Macroeconomic and Structural Adjustment Policies in Zimbabwe

By Clever Mumbengegwi | Go to book overview

3
Redistributive Policies and Economic Growth

Mudziviri T.NziramasangaandMinsooLee


Introduction

Economic reform programs have the potential to yield significant benefits, yet in most cases the necessary policy changes are only implemented as a last resort, long after policy makers realize that the status quo is no longer sustainable. Programs have rarely been implemented in full, nor have they been successful the first time around. Reform programs have usually been motivated by dissatisfaction with the lack of economic growth, or with rates that are low relative to those of neighboring countries with market-oriented systems ( Perkins, 1994). Delays in responding to the internal and external pressures are attributed to uncertainty over the distribution of gains and losses from the reform program (see, for example, Fernandez and Rodrik, 1991). Voters do not know with certainty ex ante those individuals who would derive positive net benefits, and therefore would be willing to pay the cost. Given this uncertainty the bias is toward maintaining the status quo. The evidence cited in such studies pertains to macroeconomic stabilization in the developed world. When it comes to developing countries, the lack of reform has been partly attributed to non-economic motives such as sheer ineptitude or predatory behavior ( Krueger, 1993) and the initiation of programs due to exogenous shocks, political change, or even the emulation of economic performance in neighboring countries ( Perkins, 1994). Assessing the validity of the above reasons as well as the impact of implementing gradual reform on such objectives as income growth and employment has proved problematic. In this chapter, we try to capture both the flavor and impact of the reform process by using time series data for Zimbabwe. First, we use intervention analysis to assess the impact of the actual implementation on the individual macro variables considered key to the reform process. The relative magnitudes indicate that the gradual reform process in Zimbabwe was hamstrung in that only trade liberalization, exchange rate policy and price reforms were implemented – and these measures were only introduced very gradually. Labor markets were also decontrolled. However, there

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