How China opened its economy but kept its revolution

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Joseph Mverecha
President Mnangagwa has just come back from a week-long official State visit to China; the first such visit outside the continent since he assumed power in November last year. It had to be China, for several reasons, two of which are quite prominent.

Firstly, the long standing relationship dating back to the Liberation War, including military training and material support for the armed struggle.

China was unwavering and among the leading countries supporting the nationalist cause and the struggle for independence. Without the support of China and Russia, the struggle for Zimbabwe would have been much more elongated and intractable, with even significantly higher costs in terms of human life, livelihoods as well as financially.

China was there for Zimbabwe, right from the beginning of the armed struggle, training military cadres and infusing the ideology of guerrilla warfare so effectively applied by the Chinese Communist Party from 1930 to the takeover of Beijing in October 1949.

China was there during the dark and difficult days following the assassination of chairman Herbert Chitepo and the virtual standstill years of the struggle to 1976, the Détente and the earnest resumption of the war through to Lancaster and independence.

China was there, giving all the material and moral support. Many African countries, of course also supported the struggle — Ghana, Nigeria, Egypt, Algeria, Tanzania, Zambia, Angola and later on Mozambique following independence in 1975, to name just a few.

Secondly, the global economy is at crossroads — east meeting west. A shift in the global economy, a change of guard that is occurring, perhaps imperceptibly and yet decidedly — China will soon become the largest global economy, overtaking the US, perhaps as early as 2025 by some estimates.

Others say, the change of guard is occurring right away. Effectively, we are where the world was in 1890 — when the US overtook Great Britain as the largest economy in the world and the dominance of the US dollar would follow, half a century later at Bretton Woods in 1944, towards the end of the Second World War.

It would be very important for President Mnangagwa to get first hand portrait of how the most important global power today, views the world.

Through what prisms does China see the world and how does this differ from the way the current global power views the world?

President Xi Jinping will preside over this transposition, which has already begun. What are his views about the most important questions of the day — the global financial architecture, uneven global trade, global financial volatility, world currency management, international payments and settlements, international co-operation, global terrorism financing, Cyber Crime, Anti Money Laundering and a host of other important matters affecting the global economy today?

China’s capitalist vision

Talking about the staggering rise of China to the global pinnacle, over the past four decades, it is important to note that this had always been the vision of Deng Xiaoping, for China to reclaim her position as the dominant economic power of the world.

Flashes of this vision came through briefly, early in the 1960s, during the difficult years of the Great Leap Forward — when Chairman Mao sought to transform China into a major industrial power and military giant, complete with atomic and nuclear power, the later he achieved by 1962.

The Great Leap Forwad was a complete industrial disaster with hunger ravaging poor villagers across the length and breadth of China.

This was to replay again from 1966 to 1976 during the famed Cultural Revolution, which decimated both agricultural and industrial production, claiming the lives of hundreds of thousands of ordinary people.

It was a period of incredible upheaval, with the wife of Chairman Mao at the crest of tidal waves of social and economic changes that were not only disastrous economically, but brewing much discontent with the population.

Many reformers, among them Deng were persecuted as “Capitalist Roaders” advancing imperialist interests. Liu Shaoqi, the Chairman’s No. 2 man bore the brunt of the Cultural Revolution”, in 1961, it was Liu and Deng who had succeeded in pushing the miniature economic reforms that had improved the lives of ordinary folk.

But thanks to Chairman Mao, Deng, was preserved, even though he indeed suffered humiliation, house arrest and even got banished to a remote province for nearly three years during the “madhouse” that was the Cultural Revolution. But his life was preserved. Other reformers were not so fortunate — Liu would pay the ultimate price. The same fate met Marshall He Long and Peng Dehuai — the brilliant military strategist, who led the Chinese Army in the Korean War (1950-53).

By 1970, China was deep in the throes, thanks the Cultural Revolution and the inward looking policies of Chairman Mao implemented unremittingly since 1949.

China was number 100 in the world (in GDP terms) with a paltry per capita income of US$450 per individual, and teeming poverty everywhere. Wretchedly poor, they say, the most frequently asked question in the early 1970s, when two Chinese met anywhere in the country was “have you eaten yet?” No doubt, today, in China, they are asking a different set of questions altogether.

As it were in September 1976, the Great Chairman Mao answered the call of God, as is the manner of all Mankind — everyone born of a woman — has this inevitable appointment.

Enter Deng and the beginning of the Chinese economic miracle! Hence my question, would His Excellency, the President Follow in the Big Foot Steps of Deng Xiaoping?

