Quarterly Bulletin

Poverty is an old enemy with many faces; it means going hungry, not being able to attend school, not knowing how to read or write, not having access to safe drinking water, or not being able to visit a health centre when ill or pregnant. Poor people describe poverty not so much in terms of lack of material items – money, food, shelter and clothing – or living in unhealthy, polluted and risky environments; but as a sense of powerlessness, voicelessness, and social exclusion.

Poverty eradication is a call to action to change the world so that all may have enough to eat, decent work, a place to sleep, access to basic education and health, protection from violence, and a voice in what happens in their lives and their communities. The Millennium Development Goals (MDGs) express various dimensions of human poverty in a set of numerical and time-bound targets.

The MDGs reflect the consensus that development is ultimately about reducing human poverty and protecting human rights. Traditionally, the belief was that economic growth would be sufficient to reduce poverty, and that trade liberalisation is the best way to accelerate aggregate growth. But strategies aimed at raising average incomes and liberalising markets have failed the poor. Economic growth and trade are necessary but far from sufficient to reduce poverty. To reduce poverty requires creating opportunities for citizens to gain wealth and improve their incomes. This is best provided within a free market system that allows for checks and balances with a system to redistribute this wealth to those less fortunate.

Attempts to discredit free market economics have been made by many writers. However, most of them inadvertently provide evidence of its efficacy as an economic system for Africa. One writer struck down his own argument by stating, “What we need is an economic system which will be able to combine the efficiency of capitalism and the social distribution of social democracy”. Examples given were Britain, the Netherlands and Scandinavian countries with their social welfare schemes.

But how can you want the efficiency of capitalism and also blame that system for our poverty in Zambia?  The capitalist system is efficient precisely because it generates wealth and jobs, which in turn provide tax revenues for the social welfare schemes we would like Zambia to copy. The countries given as examples are some of the best run free market economies, from which originate huge multinational firms like British Petroleum (BP), Nokia, Philips and British Airways.

More importantly, Britain is the mother of privatisation and deregulation. It should also be noted that, even though privatisation in Britain started under the Conservatives, the current Labour government has not reversed it. In fact, Labour has extended privatisation to health, social security and education. What’s more, the Labour Government, soon after taking power in 1997, imposed a “windfall” tax on UK utility companies as a way of financing social programmes and creating new jobs. Donor agencies from the UK, Sweden and the Netherlands are the biggest proponents of so-called “pro-poor” market reforms in Zambia, which in their own countries they do not do. Zambia can generate more revenue from creating an efficient resource tax system than what they receive from donors.

The UK’s Department for International Development (DFID) finances a major part of Zambia’s public sector reform; the Swedish Development Cooperation Agency (SIDA) supports financial sector reforms in Zambia, while the Dutch are the major financiers of agriculture sector and private sector development reforms. Free market economic systems are the best way for a country to create wealth and get out of poverty. If we look at the top ten countries in the UN Human Development Index, we find that highly deregulated countries are in the top ten, namely; 1. Norway 2. Iceland 3. Australia 4. Luxembourg 5. Canada 6. Sweden 7. Switzerland 8. Ireland 9. Belgium 10. United States.

Further, if we look at the top ten countries in terms of GDP per capita, we find the same story, and basically the same countries. When you compare a list of the top ten countries, with the lowest ranking country (Malawi), by per capita GDP (in terms of Purchasing Power Parity or PPP, the statistical method adopted by the UN) it shows the following:

1. Luxembourg                    US$69,800
2. Norway                                       42,364
3. United States                  41,399
4. Ireland                                         40,610
5. Iceland                                        35,586
6. Denmark                                     34,737
7. Canada                                       34,273
8. Austria                                        33,615
9. Hong Kong, SAR             33,411
10. Switzerland                                32,571

179. Malawi                                    596

These statistics do not match the theory of capitalism as some dangerous beast out to steal people’s wealth. In actual fact, capitalism is a catalyst for economic development, and it distributes wealth much better than using corrupt state controlled means which do not reach the intended masses. In 1755 Adam Smith declared, "little else is required to carry a State to the highest degree of opulence from the lowest barbarism but peace, easy taxes and the tolerable administration of justice". This leading advocate of laissez-faire capitalism is widely regarded as the father of modern economics around the developed world.

While he never used the term capitalism, he referred to his ideal as "the system of natural liberty." Indeed what is known today as capitalism  is all about liberty. Those who strongly support individual liberty, as most Zambians do, see that it is government interference in people’s lives that is a great barrier to freedom. Anything that impinges on individual freedom is likely to have seriously negative consequences. This is clear when one looks at the economy of our country which, after suffering from “one party participatory democracy,” is now suffering from poor public sector management in a poorly regulated market system. The Zambian Government has failed to implement effective market deregulation.

We should learn from our mistakes and improve the system. Socialism or Marxism works only in the minds of academics and failed politicians and the reality on the ground is stark. Socialist countries are the poorest countries in the world. It is worth noting that at a time China, India and Russia are embracing market economics, who are we in Zambia to advocate a return to the dark ages? We should get away from ideology and begin to reflect on how we can create systems that will multiply jobs, diversify our economy and enable our people to escape from poverty!!

 

Trevor Simumba
International Business Consultant
United Kingdom