Politics, economics: Bane of Zim's socio-economic prospects (Part 11)

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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