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When Zimbabwe had a Model Economy
There was a time when the management of the economy in Zimbabwe was highly regarded in Western circles. Throughout its first decade of independence, Zimbabwe's economy grew at an average of 4 percent per year, and substantial gains were made in education and health. Zimbabwe was handling its finances well, and between 1985 and 1989 had cut its debt-service ratio in half. (6) However, the demise of socialism in Europe resulted in an inhospitable environment for nations charting an independent course, and Zimbabwe felt compelled by Western demands to liberalize its economy. In January 1991, Zimbabwe adopted its Economic Structural Adjustment Program (ESAP), designed primarily by the World Bank. The program called for the usual prescription of actions advocated by Western financial institutions, including privatization, deregulation, a reduction of government expenditures on social needs, and deficit cutting. User fees were instituted for health and education, and food subsidies were eliminated. Measures protecting local industry from foreign competition were also withdrawn.
The impact was immediate. While pleasing for Western investors, the result was a disaster for the people of Zimbabwe. According to one study, the poorest households in Harare saw their income drop over 12 percent in the year from 1991 to 1992 alone, while real wages in the country plunged by a third over the life of the program. Falling income levels forced people to spend a greater percentage of their income on food, and second-hand clothes were imported to compensate for the inability of most of Zimbabwe's citizens to purchase new clothing. A 1994 survey in Harare found that 90 percent of those interviewed felt that ESAP had adversely affected their lives. The rise in food prices was seen as a major problem by 64 percent of respondents, while many indicated that they were forced to reduce their food intake. ESAP resulted in mass layoffs and crippled the job market so that many were unable to find any employment at all. In the communal areas, the rise in fertilizer prices meant that subsistence farmers were no longer able to fertilize their land, resulting in lower yields. ESAP also mandated the elimination of price controls, allowing those shop owners in communal area who were free of competition to mark prices up dramatically. In 1995, the IMF cut funding to the program when it felt that Zimbabwe wasn't cutting its budget and laying off civil service employees fast enough. Furthermore, the IMF complained, the pace of privatization wasn't rapid enough. But implementation of ESAP was quite fast enough for the people of Zimbabwe. By 1995, over one third of Zimbabwe's citizens could not afford a basic food basket, shelter and clothing. From 1991 to 1995, Zimbabwe experienced a sharp deindustrialization, as manufacturing output fell 40 percent. (7) According to an economic writer from the ruling Zimbabwe African National Union Patriotic Front (ZANU-PF), "There is a general consensus among the people of Zimbabwe that ESAP has driven many families into poverty. The program only benefited a privileged minority at the expense of the underprivileged majority." (8) As intended by Western financial institutions, one could argue.
Ditching ESAP
The government of Zimbabwe felt it could no longer endure this debacle, and by the end of the 1990's, started moving away from the neoliberal program. Finally, in October 2001, the abandonment of ESAP was officially announced. "Enough is enough," declared President Mugabe. "ESAP is no more." A press release issued by the governing ZANU-PF declared, "The termination of ESAP brings to an end the era of control of our economy by the IMF and the World Bank. While we must continue to work with these organizations on agreed projects, they will no longer dictate the direction of policy and the country." Price controls were implemented for basic commodities that soaring prices had made all but unattainable for many poor Zimbabweans, including bread, maize meal, flour, sugar, cooking oil, beef, chicken, pork, milk, soap and generic drugs. To counter the threat of companies closing in protest against price controls, President Mugabe announced, "The State will take over any businesses that are closed. We will reorganize them with workers, and at last that socialism we wanted can start again." Mugabe dismissed claims that government should not interfere with the market as "absolute nonsense," and stated that the nearly hourly price increases for goods and commodities had been unjustified. (9) The 1997 launch of a new phase in the land reform program, in which 1,471 farms were listed for compulsory purchase, triggered British intervention in Zimbabwe. The jettisoning of ESAP four years later, coupled with the statement that sectors of the economy would be placed on a socialist path, only increased the sense of outrage among Western leaders.
