By Henry Kyambalesa
The fate of less-developed countries has become one of modern civilization’s major sources of concern. The extreme and persistent poverty, hunger, ignorance, and disease which have come to characterize life in such countries are certainly unprecedented in human history.
Unfortunately, there are clearly no easy answers or quick fixes to the seemingly self-perpetuating socioeconomic problems facing less-developed countries.
However, three elements are fundamental to the improvement of the quality of life in less-developed countries. Firstly and foremost, government officials in such countries need to make a sustained effort to contribute positively to the attainment of lasting political stability, as well as ethnic, religious and industrial harmony.
History and experience have taught us that political instability and civil strife are disruptive to economic and all other kinds of productive human pursuits and endeavors and are, therefore, detrimental to socioeconomic development.
Secondly, government officials in such countries need an arsenal of sound and stable economic policies, incentives and initiatives in their quest for higher productivity, greater competitiveness in the global marketplace, and sustained expansion of their countries’ economies.
And, thirdly, government officials in such countries need to learn that their countries’ real future does not hinge on seeking the compassion of, or excessive and protracted reliance on, industrialized nations in matters of socioeconomic development, such as by calling for a new international economic order (NIEO), or by overly relying on efforts to “spread the wealth” worldwide spawned at the summit of G-7 leaders and Mr. Boris Yeltsin, former Russian president, held in Denver in June 1997.
They need to take full responsibility for finding viable solutions to their domestic problems, as Akashambatwa Mbikusita-Lewanika, founder and former president of the defunct Agenda for Zambia party, has advised in the following words:
“Just as we must stop blaming external factors for our … problems, we must also stop looking to external intervention for solutions; the fundamental problems facing us, as well as their critical solutions, lie within the grasp of … [our] nation[s].”
Given the extreme and astonishing poverty and human suffering which have, by and large, gripped less-developed countries, government leaders in such countries have no time to waste—they need to work briskly in finding viable solutions to the catalogue of socioeconomic ills facing their countries.
For a great number of less-developed countries where national economies were initially captained by monopolistic state enterprises, one of such solutions is the liberalization of commercial and industrial activities in a deliberate effort to make them the preserve of the private sector. This matter constitutes the subject of this article.
The term “economic liberalization” refers to the process by which a country’s government pursues the following measures, among a host of other related measures: (a) selling or privatization of state-owned assets and enterprises to private investors; (b) removal of investment restrictions and provision of investment incentives; and (c) revocation of price, foreign-exchange and currency exchange-rate controls.
With respect to the selling or privatization of state-owned and operated enterprises which could have been either established by national governments or nationalized from private owners, several reasons are cited by O. C. White and A. Bhatia (1998:22) and Gerry N. Muuka and Binta Abubakar (2002:14) as having prompted national governments to sell or privatize the companies. That is, to:
(a) Reduce fiscal (or budget) deficits by reducing loss-making companies’ dependence for funding on the national government;
(b) Develop the private sector;
(c) Broaden ownership of commercial and industrial undertakings;
(d) Foster competition and, thereby, boost economic efficiency in commercial and industrial sectors;
(e) Reduce the administrative burden of state-owned companies on the national government;
(f) Gain access to private investors’ capital and technology;
(g) Raise revenue from the sale of state-owned assets and enterprises; and
(h) Comply with requirements imposed by The World Bank and the International Monetary Fund associated with funds borrowed by the national governments to meet domestic budgetary shortfalls as well as address critical educational, healthcare and infrastructural needs.
There are a number of benefits that can accrue from privatizing government-owned assets and business undertakings. As David M. Chilipamushi (1994) and N. A. Deassis and S. M. Yikona (1994) have reasoned, privatization can stimulate private investment, give economic power to a greater number of people through stock ownership, promote competition and encourage efficiency in commerce and industry, beef up government coffers through the sale of government holdings in State enterprises, as well as ease the financial burden of state companies on the public treasury.
Moreover, as C. Pitelis and T. Clarke (1993) have noted, the reduction of government involvement in commerce and industry which follows the privatization of state enterprises results in reduced public-sector borrowing and government spending.
However, governments committed to privatization need to address a number of issues, such as the pace of privatization, the choice of companies or industries to be affected, and the conduciveness of existing policies and conditions to the evolvement of a sound market economy.
Pace of Privatization:
All too often, there is a tendency for governments committed to economic liberalization to be obsessed with speedy privatization of state and ‘parastatal’ companies without considering the very likely possibility that they are merely shifting the monopolistic positions enjoyed by such companies from government to private hands if new, private investments are not quickly made in the lines of business involved to provide the necessary competition to the buyers of the companies.
