The influence of IMF and World Bank on development in post colonial Zimbabwe.

Zimbabwe at independence was faced with a mammoth task to ensure that development is realised in a country that has been destabilised by a more than a decade war, against white colonial regime. Development was to be realised through positive transformation of the political, economic and social fraternity through practise of good governance, ZIMCORD(Zimbabwe Conference of Reconstruction and Development) policy formulation, and establishment of institutions that encouraged development. Post colonial development in Zimbabwe, was a balance of two major conflicting ideologies namely communism and capitalism which had a bearing in financing developmental projects. The state had to play cards close to its chest as it sought to benefit from both without compromising relations from either part. Capitalism enshrined principles of Washington consensus while on the other hand communism was propelled by Beijing consensus. Both ideologies were buttressed by its own financial institutions in order to increase chances to hypnotise the- would be satellite states. IMF and World Bank stood to be the Western financial organs embracing capitalist ideologies in initiating development in Zimbabwe. Their presence posed both positive and negative impact to post colonial Zimbabwe development, for instance on a positive note it facilitated the establishment of training colleges both for education, health and agriculture, infrastructure development, attainment of good health, poverty reduction, land reform(resettlements),natural resource protection while on the negative aspect the conditions attached to their loans disintegrated the true principles of a sound political, social and economic cohered state, by undermining democracy, eroding human rights, creating poverty, unemployment, illiteracy and causing social outcry just to mention a few. It is the purpose of this essay to illustrate how development in Zimbabwe was influenced by both IMF and W/B as well as exposing the contradictions between Washington consensus and Beijing consensus to post colonial Zimbabwe’s development.

Conceptualisation

The IMF (International monetary fund) and the World Bank(W/B) these two monetary institutions were first formed by 44 nations at the Bretton Woods Conference in 1944 with the goal of creating a stable framework for the post-war global economy(world bank,2002). The IMF in particular, was originally formed to promote steady growth and full employments by offering unconditional loans to economies in crises and establishing mechanisms to stabilize exchange rates and facilitate currency exchange. Much of these visions never came to reality. Pressure from the US government made IMF start offering loans based on strict conditions. Critics have said that these policies have reduced the level of social safety and worsened labour and environmental standards in developing countries. The World Bank, initially known as the International Bank for Reconstructions and Development was formed to fund the rebuilding of infrastructure in nations ravaged by World War II. Its focus soon changed in the mid 1980's. The Bank turned its attention away from Europe to the third World countries, most of which are in Africa. It started funding massive industrial development projects in Africa, Asia, and Latin America. The term Washington Consensus was coined in 1989 by English economist John Williamson referring to a set of 10 relatively specific economic policy prescriptions that he considered constituted the "standard" reform package promoted for crisis- wracked developing countries by Washington, D.C.–based institutions such as the International monetary fund (IMF), World Bank (W/B), and the US Treasury Department (Williamson, 1989). The prescriptions encompassed policies in such areas as macroeconomic stabilization, economic opening with respect to both trade and investment, and the expansion of market forces within the domestic economy. The term Beijing Consensus according to Zhang(2011) refers to the "China Model" or "Chinese Economic Model substantively referring to the political and especially economic policies of the People’s Republic of China as alluded to by Zhang (2006), that began after the death of Mao Zedong and the rehabilitation of  Deng Xiaoping (1976) and are thought to have contributed to China's eightfold growth in gross national product over two decades, The phrase "Beijing Consensus" was coined by Joshua Cooper Ramo to pose China's economic development model as an alternative — especially for developing countries — to the Washington Consensus of market-friendly policies promoted by the IMF, World Bank and U.S.Treasury (Ramo,2004). He further state that the term has been described variously as the pragmatic use of innovation and experimentation in the service of "equitable, peaceful high-quality growth", and "defense of national borders and interests" with the use of "stable, if repressive, politics and high-speed economic growth"( Kurlantzick,2004).

