3 Νοεμβρίου 2012

Why Zimbabwe (and Africa) is so poor.

Eddie Cross
01 November 2012

Fundamentals for the Future - Property Rights

In 1980 when Zimbabwe became a democratic State after 86 years of government by various white settler dominated governments, the new government took control of an economy that had been created without significant overseas aid, had very little debt, a currency that was worth twice the value of a US dollar and a population that had the second highest per capita income in Africa. That this was achieved despite the country being at war with itself for many years, operating under mandatory, universal, United Nations sanctions enforced by the Security Council, was an astonishing achievement.

In 2008, when the control of the State by Zanu PF was finally broken by regional intervention and the imposition of an inclusive government including the MDC, the Zimbabwean economy was in a sorry state. Despite receiving many billions of dollars in foreign aid over the previous 28 years, the currency had totally collapsed and was worthless. National debt was 240 per cent of GDP - perhaps the worst in the world and even if all export receipts had been used to pay back the debt; it would have taken nearly 8 years to do so. Incomes per capita were the third lowest in the world, three quarters of the population was living on aid from the west - mostly the United States and Europe, nearly all schools and hospitals were closed and the infrastructure collapsing.

What had gone wrong?

There are many of my former compatriots who would say "we told you so", arguing on a racist basis that black Zimbabweans simply could not manage the State properly. Sure, corruption was and is a problem, sure they made mistakes in macroeconomic policy, but in my view that was not the problem. The problem was that the new regime destroyed property rights in their efforts to perpetuate their hold on the State and maintain their privileges and patronage rights.

When I was a small boy, my father became an alcoholic. I must have been about 5 at the time. He lost his job as a senior executive with an oil company, lost the house and car and all his savings. My mother took over with five children and two years of basic schooling. She taught herself how to type and write shorthand, got a job as a secretary and quickly established herself as a personal assistant and secretary to a senior executive in a local company. We moved from the most exclusive part of town, to a slum area made up of houses built in the War to accommodate air force trainees.

After living in this house rented from the local authority for some years, the government announced that they were going to sell these houses to their occupants - the deposit was what we had been paying as rent and in future the rentals would go towards paying off the bond. The place would be ours in five years.

I was only 12 when that happened but I will never forget how that decision transformed out lives. Overnight, our community changed, walls went up, gardens were planted, houses painted, roofs repaired even house extensions and basic improvements started. In months, the place was hardly recognizable. The only thing that had changed was that we now owned the places we lived in. We were still poor, we still struggled to put food on the table and meet our bills, but we owned our own home.

If you drive around any town, anywhere, you will be able to quickly identify where people own their own homes and where they do not. This principle is universal, operates in all cultures and places.

Nearly all newly independent States in Africa abolished freehold rights to property early in their new history. The reason being that such rights were alien to African cultures, where people relied on free access to land as the only basis on which they could make a living and have any long term security. But such societies did not allow accumulation or differentiation. The people were all poor together and the only people, who had any security of title, were the feudal type tribal leaders and then the leaders who came out of the bush to claim the right to leadership and control, in most cases in perpetuity.

Here, because of the constitutional restrictions imposed in 1980, it took many years for this process to manifest itself and for the first 18 years of independence there were few changes to the security of tenure and property rights. In the towns, people built homes and bought and sold them, people went into business and invested their savings and time and energy to create businesses, farmers went about their business and agriculture expanded steadily right up to the year 2000.

Sure over that whole period the regime became steadily more corrupt and they violated the fundamental rules of macroeconomic management, but the economy carried the burden and there was a slow but steady improvement in life for most people. Then came the challenge to the control of the State, this time from an unexpected quarter and suddenly the people who came in from the bush to assume control in 1980, felt threatened. They then attacked what had been the basis of the fragile stability and growth over the previous century - property rights. The reason - the people who lived on the farms were just too independent and held the balance of power between the towns (where secure property rights prevailed) and the communal areas where there were no property rights and feudal political structures prevailed.

The problem was that when you attack such fundamental rights you undermine those rights throughout the economy. The net effect was not just the collapse of agriculture, but the entire economy. Once they did that, the whole edifice came tumbling down, the consequences of living for years on credit and beyond their means came home to roost, business took steps to protect themselves and the productive elements in our society looked for greener pastures. Suddenly, in a mere 7 years, we were a basket case.

What made Rhodesia such a resilient and self sufficient place was the issue of ownership. It is the only explanation for why farmers, living in isolated areas, were able to put up with the pressures of the war, sanctions and the real sacrifices that had to be made. They were defending their homes and families. But in an urban context, even though the relationship is more complex, it is the same and if that is threatened then everything else is vulnerable. This is why indigenisation is such a threat to all of us. In Zambia, the Mulungushi declaration by Kenneth Kaunda (essentially the same thing as indigenisation) stopped the Zambian economy in its tracks and there was no significant growth in that country for the next 20 years.

Property rights are fundamental to economic growth and stability. They are also the very foundation of democracies and not just in Europe or America, but wherever men and women choose to make a place their home.

Eddie Cross is MDC MP for Bulawayo South. This article first appeared on his website www.eddiecross.africanherd.com

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