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Exam economic liberalisation

Introduction:

• Messages from the west: economic development follows liberalisation
• Criticism though of Washington consensus as mostly ineffective and even harmful to
• Impliction for the political legitimacy of African states as shift attention towards attraction of
foreign investment and away from social redistributions and problems of inequality within
their own borders
SAPs
• Designed to address what the WB saw as unwarranted and damaging gap between rural and
urban developemnt
• Policies aimed to help the livelihoods of urban poor (food subsidies eg) aolished
• Relative gap between rural and urban incomes reduced drastically and even sometimes
reveresed
•
South Africa:
GEAR (see evans in SADC)

Mozambique:
• Portuguese colonies which retarded economic development and delayed independence
until 1975
• IFI involvment during civil war between Frelimo and Renamo rebels
o IFI fundamental aims to shift country towards free-market policies similar in some
ways to the aims of enemy of the state
• Necessity of food aid in the 80s -> forced to accept IMF and WB rules and stop support for
ANc
o Largest aid recipient in SSA
• Controversial liberalisation on the cashew industry
• Industrial production fell and economy suffered
• 'success story' for its progress in rolling back the state, privatisation and trade liberalisation
reforms
• Large part of economic growth comprised of aid transfers from western donors
• Over the last 25 years has not left the bottom 10% of HDI
...

o Gap between rich and poor widening
o Chronic child malnutrition rate rising
• Recreation of a narrative, success story as need liberal policies to validate the success model
of IMF and WB
•

Zimbabwe:
• 1940s high level of industrialisation with gov
...


Economy diversifying
HETERODOX/PROTECTIONIST policies
§ Adjusting exchange rate of currency
§ Inflaiton held down by price/wage control
§ Budget deficit remained – 10% of GDP (mainly caused by destabilisation)
§ But serviced its debt without rescheduling
Increase in social welfare (IMR halved in 10 years, contraception, education excellent by
regional standards, water/saniation improvements in rural areas)
1984-1990 own home-grown stabilisation programme and achieved growth rate of over 4%
anually
By 1988/9, 40% of value of all exports from manufacturing, key success
...

SAP in 1990 (later than the rest) voluntarily
Foreign debt manageable, debt commitments honoured, positive GDP per capita growth
throughout the 1980s
...
Pressure from IFIs and key donors (Britain/USA) which would withhold support from
successful policy intervention if they were too economically 'illiberal' and too successful
2
...
Finance minister with strong neo-classical economic beliefs
4
...
Lure of easier borrowing
6
...
Recommended SA and trade liberalization even though
data proved manufacturing sector to be efficient by both Zimbabwean and global standards
...
) and even to Mozambique as reversal of past
trends
o People leaving
• Inflation due to
1
...
Many commercial farmers shift to lucrative tobacco and horticultural crops for export in
response to liberalised prices
3
...
Speculative investment driving up interest rates
...

• 1960s/70s GDP growth 6% per annum
...

o 90% earnings from copper so heavily affected
• Landlocked position + difficulty with alternative transit route after Rhodesia declared UDI ->
excerbated
• Borrowed heavily in what was believed to be temporary fall in commodity prices
o To maintain infrastructural and productive investment
• Needed stablisation in 1975
• SAP
o Deepen poverty
o Raised mortality rates
o Harmed education
o Sell off parastatals including copper industry (nationalisation of which had been
mark of national pride in the 70s)
Out-migration as a consequences:

Conclusion:
• WB and IMF treat Africa as a whole
...
But in the real world, competitive advanages matters
o Free trade beenfits those with highest productivity -> Asian countries in labourintensive industries
1970s as a project to create a single world market, irrespective of possible harms
IMF concerned with short-term stability, not long-term development
...

Austerty measures can be appropriate for short term shocks but socially and
developmentally negative in medium to long term

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