Soon after the attainment of independence, the Government of Zimbabwe organized a major Conference on Reconstruction and Development (ZIMCORD). The purpose of ZIMCORD was to enable Zimbabwe to woo international agency and government aid to assist in the reconstruction of its infrastructure which had been destroyed during the protracted war of liberation. Development projects focused on infrastructure, such as schools, clinics and dip-tanks in the rural areas. A serious reconstruction programme had to be undertaken which Zimbabwe could not afford to do single-handedly. Apart from physical infrastructure, there were many other areas needing financial assistance. At ZIMCORD, Zimbabwe produced a shopping list of all areas for which international aid was seriously needed.  The state in its bid to mobilize funds, it never took a selective stance, as some scholars purport that it was a socialist propelled. Financial aid came from both the communist and capitalist financial organization pouring into the ZIMCORD blue print; this helped to transform the education and health sector as well as infrastructure development.

Futhermore, Mandaza(1986) noted that at independence the country had no clear defined transition development strategy. He pointed that the liberation (nationalist) struggle thrust Zimbabwe into a transition but the content and direction of this transition is left largely undefined. Mandaza (1986) calls this phase simply 'the post-white settler colonial phase'. Thus he criticises those scholars who have evaluated post liberation Zimbabwe from the standpoint of a socialist revolution. He chastises this group for holding mistaken views on the simultaneous process of national independence and a socialist revolution. In brief therefore the first six years of Zimbabwe's independence have been characterised by the consolidation of that independence. During this period however, the state has vacillated between preserving and protecting imperialist and settler colonial interests and serving the demands of the masses. It is from this backdrop that authors like Mandaza view the activities after independence as nothing but continuity of the imperial regime hence the influence and participation of the western institutions in influencing development of the independent Zimbabwe.

Educational sector reforms and studies in any country are a reflection of that country’s ideological stance. When Zimbabwe achieved independence in 1980, it adopted socialism as its overall policy. With regard to the education sector, this policy focused on the need to seriously change the social injustices and imbalances of the past in which a minority group (the Whites) were adequately catered for in terms of educational provision and the other major section (the Blacks) was seriously discriminated against. In short, educational activities and developments were being clearly influenced by the new political order.

However, in order to achieve these objectives huge sums of money had to be found either through the government’s own budgetary allocations and/or through financial assistance by way of support from international funding and technical assistance agencies. Serious involvement of international agencies, NGOs and foreign governments in education and other sectors in Zimbabwe started in earnest when Zimbabwe attained its independence in 1980. Prior to independence no agency or foreign government, except apartheid South Africa, could be seen as openly associating itself with a rebel state (Rhodesia) which had unilaterally declared independence from Britain.   

 Trainning of skilled labour is one way IMF and World Bank, despite their negative impact to the development of Zimbabwe have contributed positively to its development. In a bid to address the imbalance between the black majority and white minority the government engaged in massive training of teachers, agricultural extension workers, and nurses’ that were funded by IMF and World Bank(world bank,2002). At independence there was acute shortage of trained staff with knowledge and skill to impart to the black majority hence the state required money to ensure training of various skills is done so as to make it easy in knowledge and skill transfer to the indigenous people. Apart from training, there was also an immediate need to reform the curriculum to replace the old colonial curriculum which was unacceptable to the new political orientation with a socialist thrust. The required curricular reforms needed a high amount of funding, in particular to produce school textbooks which were ideologically more suitable to the new government. The new government’s policies on education were well received by the international community, particularly its emphasis on basic education as a fundamental human right and the area of human development generally. International agencies IMF and W/B inclusive, viewed education, training and improvement of managerial skills as major concerns for the newly independent Zimbabwe. United States Agency for International Development (USAID) played a significant role in supporting the training of teachers and setting up of a teachers’ training college. Assistance in education was, however, stopped because of some political misunderstanding with the Government of Zimbabwe.

