[NOTE: This article contains references to Zambian organizations and is based around the specific circumstances of the nation but the ideas can be ported anywhere else]
Many armchair critics rightly observe that many other armchair critics complain about problems in Zambia without offering solutions (ironically, they equally offer no solutions either). So today, let’s debate some ideas about what specific steps a government of a poor nation needs to do to produce prosperity. I shall do things in reverse. Steps first with explanations, and then the main reasoning behind.
a) Drastically cut the size of government to ten Ministries and get rid of all Deputy Ministers (we do not need 70 ministers). Reduce some ministries to small departments. A Kwacha in private hands produces more than a Kwacha in government’s hands (they are driven by politics of the belly and the desire to remain in power forever).
3. Commerce, Trade and Industry
5. Home Affairs
6. Foreign Affairs
8. Transport, Works and Supply
10. Local Government and Housing
Ministries reduced to small departments:
1. Information, Communication and Broadcasting
1. Gender and Child Development
2. Chiefs and Traditional Affairs
3. Tourism and Arts
4. Natural Resources and Environmental Protection
5. Mines, Energy and Water Development
6. Youth and Sport
7. Community Development, Mother and Child Health
8. Agriculture and Livestock
Big government = Big taxation = Big waste, theft, abuse, misuse, disuse.
Smaller government = Lower taxes = Better use of resources.
b) Completely and totally privatize everything under the sun, starting with the biggest companies like ZESCO, Zampost, Zamtel, Zambia Railways, etc. Simultaneously liberalize the economy more, removing tariffs and regulatory barriers to entry (eg expensive licensing fees). This produces competition which leads to cheaper higher quality goods and services, translating into higher standards of living since the same money will now be able to buy more.
More disposable income = more savings and more credit = faster economic growth.
c) Change the Land tenure system back to freehold from leasehold. Convert all traditional land that is unused into free land up for grabs. Enforce land ownership with title deeds. Land ownership makes access to credit easier.
More credit = More business = More economic activity
d) Reduce the powers of the Executive. There should be mandatory parliamentary oversight of any major appointments like Chief Justice, DPP, Attorney General, Police Commissioner, Army/ZAF/ZNS chiefs, etc. Other positions should be advertized (ZNBC Director General, Board Chairmen, etc). Simultaneously amend contentious laws one by one, instead of wasting money on another useless constitutional review process. Public Order Act, Electoral Act to add 50%+1 system, Presidential running mate, Cabinet chosen from outside parliament, Freedom Of Information, etc.
Less political interference = More certainty = Better credit rating.
e) Simplify business procedures and make licenses dirt cheap.
Lower costs of doing business = more investment.
f) Remove the monopoly of ZIALE in admitting lawyers to the bar (allow other competing bodies). Reform legal system with ICT’s (computers and online databases) and KPI’s (eg set a time limit for judgements to be written).
Better judiciary = Better Rule Of Law = More business between strangers
g) Begin outsourcing to the private sector some government functions like tax collection, garbage collection, border processing, passports, NRC’s, drivers and other licences, etc. Use a competing franchise system like in fast food restaurants.
More competition = Lower costs = Better Services
a) Cut ALL taxes and introduce FLAT tax rates. 25% Income Tax, 20% Corporation Tax, 10% VAT/WHT, 5% Excise duty, 10% Import duty. No more tax tables or zero-rated items while others are 60%. This cuts administrative costs and make things more predictable.
More money in people’s pockets = faster economic growth.
b) Go into PPP arrangements for schools and hospitals/clinics with a view to eventually make them self-sustaining through widespread medical insurance schemes and school vouchers.
c) Offload other assets like state farms, government houses, idle government land, etc. Lease all national parks.
d) Cut more fat from government by abolishing some bodies or turning them into small nimble departments. eg ERB, FRA, ZICTA, etc.
e) Privatize state media or else make it completely independent with no political appointees (eg BBC).
a) Cut taxes even further as more irrelevant government functions are trimmed and the economy grows (eg FISP, Maize marketing, etc). 20% Income Tax, 15% Corporation Tax, 10% VAT/WHT, 5% Excise duty, 5% Import duty.
b) Start process of turning the nation into a Federal state, complete with Governors, Mayors and State Legislatures. Abolish Provincial Ministries and District Administrators.
c) Increase budget significantly for police force and Judicature in general.
d) Begin removing subsidies.
a) 15% Income Tax, 10% Corporation Tax, 10% VAT/WHT, 5% Excise duty, 0% Import duty.
b) Continue removing subsidies.
a) 10% Income Tax, 10% Corporation Tax, 10% VAT/WHT, 0% Excise duty, 0% Import duty.
b) Remove all remaining subsidies and other freebies.
c) Begin the privatization of schools, Collages/Universities and Hospitals/Clinics by selling them to the Teachers/Lecturers and Doctors/Nurses running them. If an MBO cannot work, open it up to outsiders.
Economic and political policies implemented by a sitting govt have a far greater impact on a nation than relatively short-term external shocks (eg export/import commodity prices). Perpetual poverty or prosperity is predictable based on empirical evidence we now have about what works and what does not. Centrally-managed economies (Socialist or Communist States) tend to do poorly compared to market-driven ones. Zambia started off as a more Capitalist nation, delved into Socialism and lost half its GDP per capita. After reversing course, the figures improved from 1999 by about 40%, though still below the 1965 peak.
THE WRONG POLICIES
In order to implement the correct policies, we must recognize the bad decisions made by previous governments and their root cause. In my view, the specific actions and policies that were disastrous to Zambia between 1964 and 1991 were:
a) One party state and state of emergency for 27 years. This created a bloated political monopoly which turned citizens into virtual slaves.
b) Nationalization which created inefficient wasteful monopolies that went bankrupt when economic liberalization was introduced.
c) Excessive expenditures due to dishing out freebies (free education, free health, etc, even though many Zambians could afford these things).
d) Pouring money into liberation wars which drained the treasury.
e) Zambianization which replaced competent white people with half-baked black Zambians.
f) Printing money in the late 80s which produced over 100% inflation in the 90s.
g) Politicization of the civil service which turned it into a bloated appendage of the ruling party UNIP.
h) Intolerance of dissenting views which made it impossible to correct these very gross errors.
FUNDAMENTAL CAUSES – WRONG IDEAS
The core philosophy of the freedom fighters was Collectivism, as opposed to Individualism. They thought by draining the treasury and spreading the money around for free, everyone would be happy. They thought by controlling the means of wealth creation (companies), they could milk them and spread the money around. By putting unqualified Zambians to run these nationalized companies, they thought citizens would be empowered and have better lives. They thought that a centrally managed economy was better. They thought that controlling citizens would make it easier to govern. Of course every one of these backfired and we are where we are today, much poorer than in 1964.
[Originally posted on Facebook on 29 October as smaller version and 15 November 2013 as current expanded version]