There was a time when the management of the economy in Zimbabwe was highly regarded in Western circles. Throughout its first decade of independence, Zimbabwe's economy grew at an average of 4 percent per year, and substantial gains were made in education and health. Zimbabwe was handling its finances well, and between 1985 and 1989 had cut its debt-service ratio in half. (6) However, the demise of socialism in Europe resulted in an inhospitable environment for nations charting an independent course, and Zimbabwe felt compelled by Western demands to liberalize its economy. In January 1991, Zimbabwe adopted its Economic Structural Adjustment Program (ESAP), designed primarily by the World Bank. The program called for the usual prescription of actions advocated by Western financial institutions, including privatization, deregulation, a reduction of government expenditures on social needs, and deficit cutting. User fees were instituted for health and education, and food subsidies were eliminated. Measures protecting local industry from foreign competition were also withdrawn.
The impact was immediate. While pleasing for Western investors, the result was a disaster for the people of Zimbabwe. According to one study, the poorest households in Harare saw their income drop over 12 percent in the year from 1991 to 1992 alone, while real wages in the country plunged by a third over the life of the program. Falling income levels forced people to spend a greater percentage of their income on food, and second-hand clothes were imported to compensate for the inability of most of Zimbabwe's citizens to purchase new clothing. A 1994 survey in Harare found that 90 percent of those interviewed felt that ESAP had adversely affected their lives. The rise in food prices was seen as a major problem by 64 percent of respondents, while many indicated that they were forced to reduce their food intake. ESAP resulted in mass layoffs and crippled the job market so that many were unable to find any employment at all. In the communal areas, the rise in fertilizer prices meant that subsistence farmers were no longer able to fertilize their land, resulting in lower yields. ESAP also mandated the elimination of price controls, allowing those shop owners in communal area who were free of competition to mark prices up dramatically. In 1995, the IMF cut funding to the program when it felt that Zimbabwe wasn't cutting its budget and laying off civil service employees fast enough. Furthermore, the IMF complained, the pace of privatization wasn't rapid enough. But implementation of ESAP was quite fast enough for the people of Zimbabwe. By 1995, over one third of Zimbabwe's citizens could not afford a basic food basket, shelter and clothing. From 1991 to 1995, Zimbabwe experienced a sharp deindustrialization, as manufacturing output fell 40 percent. (7) According to an economic writer from the ruling Zimbabwe African National Union Patriotic Front (ZANU-PF), "There is a general consensus among the people of Zimbabwe that ESAP has driven many families into poverty. The program only benefited a privileged minority at the expense of the underprivileged majority." (8) As intended by Western financial institutions, one could argue.
Ditching ESAP
The government of Zimbabwe felt it could no longer endure this debacle, and by the end of the 1990's, started moving away from the neoliberal program. Finally, in October 2001, the abandonment of ESAP was officially announced. "Enough is enough," declared President Mugabe. "ESAP is no more." A press release issued by the governing ZANU-PF declared, "The termination of ESAP brings to an end the era of control of our economy by the IMF and the World Bank. While we must continue to work with these organizations on agreed projects, they will no longer dictate the direction of policy and the country." Price controls were implemented for basic commodities that soaring prices had made all but unattainable for many poor Zimbabweans, including bread, maize meal, flour, sugar, cooking oil, beef, chicken, pork, milk, soap and generic drugs. To counter the threat of companies closing in protest against price controls, President Mugabe announced, "The State will take over any businesses that are closed. We will reorganize them with workers, and at last that socialism we wanted can start again." Mugabe dismissed claims that government should not interfere with the market as "absolute nonsense," and stated that the nearly hourly price increases for goods and commodities had been unjustified. (9) The 1997 launch of a new phase in the land reform program, in which 1,471 farms were listed for compulsory purchase, triggered British intervention in Zimbabwe. The jettisoning of ESAP four years later, coupled with the statement that sectors of the economy would be placed on a socialist path, only increased the sense of outrage among Western leaders.
