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Whythawk on Zimbabwe: The war of informal markets against central states; a bellwether of support
Whythawk discusses the informal market and remittance using Zimbabwe as study. The post offers some insights to why Zimbabwe hasn’t “collapsed in anarchy and civil war” despite the crushing economic difficulties: 80% of the working-age population (4.5 million people) unemployed, and inflation at 11 000%.
Failed states are less likely to experience catastrophic collapse if they have a large diaspora sending lots of money home…In relatively open economies the scale of the informal market provides a good approximation to the real level of support for the state. At 20 – 30% of the economy a government would do well to look to its policies. At 40 – 60% the state is in danger of losing all authority. At 80%, Zimbabwe’s level, the state is functioning in name only. While it may have the largest army and be able to terrorise the masses, it has lost.
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MrK | Jul 20, 2007 | Reply
http://www.africanloft.com/whythawk-on-zimbabwe-the-war-of-informal-markets-against-central-states-a-bellwether-of-support/
I have a few points to make. My perspective is that I believe in truly free markets, however, I define free markets very differently than the IMF, World Bank or neoliberals do. Truly free markets are markets that any ordinary citizens with skills or goods can enter or leave. It is not a market that has not limitations on corporate power, their ability to externalize profits, not share earnings and not pay taxes. I am a social libertarian, not an economic libertarian. I believe that the state is needed to protect free markets from monopolisation and consumers and the environment against exploitation and pollution. I want to see a broadbased middle class (90% of the population or more), through the creation of hundreds of thousands of Small and Medium-Sized Enterprises.
Here are my commments on Zimbabwe and Africa:
- Land reform is necessary not only in Zimbabwe, but throughout Africa. It is the only way to have the land play it’s proper place in the economy. Land has the possibility to give the majority of the population middle class income, and doing so, eliminate poverty, or food shortages. I would like to see a situation where every farmer has access to 100 hectares of land. In Zimbabwe before land reform, the average African farmer was eking out an existance on 2-3 hectares of land, while the average white ‘commercial farmer’ had access to 2000-3000 hectares of land. Most of which they did not use, leading to 80% of arable land not being under cultivation.
- Government. 50% of national revenues must be spent at local government level. Local government must be tasked to perform the following basic tasks, which every citizen deserves to receive: education, healthcare, policing/security, public utilities. Taking these tasks out of the hands of central government will put an end to the politics of poverty, and eliminate tribalism from presidential politics. Once people receive basic services, irrespective of who is in power, irrespective of whether their constituency voted for the ruling party, there will be a return to issue based politics, not the politics of ‘I am one of yours, if you vote for me, I will make sure our region receives development’. To this purpose, it makes sense that the agency that collects taxes, pays them out directly to local government, and then national government. The national government should spend most of it’s money on infrastructure creation. To finance all of this, there must be a reduction in the number of ministries – from 30 to 10-12. There must also be a general streamlining of government functions, and the elimination of political positions.
- The marketeers or tutemba owners are the future business class. They need support from the state to get started, but once they have, they too can achieve a middle class lifestyle through income from their stores. If only 10% of them would up their operations to where they employ 8-10 people, that would create 1 million jobs in Zambia alone. Because of the dire economic situation, many college and university graduates are running tutembas. They should be given loans so they can create bigger business. It should also be easier to start a legal business, which also means that the government must drastically lower taxes on indigenous businesses. High taxation is the main cause of the huge size of the informal sector.
- Ownership. The mines must be mainly owned by the people. That means that at least 50% of shares should either be owned by the state, the local government or even the chief whose area business is conducted in. Right now, because of IMF coercion and likely corruption on behalf of the then ministers and officials.
- Corruption. Governments must put in place systems that track the state’s money. This would take away most of the opportunity for corruption, mainly the syphoning off of public funds. There should be many fewer rules and regulations, to take away the opportunity for petty corruption by government officials.
If this comes to pass, Africa will have a world class future. These comments hold for Zimbabwe, Zambia, Malawi, Tanzania, Kenya and more.
For my own personal manifesto, see:
http://maravi.blogspot.com/2007/06/my-manifesto-for-economic.html
MrK | Aug 2, 2007 | Reply
Also, it is impossible to analyze the situation in Zimbabwe, without discussing and understanding the impact of the Zimbabwe Democracy and Economic Recovery Act of 2001 on the state’s (in-) ability to borrow money internationally, creating an acute shortage of foreign currency, and the near immediate drying up of ‘donor’ support and the government’s budget.
http://www.govtrack.us/congress/billtext.xpd?bill=s107-494