“There are several economic challenges. Among them is a lack of diversification. Copper represents about ninety per cent of the country’s export revenue. Miracles do not just happen in economics; they are caused. Planning plays a very big role. Planning from a lame vantage, however, can be very frustrating.
A nation can borrow all it can, but if it does not produce, it is only postponing trouble. I reason that is why the wealth of nations is measured in productivity terms – GDP. The key word is “product.” Diversification means multiplying productivity. It means lessening dependence on only one means of production and expanding the reserves
Government should not guarantee the equality of results. It should do everything possible to guarantee every citizen an equal chance to participate in the economic marketplace. The economy must be constructed on free markets model – where firms and households, and not government, determine the market activities by their interaction in the marketplace. Prices and self-interest should guide the firms and households’ decisions and not government. This will lead to efficiency as will be in the position to get the most she can from her scarce resources.
The role of government economy should be to ensure equity. Government should create a level playing field for all competing in the marketplace. It can do this by enacting legislation, setting out regulations and developing policy that ensure equitable competition and fair play.
Inflation Challenge
Absence of productivity leads to economic problems. The biggest of these is inflation. Inflation not surprisingly is also defined in production terms as the rapid rise in prices caused by an inadequate supply of goods and services. Inflation arises from a decline in the purchasing power of the money. As a result government is tempted to print more money leading to an increase in the overall level of prices in the economy.
In simple economic terms, this means that total demand exceeds supply. This is a productivity issue. It simply means that there is less than what is required. The problem is in government’s rush to print more money or borrow more thereby compounding the inflation problem further instead of curbing it.
Emerging leaders will have to address the inflation challenge head on. High inflation imposes various costs on the society. Keeping inflation at low levels should be a goal of the emerging leaders.
In strong economies such as the ones China, the US, Germany, Canada and Japan have, sometimes there could be a short run tradeoff between inflation and unemployment. The printing of more money may lead temporarily to the creation of employment. However, in the case where inflation has existed for far too long, inflation is a menace. This calls for government to employ various policy instruments of monetary and fiscal policy such as spending, tax cuts, and so on, to control the economy.
Debt Burden
The complexity of the economic system is compounded further by a large foreign debt at US $4.4 billion (2006) which needs to be serviced and an insurmountable public debt which has paralyzed all efforts at redeeming the economy. Pegged at 65 per cent, public debt denies the proper running of the economy.
Sometimes we have lambasted the bilateral and multilateral agreements for our debts. What we forget is that the borrower is always a slave of the lender! When we borrow, we empower the lending institutions to control us. The Highly Indebted Poor Countries Initiative (HIPC) may seem like an ideal initiative now, but why don’t we avoid both the shame of being categorized as highly indebted and poor, and begin to be the lenders instead?
We cannot achieve national dignity if we continue to borrow, and expect debt forgiveness. HIPC, introduced in 1996, is not a bad idea if its purpose is to help us stop further begging. HIPC necessitates a threshold benchmark which in turn facilitates debt reduction of up to over 60 per cent. In lieu of HIPC and related initiatives, we must strive to produce and invest so that we prevent the embarrassment of being always at the receiving end.
Foremost was the initial failure to diversify economic activities away from the mining industry. This subjected the national economy to the vagaries of steep decreases in copper prices and production levels.
Secondly, the unprecedented Likes in petroleum prices by the Organization of Petroleum Exporting Countries (OPEC) in 1973-1974 and 1979-1980 resulted in a sharp rise in the price of imported oil which essentially drained the public treasury.
Thirdly, the socialist policies espoused by UNIP barred both local and foreign private investors from certain commercial and industrial sectors of the country's economy and recommended the creation of state and parastatal companies to operate in such sectors of the economy from the late 1960s to 1991.
The monopolistic position enjoyed by both state and parastatal companies in the country’s economy culminated in complacence and gross inefficiency because, in the absence of competition, government found it unnecessary to seek innovative ways and means of improving the quality and quantity of production output.
This led to the rampant commodity shortages during the Second Republic. Coupled with this was the UNIP government’s postponement of the macro-economic adjustment — which would have enabled to create a competitive and more productive socioeconomic system.
The moneys we borrow come with strings attached. What we call conditionality is nothing but a safeguard. Safeguards are necessary for business survival. In Africa we think that we can borrow and still be free. That’s a ruse. The IMF only helps countries that are facing serious financial difficulties in paying for their imports or repaying loans. Imports are goods and services we buy from outside.
IMF comes in when we fail to repay the loans we get. Some people blame the IMF for the economic problems.That’s not being realistic. After all, if our governments never borrowed (or if we borrowed and invested wisely), we would not be affected in any way by the IMF conditions.
In relation to production, we are mainly talking about agriculture and manufacturing. Agriculture or farming produces raw materials which industries use to make finished products. Recognizing this, the Bretton Woods created the World Bank which provides low-cost, long-term loans to less developed countries to develop basic industries and facilities, such as roads and electric power plants. So far the World Bank has fulfilled its obligation and should be commended. Onus is on affected governments to channel the loans to their intended projects.
The government cannot be sequestered from the IMF or the World Bank. It should instead work with these institutions if is going to successfully overcome its enormous economic challenges. Rule of thumb is in reinvesting what is procured from these institutions in infrastructure development and employment creation.
Balance of Payment Deficits
Production leads to export spurts. In balance of trade terms, the more we export the better. Exporting more goods and services and decreasing imports has explained why despite having constant deficit in its current account, the United States continues to be the richest nation on earth.
When a country buys more goods and services made abroad than it sells to foreigners that country will have balance of payment deficit. A country cannot continue to buy more than it sells indefinitely. This scenario has led to the inability to pay bills and to limited international trade.
This state of affairs has also led in part to the frequent restrictions on the outflow of the Kwacha and the inactivity of foreign businesses in the country. When that happens we run to the IMF. In balance of trade, what matters is production. The nation that produces wins no matter on what terms or conditions!
Investing in Investment
Conventional wisdom teaches that consuming more than you produce may lead to deficit. The credit crunch of 2008 which led to the global economic recession in the United States was partly caused by greed – people consumed more than they earned.
The emerging leaders should learn an economic lesson from recent history. If the 21st century is to be different from that of yesteryear's, there should be concerted effort to produce, invest in infrastructural development, education and health-care while at the same time educating both the government and the citizenry to live within their means.
The current economic picture may be bleak, but her future is promising. To unlock our nation’s economic potential I submit the following: Government should both cut taxes and spend on major infrastructural development. Tax cuts, and even tax holidays, will give tax payers enough purchasing power and thus avoiding the temptation of printing more money which leads to inflation.
In adhering to free market economics, government should reduce tax rates on capital. This will encourage business investment and the creation of well-paying jobs. When the highest tax burden falls on business investment, employment creation suffers.
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