Infrastructure development is one area the World Bank and International monetary fund helped in fostering development in Zimbabwe (world bank,2002). Infrastructure development had bearing and focus on agriculture where the government was helped to construct dams to assist in boosting agricultural production through irrigation. This saw dams like Mhakwe Dam in chimanimani district being put under plans in the mid 1980s. In addition the construction and refurbishment of road network especially in most rural areas received funding from the W/B and the government had to distribute road finances through the District Development Fund.(DDF). It was this department that had to ensure the construction of roads as well as managing the maintenance of all rural road networks.

Policies are central to ensure positive development takes place. The IMF had been very influential especially in the period 1990s in helping government with good policy formulation that informed government to remove burden on funding all social services a situation it viewed as straining the national budget. The IMF encouraged the government to engage in liberalisation of the economy which was purported to be a good thing that will enhance economic growth since it was deemed to increase export and would open the market to competition. On the other hand it advised government to abandon its subsidy approach on both sectors of the economy. They had the view that government had to benefit from saved money that was used to subsidise education, health and agriculture. The benefits from liberalisation were believed to be beneficial in allowing government to improve its high expenditure against limited industrial production. However, the policies that were encouraged never worked to the benefit of Zimbabwe’s development, but it worked more towards reversing the development gains the country achieved at independence.

IMF and WB contribution to post colonial Zimbabwe’s development registered a negative development more than a positive development. The policies of economic liberalisation according to Halifax Initiative (1997) this have forced the country to open its economy to western penetration and increase exports of primary goods to wealthy nations. These steps amongst others have multiplied profits for western multinational corporations while subjecting Third World countries like Zimbabwe, to horrendous levels of poverty, unemployment, malnutrition, illiteracy and economic decline. For two decades the World Bank and the IMF have forced developing countries to create conditions that benefit Western corporations and governments. These conditions are known as Structural Adjustment Programs (SAPs). SAPs require governments to: cut public spending,(including eliminating subsidies for food, medical care and education); raise interest rates, thus reducing access to credit; privatize state enterprises; increase exports; and reduce barriers to trade and foreign investment such as tariffs and import duties. These measures are supposed to generate export-led growth that will attract foreign direct investment and can be used to reduce debt and poverty (Naiman and Watkins, 1999).

Education system in the country was negatively affected following the adoption of the structural adjustment policies which the IMF and W/B had encouraged the country to engage in. Education spending also declined significantly under the SAP by 36% and 25% respectively for primary and secondary education between 1990-94. Teachers’ wages fell by at least 26% during 1990-93 (SAPRIN study, 2002.).  Education was affected by the removal of government role to cater for free primary education for all and subsidised tertiary education. The introduction of user fees in education has “led to a dramatic increase in dropout rates.” By 2000, only 70% of children completing primary school were going on to secondary school and the fourth and final year of lower secondary school had an average dropout rate of 92% for males and 93.4% for females during 1990-97(.60). The illiteracy rate started to increase during this period with a highest record of school drop outs thus affecting the education sector.

Furthermore, health care also declined during the liberalisation period where IMF and WB advised government to introduce user fees as a condition to access the 484 million which government wanted to boost the economy in the 1990s (SAPRIN,2002). The IMF required that Zimbabwe reduce noninterest expenditures by 46%. Though the government never met this incredible target, health care spending under the SAP fell to 4.3% of the budget in 1996 from 6.4% in 1990. The per capita budget for health care fell from U.S. $22 in 1990 to U.S.$11 in 1996. As the SAPRIN study of 2002 states “[Zimbabwe’s] public health budget is not enough to meet health needs. The per capita budget has fallen since 1991 to a level where it does not even pay for prevention, clinics and district hospital costs per capita.” The IMF’s fiscal demands have thus created a health care crisis in Zimbabwe and reversed “the previous trend of improving health outcomes.

