Tuesday, May 3, 2011

Signs of progress in Zimbabwe

Praveen Kumar over at the Africa Can…End Poverty blog writes:

In the two years since the Government of National Unity (GNU) was formed and Zimbabwe dollarized fully, there have been encouraging developments on the economic front.

The economy grew at nine percent in 2010, following on six percent in 2009. Government revenues climbed to 29 percent GDP in 2010; they were just three percent of GDP in 2008. And the banking sector which had dis intermediated almost fully during the hyperinflation grew its dollar deposits briskly to around 30 percent of GDP at the end of 2010. But election talk has suddenly mushroomed in 2011, setting off political competition that could slow down Zimbabwe’s return to normalcy.

This good performance starts from a low base; the economy had contracted by more than 45 percent from 1999-2008. Furthermore, world prices of commodities, such as platinum, tobacco and gold, which are Zimbabwe’s main exports, have been on the rise. Weather has been good in the past two years. But the point is that Zimbabwe was able to make good use of these conditions. There was a supply response to high prices in agriculture and mining, and manufacturing showed signs of life. And importantly, some key economic institutions such as the revenue agency performed. These are the good economic genes.

The revival of agriculture goes against commonly held wisdom. Redistribution of erstwhile large commercial farms to indigenous Zimbabweans has been largely achieved. There is a widespread concern about disputed titles and insecure tenure. Yet smallholder agriculture appears to be moving.

The number of smallholder farmers in tobacco has increased sharply. Output of tobacco, maize, and cotton is recovering. The yields are nowhere near their previous levels. But then Zimbabwean agriculture has undergone a huge structural change and some yield losses, particularly those due to the reduction in average farm size, could be permanent. The ability of farmers to respond to price incentives is a strong signal that policy distortions in the sector are minimal and markets are functioning well. In the long run structural constraints could bind however.

The Rise of the Rest

I just finished reading Fareed Zakaria’s book The Post-American World and the Rise of the Rest. It is quite an interesting and easy to read book. Zakaria, one of my favorite commentators, explores the rise of America, its declining power and the rise of the rest of the world (mostly few emerging economies like India, China, Russia, Brazil, South Korea, Japan and Turkey, among others). His main point, commonly sensed and very true, is that America’s superpower status (and ability to influence global diplomacy, economics and military power) is waning as the rest of the world rises, both economically and politically, but no country will replace America as the superpower. It will just have to live with a little bit of diminished influence (political and economic) but still will wield the most power to influence global politics and economics. To smooth out the transition, he recommends America to not be Britain (during its imperial rule and how it got diminished), but be Bismark, who tried to project Germany as the center of engagement in power (America has to become the pivot of world’s international system).

He tries to make a point that the world is in transition, both economically, politically and militarily. First, Britain (and the Western world) rose during the Industrial Revolution and made great strides in economic, technology, military and political fronts. Then the USA rose during the beginning of the 20th Century and sidelined Britain’s global power. Now, the rest of the world is rising, which will wane America’s global influence, but will not depose it as the superpower. It will remain the sole superpower but will not wield the same power it had during and after the WW II.

Excerpts from the book:

[…] The United States never could have arrived at such a position had there not been nations willing to lend it the money. That’s where the economic and political empowerment of the developing world—the “rise of the rest,” as I call it—comes in, and it’s best symbolized by the rise of China.

[…] The rise of the rest is at heart an economic phenomenon, but the transition we are witnessing is not just a matter of dollars and cents. It has political, military, and cultural consequences. As countries become stronger and richer, and as the United States struggles to earn back the world’s faith, we’re likely to see more challenges and greater assertiveness from rising nations.

[…] if properly managed, the rise of the rest need not be destabilizing. America is not sinking fast, about to be replaced by a single country. Everyone is, in a deep sense, in this crisis together. Other countries can play major stabilizing roles. And not just in economics.

My disagreement with this otherwise excellent weekend reading is that on page 154 he argues that “Buddha was Indian, and Buddhism was founded in India, but there are virtually no Buddhists in the country today”. This is simply untrue. Buddha was born in Lumbini, Nepal. He went to Bodhgaya to meditate and became Buddha (previously, he was known as Siddhartha Gautam). And, yes, there are Buddhists in India. It is pretty puzzling and surprising how Zakaria could have made this mistake and not crosschecked facts and historical accounts.

Anyway, it is an excellent book. Light and pleasant reading for one fine weekend.