It is advisable that, while privatization should be considered to be an essential element of the liberalization process, the pace of its implementation should be treated with equal seriousness, otherwise the benefits expected to accrue from such a program (such as lower prices, high-quality products, and greater variety and abundance of products in an economy) cannot be realized at all.
Choice of Sectors:
Apart from the need for a cautious and well-calculated pace of privatization, it is important to determine whether there are some sectors of a country’s economy in which it would make sense for national and/or local-government involvement. In Zambia, for instance, examples of such sectors are those involving copper mining, electricity supply, and posts and telecommunications (Africa Research Bulletin, 1992 & 1993).
Admittedly, there are—in Zambia, at least—as many advocates as there are opponents of government involvement in such economic sectors. Countries facing this kind of dilemma can perhaps do well to pick a leaf from the following examples drawn from the United States, which, to date, is clearly the exemplary and most advanced free market system in the world:
(a) The National Level: The Federal government has maintained a monopoly in the provision of postal services through the U.S. Postal Service. The combined volume of business of private postal service companies (including United Parcel Service, Federal Express, DHL, and numerous small postal facilities across the country) is far below that of this government monopoly.
(b) The Local Level: In the country’s states, the local provision of electric power, public transport, and telephone services is generally undertaken by state-regulated monopolies. In the State of Colorado, for example, public transport is catered for by the Regional Transportation District (RTD), and water in the City and County of Denver is supplied by Denver Water.
An Enabling Environment:
The success of a privatization program is greatly dependent upon governmental commitment to the creation of an enabling environment for the evolvement of a market economy—that is, a socioeconomic environment in which business entities can, to use the words of Joe Webb (1999), “succeed or fail on their own merit.”
Ernst & Young, Inc. (1994) has identified several important aspects which should constitute such an environment; these are:
(a) Trade liberalization and promotion of exports to beef up foreign reserves;
(b) Revocation of price controls;
(c) A sound legal framework designed to protect private investment and facilitate the functioning of a market economy;
(d) A well-developed financial market;
(e) Good infrastructure—including energy, water, telecommunications, and transport facilities;
(f) Governmental assistance in nurturing entrepreneurial and management skills; and
(g) Government programs designed to reduce the negative impacts of a transition to a market economy on vulnerable individuals and institutions.
A Final Word. Forget about socialism. It contributed to the disintegration of the former USSR and the collapse of the former East Germany. It caused voters’ disenchantment with Kenneth D. Kaunda and the United National Independence Party (UNIP) in Zambia. And it has led to greater misery and destitution in countries where it is currently being pursued.
Jair Bolsonaro, former President of Brazil, was not joking when he made the following comment concerning oil-rich Venezuela on September 24, 2019 in a speech delivered at the United Nations General Assembly in New York: “It is fair to say [that] socialism is working in Venezuela—they are all poor.”
The same can be said about other socialist / communist countries worldwide, including Castro’s Cuba.
With respect to the misconceptions regarding the People’s Republic of China as being a robust and successful ‘socialist’ or ‘communist’ country, an editorial that appeared in News China in February 2019 has summed up the actual reason for the country’s economic success in the following words: “China’s economic success in the past decades has been established on the premise of a liberalized and vital private sector.”
In November 2018, the same news source carried a similar message: “Chinese President Xi Jinping affirmed in a meeting … that the [Chinese] government will support the private sector to become bigger and stronger.”
Also, the following quote excerpted from the South China Morning Post (March 6, 2023) highlights the country’s yearning for foreign private investment:
“[Former] … Premier Li Keqiang said China will make greater efforts to attract and utilize foreign capital, by expanding market access to foreign investors, especially in the modern service sector.”
News China (May 2023) has perhaps provided a more succinct assessment of the private sector’s contribution to China’s economic performance in an editorial in the following words:
“The importance of the private sector [in China] has long been recognized and is dubbed ‘56789,’ an allusion to the private sector’s contribution [amounting to] … 50 percent of the country’s tax revenue, 60 percent of national GDP, 70 percent of technological innovations, and 80 percent of urban jobs, with private firms accounting for 90 percent of all enterprises.”
For reasons I have articulated in my other articles on this subject and the rationale for economic liberalization I have encapsulated above, therefore, politicians who genuinely love their respective countries and their fellow citizens would adamantly resist the temptation of considering socialism as a potential ideology for improving the general welfare of the majority of people in their countries.