Unemployment is another aspect that came on the rise following the IMF and W/B liberalisation policies that it prescribed for the post colonial Zimbabwe. These measures brought “massive closings of companies,” leading to increased poverty and unemployment. The Zimbabwean economy went into recession in 1992 when real GDP fell by nearly 8%. Twenty-five percent of public workers were laid off and unemployment reached between 35% and 50% in 1997. By 1999, 68% of the population was living on less than $2 a day and with the collapse of wages many workers lived far below the poverty line (SAPRIN, 2002) Manufacturing production “has been the main victim of liberalization policies” it’s share of the GDP falling to 16% during the 1990s for the first time since 1960, compared to an average of 25% during 1970-1990. Manufacturing output declined more than 20% between 1991 and 2000 due to high interest rates and the cost of foreign currency. The sector has stagnated since the introduction of the SAP and the loosening of import controls, and the 1990-97 periods has been characterized by “a lack of industrial development” (SAPRIN, 2002). Zimbabwe’s real GDP per capita fell by 5.8% during 1991-1996 and total private investment fell by 9% between 1991-96. During the same period, private per capita consumption dropped by 37%. “This alone transformed the group of those who lost from the reforms from a minority to a majority” (Halifax initiative). Employment growth in manufacturing fell from 3% during 1985-1990 to -3% in 1999-2000.54 Real wages declined by 26% between 1991-96 to the point where even those with fulltime jobs were no longer guaranteed a living wage; food prices rose faster than other consumer prices, having the greatest impact on the rural poor

Agriculture sector was not spared by the economic policies prescribed by IMF and W/B through the banner SAP (structural adjustment programme). The removal of subsidies on inputs negatively impacted on the production of the country, thus affecting the national GDP negatively. Farmers have been hurt by high interest rates, the removal of subsidies on agricultural inputs and a reduction of government spending on roads and transport systems. The price of fertilizer has shot up 300% in five years leading to the drastic reduction of acreage under cultivation. Trade liberalization has resulted in a shortfall in maize production

(required for human consumption and livestock feed) which experienced a persistent surplus

before 1991(SAPRIN,2002) .The implementation of the ESAP also had a negative impact on small-scale and communal farmers as the removal of government subsidies on agricultural inputs such as seeds and fertilizer, and a reduction of public expenditure on agricultural extension services, increased the cost of production. As a result of the withdrawal of state involvement in marketing agricultural inputs, many small-scale farmers became dependent on middlemen, and were forced to sell their produce at below-market prices (Structural Adjustment Participatory Review International Network, 2001).

Lastly, undermining of democracy and infringement of human rights has stood to be one negative way the W/B and IMF policies have contributed to the negative development of Zimbabwe. Development is said to have taken place, if the people are given the democratic right to choose what they want. On the other had respect of human rights is a positive indicator of positive development. W/B and IMF have infringed with the democratic rights and respect of human rights by imposing to Zimbabwe conditions to be followed and policies to adopt if they were to receive the loans (Ismi, 1998). Such conditions and prescriptions then worked hard towards robbing the nationals their democratic right to adopt policies that will help the nation grow its economic, social and political status.

The above discussion clearly points it out that IMF and W/B contribution to the development is more on the negative side than the positive side. The policies IMF and W/B prescribed to Zimbabwe have failed to bring development in a transformation dimension but have instead brought more social and economic suffering to the nation. SAPs emphasize export-led growth in order to generate foreign currency to reduce debt. However, trade liberalization in Zimbabwe’s case (and that of many other countries) has led to imports growing more than exports; this has raised trade and current-account deficits thereby significantly increasing the country’s debt burden (Ismi, 2004) Overall, structural adjustment in Zimbabwe has gutted an economy making rapid progress before 1991. The SAP has destroyed Zimbabwe’s productive capacity causing massive unemployment and poverty; the reforms have further impoverished Zimbabweans by denying them access to health care and education.

