Fay Chung Overseas, the Economic Structural Adjustment Programme (Esap) is known as the Neo-Liberal policy. It enjoyed very enthusiastic and widespread popularity in the West from the 1970s up till last year and this year.
For various reasons it is losing its predominance. Why has Esap lost its predominance worldwide? This critical question seriously affects Africa as a whole, and Zimbabwe in particular.
“Socialism”, which President Mugabe named Marxist-Leninist Socialism, was the dominant policy in Zimbabwe for more than 10 years.
It was replaced by Esap in 1992. Esap is still faithfully followed through Zimbabwe’s policies and Budget. Yet in America and Europe it has largely lost out.
Why is Zimbabwe, and Africa as a whole still clinging to Esap, when it has lost its predominance in the world? Neoliberalism or Esap was highly favoured by industrialised Western countries because they had already developed an adequate level of industrialisation, and could export their equipment and machinery all over the world, especially to their old colonies.
They did not want poor and under-developed countries, such as those in Africa, to begin industrialisation in competition, enabling them to make their own equipment and machinery rather than importing from already industrialised countries.
Esap was an excellent policy for the West, which they could support through generous donor funds, mainly for education and health which were very poorly developed all over Africa. This included Zimbabwe, with only 35% of Africans at primary, 4% at secondary, and 1% at tertiary before Independence. Health facilities were mainly provided by missionaries in the rural areas. Zimbabwe was given generous donations for health and education for 20 years. But not for economic growth.
Everybody was happy. However, the situation changed after 2000, when donor aid to Zimbabwe suddenly stopped. This was for various reasons, such as the end of Communism in the Soviet Union; the sudden emancipation of neighbouring South Africa in 1994; the Fast Track Land Resettlement Programme in 2001; and Zimbabwe’s leadership and success in changing the government of the DRC from 1998.
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Money that the West had reserved for its former partners was now sent to the newly independent countries of Eastern Europe and South Africa. Sanctions were imposed on Zimbabwe in 2001 and have never been removed. Why have America and Europe suddenly abandoned pure neo-liberalism over the past year? But neoliberalism, Esap, is still very much in force in Africa. Esap is for health and education, not for economic growth and industrialisation.
African countries have become accustomed to donor funds from the West for health and education, and still need such funds desperately, as most have stagnant subsistence economies, and have not industrialised.
Those which had industrialised, like Egypt and South Africa, are better off as their economies are able to move beyond subsistence.
Neoliberalism was based on buying goods from the cheapest source. Initially the cheapest sources were the industrialised Western countries which had also become self-sufficient in food because of their modernised and highly mechanised farming systems.
However, they lost both their food and industrial dominance to low income Asian countries such as China and India, which paid their workers a fraction of the Western salaries, whilst starting to compete in terms of both food and industrial goods.
These Asian countries had well educated personnel and had developed middle level industrialisation: with the new demand for better industrialisation, especially through partnership with well developed Western companies, they were soon able to catch up. Western countries opened factories in Asia. Their goods, both food and industrial products, were much much cheaper than those in the West.
Thus Western countries began to import food as well as industrial products. They closed down many of their best factories because their workers were expensive: these well-trained and highly experienced workers now found themselves on the dole, getting just enough for survival from their governments.
They naturally were not happy. The Ukraine War increased the crisis: food shortages such as of wheat and milk, fuel crisis such as of gas, became serious. Most things now had to be imported, and ordinary citizens in Western countries were unhappy at the high unemployment in their countries. This led to political instability in many Western countries.
Meanwhile, some Asian countries were doing well. As a result, China, for example, developed from one of the poorest countries in the world, to becoming the second largest economy in the world, second only to the United States. These severe contrasts meant that if they continued for a few more decades, Asian countries would begin to dominate the world economically.
In order to stop this the American government had to drastically change its policies, for example by providing billions of dollars for infrastructure and the expansion of companies. They also supported banks to invest in private enterprises. For the previous four decades, the government had lowered taxation, but now it had to increase it.
No longer could it just buy from the cheapest source (mainly Asia) but now had to support their own more expensive companies. Government intervention became more essential, the opposite of neo-liberal policies. Moreover, they had allowed the US dollar to become the world’s international currency, so that all the trade under neoliberalism was done in US dollars.
This allowed America to increase its wealth by providing all the dollars required. Everybody wanted the US dollar, including of course Zimbabwe. Whilst this weakened the Zimbabwe dollar, it did not increase either agricultural or industrial productivity in Zimbabwe. Zimbabwe had to import fertiliser, seed, equipment and machinery. In particular Zimbabweans favour second hand motor cars, affordable in US dollars.
We are unable to purchase farms or houses, so we buy more and more cars.
What next Zimbabwe? Under Esap Zimbabwe relied on importation of food and industrial goods.
Nearly all the country’s food is now imported, including wheat from South Africa, Ukraine and Russia; industrial goods from China, India and South Africa. Zimbabwe’s agricultural and manufacturing production has more than halved, except for the exportation of tobacco and under-processed minerals. Infrastructure investment was cut except in the last year when some main roads have been rehabilitated.
Other infrastructure such as railways, airlines, communications, etc, have suffered from serious under-investment.
Government has invested little into the economy, instead emphasising its budgetary savings. This has been at the cost of lower salaries, lower than half compared to a few years ago; dependence on donors for basic school textbooks; lack of medicines in clinics and hospitals; a general deterioration of the quality of goods and services such as health and education; the externalisation of a 4-5 million people into the diaspora.
The decision by America and Europe to strengthen their governments in order to improve their infrastructure, their companies, their employment patterns, their salaries, their education and health, are important lessons for Zimbabwe.
We cannot afford to continue the poor agricultural, manufacturing and health services we have witnessed in the last three decades. This bad heritage, as displayed in America and Europe, will only lead to political instability and economic failure.
- Chung was a secondary school teacher in the township; lecturer in polytechnics and universities , teacher trainer in the liberation struggle , civil servant and minister of primary and secondary . These weekly New Horizon articles published in the Zimbabwe Independent are coordinated by Lovemore Kadenge, an independent consultant, past president of the Zimbabwe Economics Society (ZES) and past president of the Chartered Governance & Accountancy Institute in Zimbabwe (CGI Zimbabwe). — [email protected] and mobile No. +263 772 382 852.
