A little over 50 years ago, the British colonial office was told by an economist who had visited Nyasaland (Malawi) and Mauritius that these countries when granted independence would have to depend on another country for survival.
Thirty years later, the name Mauritius was hitting media headlines as a star performer in the field of economic development and that it has become a middle income country. What about Malawi? They were saying it has retained its position in the bottom league of the poorest countries of the world.
In the latest issue of the magazine, New African, we read that the tiny Indian Ocean Island, Seychelles, has replicated the economic miracle earlier achieved by its neighbour, Mauritius. What about Malawi? Nothing sensational achieved as yet.
Economists who study economic history have the opportunity to compare economic systems that have existed for centuries. Possibly most economies would admit that no system has served well all countries everywhere, all the time. Environments, both domestic and external, determine the efficacy or otherwise of the system.
What system are we following in Malawi? Is it the right one for our environment? It is operated by the most capable of our men and women?
These questions must be asked because groping in the dark leads one to fall in the dungeon. If 30 years were long enough for Singapore, Mauritius, South Korea and Taiwan to experience change, why not Malawi even 50 years after independence?
The economic system to which Malawi belongs is called capitalism or free market economics. But how this system works in one country is never quite like the way it works in another country. This is because social and natural environments differ from country to country.
At the beginning of the multiparty era in 1994, sub capitalist systems in vague were Reaganomics and Thatcherism. Reaganomics was named after President Reagan of the United States (US) who reduced State involvement in the economy largely through deregulation. Industries were freed from State directives about what they were to produce and how much they were to charge.
Thatcherism was named after Britain’s first woman Prime Minister Dane Margaret Thatcher. She went the whole hogg denotionalising public corporations and selling them to the private sector. Behind her were thinkers like Sir Keith Joseph and economist Sir Watter Allen.
From both the US and United Kingdom, the philosophy of hands-off was preached all over the developing world. In Malawi, ex-president Bakili Muluzi set up the Privatisation Commission which saw to it that State enterprises were sold. There was an outcry in the streets “Bakili has sold government companies and we have lost jobs”.
Have our academic economists made a survey of the impact privatisation made on the Malawi economy? We were told that private entrepreneurs were better at managing companies than State employees. Why is the Malawi economy still prodding along with heavy boats instead of flying to attain opulence?
Where privatisation achieves the highest results you will find an infrastructure of entrepreneurs already in being. All talk about the private sector playing its role as an engine of growth is useless unless the economy is endowed with entrepreneurs.
The financial meltdown which brought a depression in the industrial world six years ago has modified the conviction that economists and policy makers there had in pure capitalism. In the Economist on June 21 to 27 2014, we read that the development of State capitalism over subsequent years has undoubtedly been extraordinary. But there are good reasons for still hoping that it is a way station to more fully private economy, not a new form of capitalism. The best State-owned Enterprises (SOEs) have demonstrated that they can thrive without the guiding hand of the State and the worst have proved that. However, many market disciplines you impose upon them, they will find a way of turning State capitalism into its ugly sister crony capitalism.
In other words, the economies of developed countries have also established some successful State enterprises, but that the successful ones have been those which have been left relatively free from government guidance. Those which have been closely monitored have degenerated into crony capitalism, a capitalism of corruption.
In young economies like Malawi, State participation in the economy by setting up government companies is a necessity because private people with the capital and willingness to take risks may not be in abundance. Indeed at the beginning of independence, this is what was done in countries such as Ghana, Tanzania and even Malawi. The problem was that persons appointed to these enterprises were usually political favourities and cronies. Merit was not the primary consideration in appointing them. The State industries invariably became unprofitable because of mismanagement and overstaffing.
These are the lessons to guide us when resuming, as we must, State ownership of some industries.