to introduce extensive economic reforms inspired by command agriculture in order to revitalise the economy.

According to the report, a team of experts from the Office of the President and Cabinet is developing a work plan for the extensive economic recovery programme, which establishes a command-driven system.

“Command agriculture has performed beyond expectations. What we are looking at as government is to have command mining, command health, command education so that we can revive our economy through these models,” Vice-President Emmerson Mnangagwa was quoted saying.

Economic analyst Evonia Muzondo said a command economy would be mired in budget overruns, corruption and failure. She warned that it could also result in government debt ballooning further.

“Government debt is already unsustainable and it will just grow further, besides we all know there is corruption and the danger is always that inputs are not given to deserving individuals who can actually produce and make a change, but to those close to the corridors of power,” said Muzondo, adding “this means the production targets won’t be met at the end of the day.”

“The other problem is that people will not repay these loans for inputs, and suppliers will suffer huge losses. We have a culture of not repaying. Look at the Youth Fund,” said Muzondo.

Muzondo also said the success of the command agriculture is being overhyped.

“The success of command agriculture is overstated. We had good rains this season and it gives an impression the command agriculture was a success. Zimbabweans have always produced on their own using their small savings and we can’t attribute a good harvest solely to the command agriculture,” Muzondo added.

Banker Jelous Chishamba said Zimbabwe should stick to free-market economics and not rush to interfere with the system, adding command economy interventions are necessary only when the market-based approach has proved inefficient or failed.

Chishamba said a command economy model — which has largely failed everywhere — is also likely to fail in the case of Zimbabwe due to a number of reasons.

“The model normally produces mixed results. Whereas it may work in resource extraction and production processes, it cannot be bluntly translated to a price-setting mechanism, as this result in distortions and shortages. A simple transplantation of successful measures from other economies will not guarantee its success. Without supportive policies, the probability of failure is high,” said Chishamba.

In order to succeed, a raft of policy measures must be formulated and implemented, Chishamba said.

“When economic activity is undertaken through commands and directives, it requires co-ordinated planning, policy consistency, a supportive regulation, reliable sources of funding and incentives. Strict ongoing monitoring and control cannot be underestimated to achieve intended results. The specific design and sequence of reforms in a command economy should be induced rather than imposed. To be effective, the actual reform measures should take the economy’s initial conditions and institutional set-up into consideration because a one-size-fits-all approach will not succeed,” Chishamba said.

Chishamba said accountability deficits and inherent inefficiencies are worth highlighting in a command economy.

“Moral hazard and inefficiencies are inevitable in a command economy. Because of the difficulties in distinguishing between policy-induced losses and operational losses, economic agents may press the government to cover losses arising from naturally poor performance and implementation. The more accountable economic agents are for their degree of co-operation, the more co-operatively they act. It follows that improving accountability is a crucial preparatory step for the success of this model, as it eliminates attractiveness of negative behaviour by bringing free-riders to account for their behaviour,” he said.

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