There are those many voices in Zimbabwe, who say the President cannot transform Zimbabwe because he was part of the system from 1980. That is true, but only half the truth.

Deng was an underling of the Great Chairman Mao since the 1930s, through the Long March of 1934/35, all the way to the proclamation of the Communist Republic on 1 October, 1949 and through the years of Chairman Mao’s 27-year rule to 1976.

He was there from dawn to dusk, back to dawn. But he transformed a nation, like no other leader has done, since Genghis Khan. The fact that he was part of the system since 1980, by itself is not enough to prejudge him.

In Africa, like much of Asia, the head of Government rules strongly, and usually will not brook anything contrary to his own vision — even a mathematical deviation from the established path.

That was true of Mzee Kenyatta of Kenya, Kenneth Kaunda of Zambia, Kwame Osagyefo Nkrumah, until his overthrow in 1966, Gamal Abdel Nasser of Eqypt, to name but a few.

Our history is replete with an acrid trail of discarded politicians left by the wayside, who had glorious ideas for their country that were incongruent with those of the “King” himself.

Indeed, it is part of the survival strategy itself, if you are a politician to know when to air your views and when to beat a haste retreat. Essentially, until mid-November, we did not know with certainty what ED himself stands for.

There were glimpses and flashes here and there that would have given insight to the fact that he would be good for business and the economy but that was that — mere flashes. He had to toe the line of the ‘Big Man” himself in everything and to be fair, he also depended on the Big Man for political survival. He was not his Man.

This is African terrain — quite different from America where you would know for good measure what Al Gore Stands for even during the presidency of Bill Clinton or how Gordon Brown had views significantly at variance from his boss during the Blair years in Britain. It is not the case for Africa, no matter how much we become anglicised by our over-hyped Anglo Saxon education.

In the true African tradition, if the “King” inadvertently steps on your foot, there is little room to seek redress. The most you can do, is to plead with the King, seeing that your leg has “trespassed” under his foot, giving him assurance by his totem that this notwithstanding, the King will suffer no hurt from his loyal subjects. In the process, wishing that the “King” would live forever and rule gloriously, seeing as he is clothed in splendour and majesty.

That is a close approximation of what was happening in Government. Nothing else explains why the economy drifted to meltdown in 2007/08, yet Government Cabinet meetings were being held every week, every month and every year — yet the economy went all the way to ground zero.

In my view, President ED has considerable capacity to transform the economy and the livelihood of Zimbabweans. Plausibly, he has the potential to alter the course for Zimbabwe, in the same way Deng altered the course of China.

However, there are critical junctures and at least five (5) are imperatives, if he is to set the nation on the path towards the miraculous, as did Deng for China. The list below is, (of course) not exhaustive:

A precise forward looking National vision;

A revisit to the Liberation War values and principles;

Genuine commitment to the people;

A determined Reform Agenda;

Balance between the “Big” National Issues and focus on the “Small” matters.

A Precise Forward

Looking National Vision

It is important to have a precise forward looking national vision, drawn from wide stakeholder consultation, across the national spectrum which must represent the broad aspirations and dreams of the people of Zimbabwe.

The national vision must have specific targets — concise and specific targets for key variables, including Real GDP growth, employment, budget deficit, gender and Youth main-streaming, schools’ enrolment — primary, secondary and tertiary, targets for the current account deficit, foreign reserves accumulation and per capita income over a defined period, say two or three decades.

The visions must also contain mechanisms for regular and periodic evaluation. Vision 2030 as espoused by the President approximates this in that there is an explicit target for per capita income growth by 2030. But more is required, in terms of how that vision will be concretised, i.e. the roadmap for realisation of the vision objectives.

“Where there is no vision, the people perish” — a time tested principle captured in the Holy Scriptures is illustrative. Equivalently, where there is no vision, there is dissipation of energy. Vision galvanises the collective national energy in one direction, becoming the driving force and guiding pillar for optimal resource allocation.

In thinking about the national vision, it is important not to be immobilised by the pain of our past — especially the pain of our colonial history. We must of necessity think only in terms of the present and future possibilities for Zimbabwe.

Building bridges with all is, therefore, an integral part of nation building — a calculated strategy focused only on advancing Zimbabwe’s national interest.

When Deng assumed power in 1978, the vision he had for China had crystalised long back around 1961, when he issued the now famous statement “I do not care if the cat is white or black, so long as it catches the mice” in reference to the rising innuendos about foreign capital.

Deng was saying, capital is neither capitalist nor socialist — under an appropriate economic system, whether capitalist or socialist — capital can bring desired results, which are: growth of the economy, growth in trade and incomes, per capita income growth and lifting up the lives of everyday people.