Empirical evidence suggests that the Zimbabwean economy started showing signs of slowing down back in 1997 after the government abandoned the IMF guided Structural Adjustment Programme mid-way. Prior to ESAP, Zimbabwe had a fairly developed economy compared to other African countries. The economic strategy was fairly interventionist, aimed at guiding growth with equity with a socialist leaning. This approach managed to support high rates of economic growth with GDP averaging 7.5 % between 1965 and 1975(Coronation Advisory, 2008). The prescriptive World Bank model was firmly based on the orthodox neoclassical view of economics – particularly the efficiency of free markets and the benefits of international trade and competition. As a result of Zimbabwe’s relatively strong and varied economy, the World Bank considered it a place where they could implement SAPs more effectively and easily compared to other African countries. The free market theory of the SAPs failed in practise. Between 1991 to 1996, compared to the 1980s, average real GDP growth fell from 4% to 1.7%, average inflation rose from 15% to 25%, interest rates trebled, the percentage of people living below the poverty line rose from 50% to 75 % (Coronation Advisory, 2008).

IMF and World Bank were largely influenced by the Washington consensus that was conceived by Williamson in 1989 this Consensus became generally accepted as the most effective model by which developing nations could spur growth. Embracing ideals of free-market capitalism, which included open trade policies, privatization, and deregulation, the Washington Consensus provided a prescription for development in the Third World.

Nevertheless, implementations of the Washington Consensus have had decidedly mixed results: as Serra and Stiglitz contend (Harris, 2008), the Consensus led to multiple currency crises, stagnation, and recession during the financial turmoil of the 1990s and may ultimately have led to the collapse of several nations’ economic systems. The most recent and more severe financial crisis, which began in late 2007 and is still running its course, has further eroded confidence in the Western, neoliberal economic model.

Recently a new strategy started to surface, defined in contrast to the Washington Consensus as the Beijing Consensus; and indeed, the Beijing Consensus has little in common with Washington’s model. Instead of prescribing rigid recommendations for the problems of distant nations, the Beijing Consensus is pragmatic—much like China in the post-1979 world—and recognizes the need for flexibility in solving multifarious problems. It is inherently focused on innovation, while simultaneously emphasizing ideals such as equitable development and a “Peaceful Rise” (Ramo, 2004: 4-5).

The Washington Consensus (WAC) is at its core based around ten policy recommendations. The recommendations are as follows: (1) Fiscal Discipline; (2) Restructuring Public/Social Expenditure Priorities; (3) Tax Reform; (4) Liberalizing Interest Rates; (5) Competitive Exchange Rates; (6) Trade Liberalization; (7) Liberalization of Inward Foreign Direct Investment; (8) Privatization; (9) Deregulation; and, (10) Property Rights (Williamson, 2004: 3-4).

These principles—in particular those regarding liberalization, privatization, and deregulation—are closely associated with the neoliberal ideology, or “market fundamentalism,” which espouses free-market capitalism as its core tenet (Serra and Stiglitz,2008). However, regardless of the true value of the economic policies the WAC suggests, Williamson—the man who coined the term—has come to the following concession: “[The WAC] has been interpreted to mean bashing the state, a new imperialism, the creation of a laissez-faire global economy, [or] that the only thing that matters is the growth of GDP” (Williamson, 2004). Disdain towards WAC policies has been most pronounced within the developing world, where it was felt that the Consensus was simply a new way for the developed North to take advantage of the developing south.

In fact, much of the WAC’s criticism can be linked to the adoption of its principles by the world’s leading economic institutions in Washington, D.C., such as the International Monetary Fund (IMF) and the World Bank (Serra and Stiglitz, 2008). In great part, these institutions can be credited with policies that were detrimental for a number of developing nations. The case of Argentina is a perennial example: “The country strictly conformed, perhaps more so than any other ‘emerging market’, to the advice of the [IMF],” however after surging in the early 1990s and then beginning to “lose momentum,” the end result was “complete collapse” by 2001 (Oniz, 2004: 375).

Beijing consensus emerged as an alternative to the Washington consensus that is rigid and had thrust on the growth GDP as the cornerstone to positive results in its policy implementation rating. The Beijing Consensus, which first gained notoriety in 2004 when Joshua Cooper Ramo published his paper—The Beijing Consensus—through the United Kingdom’s Foreign Policy Centre, is based upon three overarching ideals of Chinese development, which in turn suggest “how to organise [sic] the place of a developing country in the world”  (Ramo, 2004). These three ideas are summarized below:

Innovation In order to outpace the “friction losses of reform,” government must actively innovate in order to address the challenges introduced by the changing economic and social environment (Ramo, 2004: 12). Another author phrases this as a commitment to “constant tinkering and constant change, and recognition that different strategies are appropriate for different situations” (Leonard, 2006). It has a strong focus on creating effective policies, which solve problems that are actually important to its people.

