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Regime change, economic development

Economic and social outcomes in Malawi over the last 54 years are a mixture of paradoxes. The Gross Domestic Product (GDP) in Malawi expanded 5.60 percent in 2017 from 2016. GDP annual growth rate in Malawi averaged 4.44 percent from 1994, the time multiparty democracy was reintroduced in Malawi, until 2017, reaching an all-time high of 16.70 percent in 1995 and a record low of -10 percent in 1994.

Various Southern African countries that were behind Malawi in the 1960s have surged far ahead in most economic and social indicators. Malawi has thus been unable to realise its potential. It is usually believed that economic growth can take place only in the presence of political stability but the Malawi case contradicts conventional wisdom.

Malawi has not been at war since 1964 and the country has never been under any political crisis for a period of more than a few days and yet Malawi’s economic path resembles that of a country that has been at war for most of its independence period.

Five different presidents have ruled Malawi under four different political parties, namely Malawi Congress Party, United Democratic Front (UDF), People’s Party (PP) and Democratic Progressive Party (DPP). Three elected presidents and one who ascended to power through constitutional means— following the death of Bingu wa Mutharika— ruled Malawi in this period.

Failure to implement successive agreements led to the loss of Malawi’s credibility among the international financial community during the UDF era. The persistence of fiscal and external deficits led to the accumulation of large levels of domestic and external debt throughout the decade. Development expenditures took a major hit and social sector expenditures were squeezed to accommodate higher debt service. Exports stagnated and Malawi lost its market share in a buoyant world trade environment. The incidence of poverty nearly doubled and the unemployment rate rose as well. Social indicators lagged behind other countries in the region. The Human Development Index of the United Nations Development Programme ranked Malawi in one of its lowest development categories.

At least four main factors determined Malawi’s economic performance in the 1990s.

First, political expedience and frequent changes in the government followed by a reversal of decisions taken by the preceding government created an environment of uncertainty and a lack of predictability.

Second, there was widespread mis-governance by the two major political parties ruling the country during this period. Personal, parochial and party loyalty considerations dominated decision making while institutions were bypassed.

Third, there was a lack of political will to make timely and difficult decisions. The cumulative effect of avoiding and postponing such decisions, coupled with the failure to correct the distortions at the right time, proved too costly.

Fourth, there were unforeseen exogenous shocks, such as hunger and floods, that disrupted Malawi’s path to sustainable economic growth.

An interesting paradox is that the economic policies of both major political parties, UDF and DPP, who took turns ruling after 1994 (forget PP), were similar and could not be faulted. Both parties were committed to deregulation, privatisation, liberalisation, greater reliance on market forces and other economic reforms. The supporters of DPP argue that the demise of Bingu in 2012 did not allow positive trends to persist. It can only be speculated whether the economic output for the decade would have been better had Bingu completed his terms in office. The stop-and-go cycle faced by Malawi’s economic actors imposed enormous costs in terms of macroeconomic instability.

The lesson from this is that economic accomplishments devoid of political legitimacy, however impressive they may be, prove to be short-lived. Without the involvement and participation of the people, elegant and technically sound economic solutions developed by one regime are quickly replaced once the regime changes, causing irreparable losses to the economy. The recent example whereby good initiatives taken by the Bingu regime were either suspended, deprived of funds or abolished completely attests to this phenomenon. Similarly, when DPP came into power again in 2014, they made sure nothing remained of the ad hoc PP initiatives.

I have argued in this column before that the failure of governance and the consistent domination of political power and the state apparatus by a narrowly based elite seeking to advance its private and parochial interests were at the heart of the problem in Malawi. Regime changes so far did not make any substantive difference.

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