Four decades since he initiated the first reforms in Shenzhen, more than half a billion people have been lifted out of poverty in China, 20 times growth in per capita incomes and thousands of kilometres of rail infrastructure, bullet trains, new airports, new harbours kilometres the scale is breathtaking – something akin to a miracle.

It is not likely that future generations may be able to witness something so dramatic over such a short period of time. What other nations achieve have achieved on 250 years or more, China has achieved that in 35 years! This is because vision endures, vision persists against all odds and vision energises a nation.

A Revisit to the Liberation War Values and Principles

The bitter struggle for independence was borne out of an idea, an ideal and a dream. The idea was for total emancipation and freedom from all forms of oppression by the colonialists. The complete subjugation and brute force treatment of Africans by the white settlers, left no other option, other than to wage a protracted armed struggle.

The indiscriminate dispossession, sustained by a slew of draconian acts c the Land Apportionment Act, Land Husbandry Act, Land this and that Act — all of whose design had one primary objective — the wanton dispossession of Africans of both land, animals and any other form of wealth.

Added to that, the dispersion of Africans from fertile lands to the barren semi desert areas infested with tsetse fly, while the settlers, with brazen equanimity, parcelled out to each other limitless acres of prime farmland, completely oblivious of this grievous injustice to the natives.

Essentially the natives became hewers of wood and drawers of water in their own country, on their own land.

The ideal was for equality of all and equal access to resources and equal opportunity. The dream was for a prosperous country that confers increasing benefits for all her people, from the uttermost east to the west and north to south — across the entire country for all her people — everyone who calls Zimbabwe home, regardless of colour, tribe, creed or religion.

There is need to return to the values and ethos that gave birth to the spirit of resistance unto bitter struggle — to create a country, in which all her people are equal and have equal access to land, resources and opportunity. Since independence, there has been significant deviation from this ideal.

The staggering level of poverty among the sprawling urban and rural poor attests for urgent remedial measures. The income inequalities are incomprehensible. Breathtaking opulence on one hand and staggering poverty on the other.

Essentially, we have an enclave economy which has left adrift millions of Zimbabwe’s desperately eking a living at the periphery — the so called informal sector, which now dominates Zimbabwe’s economic landscape. We want an economy which works for everyone, where everyone has a stake, in particular the women and youth.

Genuine and Abiding Commitment to the Ordinary People

A genuine commitment to the ordinary man and woman, is an imperative for persisting with difficult reforms for economic emancipation. There is need for Government to understand the manifold daily survival struggles of everyday people and that the Government is indeed giving priority to addressing those challenges.

Deng was forthright — this indeed was one of his foremost characteristics — he would never shrink from putting forth his views, which was occasionally, a great irritant to the Chairman — for this, he was demoted, three times during his political career and each time he bounced back.

When in 1961, during the review of the Great Leap forward which had wrought much suffering and misery on the population, many members of the Central Committee rose to thank the Great Leader for his vision, Deng was among the few who voiced grave concerns and misgivings about the direction the country was taking, the implications for the poor, and the endemic chronic poverty.

The Great Mao sought to have a bilateral with Deng to understand why he was opposed to such an illustrious vision. Deng highlighted to him that China was in the throes because of the relentless pursuit of backyard industrialisation, when the whole world was modernising, agriculture production was going down and millions were facing starvation. Deng proposed some reforms to Chairman Mao which would have rolled back the land collectivisation and attracted some capital into the economy. This would improve the lives of ordinary Chinese, many of whom were starving.

The Chairman listened and pondered. “Comrade Deng is mad” he privately confided to a trusted lieutenant. “He wants us to open the economy to the flood gates of capitalism and so open China to the vagaries of Western capitalism. That will not happen.”

Deng had another salient but very important quality — he was completely devoted to those who served him. He was particularly uniquely gifted in understanding and connecting with the ordinary folk. To this there was no equivocation. During the last year of his cantonment, Deng requested permission from Chairman Mao to visit one of the “Red Guard Youth brigades” deployed from the cities to the country side at the height of the Cultural Revolution. He wanted to check on the personal welfare of a young man named Wang Ruilin, who had served as his Secretary early in the 1950s, in the process travelling half a day to locate the young secretary, who when he found him, like millions of young Chinese, was barely recognisable.

Deng was appalled by the excesses of the cultural revolution, decimating, not just the economy and livelihoods, but the dignity of humanity, leaving in its wake, a trail of famine, hunger and economic meltdown.

In 1974, at the behest of Premier Chou Enlai, Deng would once again be called to Government in an attempt to stabilize the economy that was close to ground zero.

