ZIMBABWE: Crisis showcases reasons for IMF, World Bank protests

Issue 

Picture

ZIMBABWE: Crisis showcases reasons for IMF, World Bank protests

In Zimbabwe, President Robert Mugabe appears to have taken leave of his senses, potentially plunging his country of 12 million people into civil war. What does this have to do with the mid-April protests in the United States against the World Bank and International Monetary Fund?

Confusingly, Mugabe excels in IMF-bashing, famously telling fund staff to "Shut up!" late last year. Yet, from independence in 1980 until quite recently, he followed their advice unfailingly. Indeed, just five years ago, Zimbabwe was Washington's newest African "success story" as Harare adopted economic policies promoted by World Bank and IMF lenders, and even conducted joint military exercises with the Pentagon.

Things fell apart quickly. Southern African diplomats are shaking their heads in frustration at Mugabe's quick-shattering April 21 promises — made to South Africa's President Thabo Mbeki and other local leaders — to tone down racial rhetoric, reverse the invasions of 1000 white farms, and sort out financial matters with the British and other donor governments and the IMF.

Is Mugabe deranged, or instead playing out a tragic logic partially of his own making, but partially imposed from above? Under the very real threat of losing parliament to the labour-led Movement for Democratic Change (MDC) in coming elections, he resorts to authoritarian populism: egging on a few thousand land occupiers so as to restore memories of the 1965-80 struggle against the Rhodesian regime. That was a period when his Zimbabwe African National Union (ZANU) truly represented a popular movement dedicated to reversing settler-colonial land ownership.

Yet early on, perceptive ZANU watchers identified two major problems: the party's class character and its likely realignment towards foreign capital.

Political scientist Rudi Murapa, (currently president of Africa University, Zimbabwe's second-largest), wrote in 1977 of an alliance between "a politically ambitious petit-bourgeois leadership, a dependent and desperate proletariat and a brutally exploited and basically uninitiated peasantry".

Murapa forecast: "After national liberation, the petit-bourgeois leadership can abandon its alliance with the workers and peasants and emerge as the new ruling class by gaining certain concessions from both foreign and local capital and, in fact, forming a new alliance with these forces which they will need to stay in power. Of course, lip-service commitment ... to the masses will be made."

Global financial pressure

Accusations that ZANU "sold out" are justifiable — not only has there been a steady rise in corruption, but most of the land and other wealth redistributed since 1980 has gone to cronies, not the masses — yet they are deeply unsatisfying. The same will be said of South Africa's African National Congress, as it was in Zambia of Kenneth Kaunda and his successor Frederick Chiluba. However, assailing petty-bourgeois acquisitiveness risks downplaying the second factor: global financial pressure.

Once anti-Rhodesia financial sanctions were lifted, Zimbabwe made bad policy choices and succumbed to arm twisting by Washington. Finance minister Bernard Chidzero (who later chaired the IMF/World Bank Development Committee) borrowed massively at the outset, figuring that repayments — which required 16% of export earnings in 1983 — would "decline sharply until we estimate it will be about 4% within the next few years".

The main lender, the World Bank, concurred: "The debt service ratios should begin to decline after 1984 even with large amounts of additional external borrowing". This was the economic equivalent of a sucker-punch, for in reality, Zimbabwe's debt servicing spiralled up to an untenable 37% of export earnings by 1987.

Loan conditions quickly emerged. By 1985, the IMF was pressuring Mugabe to cut education spending and, in 1986, food subsidies fell to two-thirds of 1981 levels.

Similarly, genuine land reform was stymied, not only by the "willing-seller, willing-buyer" compromise with Ian Smith's Rhodesian government (the "Lancaster House agreement" which required the white owners' consent to sell their land before it could be redistributed by the government), but by the World Bank's alternative: showering peasants with un-affordable micro-loans.

From a tiny base in 1980, the World Bank's main partner agency granted 94,000 loans by 1987. But without structural change in agricultural markets, the World Bank strategy floundered as 80% of borrowers defaulted in 1988, notwithstanding good rains.

Analyst Ibbo Mandaza lamented in 1986, "International finance capital has, since the Lancaster House Agreement, been the major factor in the internal and external policies of the state in Zimbabwe". Thandike Mkandawire, head of the Geneva-based United Nations Research Institute for Social Development, agreed: "It seems the government was too anxious to establish its credentials with the financial world".

'Structural adjustment'

The macroeconomic situation worsened when Chidzero persuaded Mugabe to ditch Rhodesian-era regulatory controls on prices and foreign trade/financial flows, liberalising the economy through an economic "structural adjustment program" (SAP) in 1991. The SAP was supposedly "homegrown", but World Bank staff drafted much of the document, which was substantively identical to those imposed across Africa during the 1980s and '90s.

The SAP brought immediate, unprecedented increases in interest rates and inflation, which were exacerbated (but not caused) by droughts in 1992 and 1995. As money drained from the country, the stock market plummeted by 65% in late 1991 and manufacturing output declined by 40% over the subsequent four years. Amazingly, the World Bank's 1995 evaluation of the SAP declared it "highly satisfactory" (the highest mark possible).

Zimbabwe's currency, more vulnerable than ever before, came under fierce attack during the 1997 east-Asian crisis, falling 74% during a four-hour raid after Mugabe joined the conflict in the Democratic Republic of Congo and paid generous pensions to protesting liberation war vets.

Reacting to growing unpopularity and two food riots in the capital Harare, Mugabe finally invoked three pro-poor policies in 1997-98: reimposition of price controls on staple foods, conversion of corporate foreign exchange accounts to local currency and steep luxury import taxes.

The IMF and donors are withholding hard currency until these three policies are reversed. So, Zimbabwe spends its hard currency repaying foreign lenders and can't afford to import petrol. The harder the economic pressure bites, the more Mugabe staggers politically.

The lessons from Harare are: evade hard-selling foreign bankers; redistribute land more aggressively, and honestly, and avoid structural adjustment policies that worsen inequality, stagnation and vulnerability. Will leaders in the MDC take heed?

Regardless, more protesters — including Harare's church-based, anti-debt activists — are joining the global campaign to shut the IMF and World Bank, precisely because of mounting evidence of this kind, from Zimbabwe and across the Third World.

BY PATRICK BOND

[Johannesburg-based academic Patrick Bond is the author of Uneven Zimbabwe: A Study of Finance, Development and Underdevelopment, Africa World Press, 1998, and Elite Transition: From Apartheid to Neoliberalism in South Africa, Pluto Press, 2000.]