Source: Politics, economics: Bane of Zim’s socio-economic prospects (Part 11) – DailyNews Live
Hama Saburi 10 September 2017
HARARE – Government has always paid its employees an annual bonus
cognisant of the level of salaries and the need to help its staff with
school fees in the following period although this thinking is now being
challenged as there is clear evidence President Robert Mugabe’s
administration can no longer afford the 13th cheque.
Politicians are adamant that it is grossly irresponsible for planners not
to include the bonus in their budgets. At the same time, technocrats argue
that committing government to pay the 13th cheque from nothing undermines
the austerity measures agreed with the International Monetary Fund (IMF).
The result has been the continuation of conflict between economists and
politicians.
Politicians look for jobs every five years and will never allow
technocrats to ease them out of their jobs. Our local economists do not
seem to have grasped the importance of timing in policy implementation
where you have an administration that is so obsessed with winning polls.
Why would government retrench staff towards elections? What are the likely
implications – politically and socially? These are simple issues that
economists need to consider.
Economists need to appreciate that hard economic policy options are
implemented soon after elections such that the results bear fruit at least
12 months before the next elections.
It is also an art to convince your political bosses on why certain
policies should be done – bring out the political benefits as well.
In an article entitled “Neo-liberalism Oversold?”, the IMF noted that the
neo-liberal agenda has not delivered as expected on the issue of fiscal
consolidation (austerity).
Fiscal consolidation entails reducing the size of government, constraining
government spending through limits of fiscal deficit and limiting the
ability of government to accumulate debt.
While noting the adverse implications of high fiscal deficits and debt,
the paper notes that fiscal consolidation also results in lower output,
welfare and higher unemployment. There is, therefore, need to strike a
balance in terms of the push towards fiscal consolidation.
While it may be necessary to reduce the size of government, consideration
should be given to the possible impact on service delivery, aggregate
demand in the economy and overall economic activity.
While it is good to cut unnecessary expenditures, it is important to take
into account that there is a limit to which one can cut expenditures
without the risk of gross domestic product collapsing as was the case in
Greece.
An assessment of when such an option is beneficial is therefore critical.
Our biggest challenge is probably to focus more on growing the economy,
which would bring down government’s deficit in a sustainable manner, and
put the nation’s finances on a firmer footing. Spending cuts and tax
increases can also play a role, but may need to be introduced gradually.
This, however, does not negate the issue of efficiency and effectiveness
in utilising the available resources so that we get value for every dollar
we spend.
The IMF and World Bank (WB) will not recommend that African countries
beneficiate or add value to their primary commodities as this would impact
on the availability of raw materials to their shareholders hence the
standard prescription to cut expenses and their over fixation with
macroeconomic ratios.
Unfortunately, our economists and technocrats would be happier getting a
pat on the back from these institutions while impoverishing their
countrymen. Politicians see things differently and rightly so in such
cases.
There is also this narrative that our economists continue to peddle: That
without getting external assistance and foreign direct investment we are
doomed.
As a result, our bureaucrats have resigned to fate and continue to push
for the need to engage IMF and WB when in fact nothing is likely to happen
on this front in the short to medium term.
Further, economists need to read and get a deeper understanding of our
economy and recommend policies from an informed position realising what
works and what does not work for us, how we can best implement and
sequence policies.
Economists should therefore avoid tying themselves to particular
ideologies, and be willing to modify and change their views.
Politicians also need to avoid self-serving policies and allow for the
implementation of policies that support economic growth and development.
Thus it can be said that politics and economics are inextricably
intertwined.
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