Economic Liberalisation in Zambia

After Zambia gained political independence their economy was doing better. Their economy was surrounded around their primary natural resource, copper. As copper sales went up, new medical buildings and schools were built, they had a promising textile industry and things were looking up. Until an unexpected rise in the price of oil in tandem with the dropping prices of copper forced Zambia to borrow from the IMF and world banks at extremely high interest rates. Soon Zambia found itself in a mountain of unpayable debts and to repay creditors, spending was cut to education and health and other infrastructure projects. Eventually all of the progress they have made goes to waste as it can not be maintained. Foreign countries currently dictate the economic policy via structural adjustment, i.e. policies that “should” increase revenue and allow them to pay the loans off. This inevitably leads to a country that is so dependent on foreign aid because their own industries have been destroyed by foreign influences.

The argument can be made that economic freedom is a necessary precondition to political freedom, yet the unilateral focus of these reforms begs the question whether during the writing of the Washington Consensus, economic liberalization was solely a means to international development, or an end in itself. The historical support is for the latter, as John Williamson later reflects that there was, “a widespread attempt to tighten fiscal policy, extensive financial and trade liberalization, virtually universal elimination of restrictions on inward foreign direct investment, a lot of privatization, and quite a bit of deregulation. [But] the things that got most widely neglected were reforming public expenditure priorities, maintaining a competitive exchange rate, and extending property rights to the informal sector”

3. Part of the reason the World Bank’s standard Structural Adjustment Policies has been counterproductive partially because of unfortunate timing. Reduce government spending caused a recessionary effect, decreasing demand and increasing unemployment hurt nations. Strict monetary policy raised interest rates and helped to further suffocate investment demand and access to capital for poor farmers and low-income entrepreneurs. Currency devaluation did make exports cheaper but at a time when export markets for primary goods were oversupplied and prices were falling. Import cost also rose making it more expensive for domestic producers to obtain new technology and replacement parts. In addition, privatization of government enterprises also increased efficiency, which was accompanied by downsizing, which resulted in unemployment for thousands of the middle class. At this time the reductions in

9. Review Klein, Chapters 2 and 3. She explains the influence of US economists, especially Milton Friedman, in designing development strategies, and of the US in installing or supporting governments that would carry them out in several countries that had been pursuing a ‘middle’ development path of ‘regulated’ capitalism in which the state played a large role in supporting social welfare and the development of local businesses. You can expect test questions on this material, including the role of the US in ‘regime change’ in these countries, the role of US-trained economists afterward, and the path that these countries were supposed to pursue.

Stiglitz argues that for economic liberalization and freedom to choose to succeed, it is essential that reformation to laissez-faire economy be implemented at the right pace and in the right sequence (Stiglitz, 2002). Therefore, if the policies being implemented at the early stage of economic growth which it could not stand by itself yet, issues including instability, poverty, and especially inequality, might arise. Therefore, only a few developing countries have become rich when following liberalism, and those include China, who did not genuinely embrace neo-liberalism.

The liberal perspective on political economy is embodied in the discipline of the Western economics (Gilpin, 1987). It emphasizes the individual interests, the freedom and the maximization of economic benefit. Economic

This unequal distribution of wealth and income has reignited centuries old debate among economist about the type of market system that should govern the global political economy—a self-directing market system or a state driven market economy. This paper, takes the side of the latter, arguing that the liberal economic project is based on flawed assumptions, which in effect must be reevaluated. Contrary to the so-called “established facts ” that underpin the liberal economic system,

The most convincing argument against development is the emergence of an authoritarian government which tries to trade individual freedom for material goods. Easterly shows that there is no evidence that even a benevolent dictatorship can increase growth of the economy. Since freedom is being traded for intangible benefits in a dictatorship, it seems that free development is the best option. As Easterly says, a democracy in which people can influence their outcomes will make a happier and more productive nation. However, this does not preclude the idea of external aid working through a democratic

Assess the significance of three factors which might limit economic development in the developing countries.

The economic and social crises in the country are characterized under three headings: poor governance: inappropriate social and economic policies and week international prices for the country’s main exports. To help solve those issues in 1990 (the same year) the country’s government (Bretton Woods Institutions) established a Structural Adjustment Programme (SAP). Its objectives are: to achieve and maintain stable economy; to redefine public sector’s role and Government’s capacity to provide basic services; and to be able to create economic environment based on transparency and regulations.

Liberalism popularly functions to describe the ideal result of peaceful economic and political relationships between democracies. In this theory, democratic ideals and promotion of democracy globally results in cooperation that otherwise wouldn’t happen, causing each nation’s growth to slow and hindering international relationships. The theory begins to falter upon inspection of its effectiveness for all nations. When liberalism begins to affect democratic ideals into states with weak political institutions, the result if often not the ideal cooperation predicted by liberalism. In fact, the democratic ideals advocated for in liberalism frequently resulted in large scale civil and international violence in states with shaky political institutions, mostly due to the lack of accountability and credibility in the forces that take power (Snyder 58). In addition, liberalism often creates economic competition that takes advantage of developing nations. Through that fact, we find the economics of liberalism often causes the opposite of the promised effect for increased cooperation and peace. Liberalism’s ideals make sense. However, by failing to recognize the need for

a. After Tanzania achieved independence, increasing corruption contributed to political instability and people began to demand for a sense of self-government rather than socialism. Moreover, the country suffered from inadequate rainfall, poor soil, and limited the resources that weakened its economy. The attempts to a socialist society was at first effective, but the numerous problems that increased economic and political instability was a major issue that prevented the government from succeeding with its goals.

The United States, Italy and other countries in 80’s were heavily involved in aid to the government of Somalia. The IMF involvement during the same period came from direct aid, but also the enforcement of Structural Adjustment Programmes (SAPs) within the country. The purposes of the SAPs, dependent upon loans from the IMF, reduce government spending, deregulation, devalue currency, control inflation, open economy to trade, convert state business to private sector, and end government food subsidies. These types of policies were part of the IMF ideal and pathway

In today’s world of global trading, multinational corporations that are looking to expand on profits turn out to operate against the welfares of the world’s poorest countries. In the documentary, “Stealing Africa,” the film director, Christoffer Guldbrandsen, brings forward the concerning economic attention of the country of Zambia, located in South Africa. Zambia is known as the third largest copper reserves across the world, owned by multinational corporations globally. Due to such a heavy abundance of natural resources in Africa, the majority of the economy of Zambia revolves around the mining industry, which is like the backbone of the country. As the natural resources in Zambia remain rich, multinational companies, specifically Glencore, grew in investments resulting in the guilt of tax avoidance and undervaluing copper, which resulted in a downfall for the revenue of copper in the nation of Zambia. Guldbrandsen talks about the country of Zambia’s abundance of natural resources, yet their struggle to remain above the poverty line, as it is ranked in the top 20 poorest countries. Guldbrandsen insists that due to privatization starting from the year of 2001, the mining industry in Zambia has taken a downfall. Although the country of Zambia is very rich in resources, maintains the top copper mine in the world, a person a day lives below a dollar and almost eighty percent of the population remains unemployed.

The term “development” has been used by political, economic and international relations scholars to explain the relative economic statutes of various countries around the world. Numerous scholars have concerns about the potentially hegemonic nature of using the term “development”. Rhetorically, their concerns range from potential bias at the expense of indigenous methods to the continuation of western imperialist domination and exploitation of lands yet to be further explored. A few of the main concerns of these scholars is ethnic cleansing, resource extraction and false perceptions of the term.