 Pursuit of Dynamic Goals/Rejection of Per Capita GDPIn essence, the second big idea of the BJC is a “rejection of per capita GDP as the be-all and end-all” of development priorities (Leonard, 2006). This ideal serves in part as a rejection of Western policies, which are known to weigh these figures heavily. Instead, the BJC suggests an increased focus on measures such as quality-of-life and individual equity, areas that China has strongly focused its attention (Ramo, 2004).

Self-Determination Finally, the third point of the Beijing Consensus emphasizes the need for developing countries to actively seek independence from outside pressure, as it is imposed by “hegemonic powers” such as the United States (Ramo, 2004: 12). Ultimately, this ideal can be seen both through the lens of China’s traditional animosity to foreign incursion, and by considering the fact that China has refused to submit to outside pressure and instead pursued its own priorities. Gresh (2008) describes this characteristic of the as “valuing independence and self-determination and refusing to let other (western) powers impose their will,” emphasizing the idea that “Countries can plan their own development without having to accept the unfavourable terms of the Washington Consensus” (Gresh, 2008).

Conclusively, IMF and W/B are financial institutions  were heavily influenced by the ideas drawn from the Washington Consensus that have thrust on liberalisation and formation of a free market capitalism that takes GDP as the mainstay of economic development. In Zimbabwe these financial institutions contributed in both positive and negative ways to thee development of post colonial Zimbabwe, as discussed above but it is clear that the pendulum balance weighed more on the negative side in bringing development in the country. The policies that were adopted from the Washington consensus worked more towards reversing the development that was achieved and gained in the early 1980s. However , it is clear that many developing countries that suffered from these rigid and conditional policies are shifting from liberal policies to adopt the china model or Beijing consensus that is founded on flexible principles that do not see GDP as the only measure to realise development but it is based mainly on innovation determination and pursuit of dynamic goals as the only way to achieve development.

Reference List

Gresh, A. (2008) “Understanding the Beijing Consensus.” Le Monde Diplomatique. 

Halifax Initiative, “What is the G8?” p. 3; “The World Bank and the IMF: Walking the Talk of the G7,” p.1. 

Harris, H. (2008) "The Washington Consensus reconsidered: towards a new global governance." (Book Review). Journal of International Affairs 62.1. Academic OneFile, (accessed November 9, 2009).

 Ismi, A.(1998) “Plunder with a Human Face: The World Bank,” Z Magazine, February 1998, p. 10.

Leonard, A. (2006) “No consensus on the Beijing Consensus.” Salon.

Oniz, Z. (2004) “Argentina, the IMF, and the limits of neo-liberal globalization: a comparative perspective.” Review of International Affairs.

Ramo, J. C. (2004) “The Beijing Consensus.” The Foreign Policy Centre.

SAPRIN, The Policy Roots of Economic Crisis and Poverty: A Multi-Country Participatory Assessment of Structural Adjustment, April 2002, Executive Summary, p. 21.

Serra, N., Stiglitz, J.E. 2008. The Washington Consensus reconsidered: towards a new global governance. Oxford: Oxford University Press.

Walden, B. “The Role of the World Bank in U.S. Foreign Policy,” Covert Action Quarterly, Winter1991-92, p. 21.

 Williamson, J. (2004) “A short history of the Washington consensus.” Proceedings from  2004: From the Washington Consensus towards a new Global Governance. Barcelona.

World Bank, “Making Monterrey Work For Africa: New study highlights dwindling aid flows, mounting challenges,” Press Release, April 10, 2002, www4.worldbank.org/afr/stats/adi2002/default.cfm.”