A determined Structural Reform Agenda

The reforms required to get the economy back on track will not be easy. Deep structural and painful reforms are required, not cosmetics. There are few low hanging fruits for sure but hard slow slog, along a perilous and difficult terrain — the road less travelled.

A determined reform Agenda is critical for the implementation of comprehensive reforms that invariably imply social costs for all stakeholders, particularly hard pressed labour facing attenuated real incomes from ever rising prices. It is no place for the faint hearted.

His biggest question mark is whether he can radically institute deep, far reaching reforms. Is he sufficiently radical, yet balanced to carry through expenditure cuts, civil service realignment, parastatal reforms, labour market reforms and all the institutional reforms needed to strengthen macro and micro fundamentals as necessary to support economic recovery and democracy.

The direction he has taken is very good and promising, the energy is present but will he have internal support from both party and Government, which is critical for internal coherence, necessary to carry through the reforms? Will his Cabinet and party troops march in single file?

Going forward, there will be need for shared costs of adjustment for all stakeholders — Government, Business and Labour through an agreed stakeholder engagement process.

For Zimbabwe, reforms are long overdue — they cannot be delayed much longer. The more the budget deficit continues to exert pressure on money supply growth and demand for money, the closer the nation faces calamity.

Sooner rather than later, something may give way. The challenge is to know when the point of inflexion is reached. Prior to 2008, when the country had its own its own currency, it was possible to observe how the currency was rapidly losing value — but with no currency, there is not much to observe in nominal terms, but dangers lurk, nonetheless.

Balance between the “Big” and the “Small” — Government Initiatives

The Government is making commendable progress on many of the big national projects that are redefining the economy and will no doubt unlock significant growth potential in the coming years.

There is no doubt, growth with multiplier effects will be realised from:

Tokwe Mukosi Dam

Beit Bridge Harare — Chirundu Highway

Batoka Hydro Project

Gwayi Shangaan Dam

Kariba South Power Project

Hwange 7 & 8 Power Project

Gwanda Solar Energy Project

NRZ Revival

ZISCO Revival

Airports Refurbishment

The above are among the many big projects — some completed, others work in progress but with significant positive downstream effects on the economy.

In macro-economic policy terms, this is the equivalent of shifting the economy’s long run production frontier, enhancing the economy’s capacity to produce goods and services for the future. This is important and must be sustained.

Importantly, however, there is need to focus on the many “small” or hygienic issues that are nevertheless enormously significant for the everyday man, who struggles endlessly to make ends meet.

The same applies for small businesses that are struggling to keep afloat against the tide. Among them, cash for daily household small expenditures and foreign exchange for businesses importing raw materials and machinery for production are critical.

The drive for plastic money is important for the economy, but not every corner of the country has access to POS and network.

Still many villagers across the country have to take a bucket of maize and half to the grinding mill – the half a bucket is for payment to the miller. Effectively, they are paying twice the normal price — that is 100 percent cost for villagers. The same is true for housemaids and gardeners and other low wage earners who are having to rely on Ecocash to access cash, at a price of 30 percent — for every $100, as much as $30 is taken. This is huge. Since September 22, prices in the economy have stabilized but remain very high — perhaps some form of static equilibrium but still very high for ordinary folk, whose wages have hardly increased.

Uncertainty is a big challenge and driven mainly by parallel market conditions. Without resorting to price controls, there is need for both immediate and long term solutions.

Kariba South has added 300MW to the national grid and Hwange 7 &8 have potential to markedly increase electricity availability, but the price of electricity is high. Business costs realignment implies the need to interrogate all cost lines — high taxes, EMA fees, local Authorities tariffs, municipality fees, ZINWA, and a disparate range of charges that weigh on business, undermining export competitiveness.

Gwayi Shangani and Tokwe Mukosi have huge positive benefits for the economy. But could authorities find space to accommodate the rural poor alongside the big investors by creating a green belt for downstream farming — perhaps 1ha each or 2ha for women and youth for all year round irrigated production for each of those dams. That would measurably alter the livelihoods of hundreds of thousands of rural poor.

Deng’s first reforms were in agriculture for food security. First the reversal of Chairman Mao’s collectivization and communes, thereafter the parceling of small plots to households where they could produce unfettered and sell any surplus to a fairly predictable market, also supported by the state. Within half a decade, China had achieved rice (staple food) self-sufficiency — following decades of policy induced hunger. By 1984/5, it was time to expand reforms towards the state owned industrial and banking sectors.

This also informs us that sequencing of reforms is also very important for reform agenda optimal outcomes.

 Joseph Mverecha is an Economist with a local commercial bank. He writes in his own capacity.

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