OPEN ECONOMY: Debt Assumption Bill is a black hole in our sociology!

17 May, 2015 - 00:05 0 Views

The Sunday Mail

There are many ways of defining Economics; I would define it as studying the effects that different social conditionings have on the livelihoods of a community.

To effectively solve a problem, a community must correctly frame the conversation around that problem. This is very true in Economics. The simple reason why most global economic challenges today are proving difficult to solve is that respective communities are not correctly framing conversations around their economic problems!

There are many ways of defining Economics; I would define it as studying the effects that different social conditionings have on the livelihoods of a community. Social conditioning is how a community instils predominant norms of conduct and existence.

It is composed of elements such as the approved economic impulses, fostered mindsets, upheld social values and enforced social contracts governing a community. Thus, as policymakers, politicians, economists and all other concerned observers have narrowly focused on economic indicators and metrics to understand economic challenges, what they should really be examining is whether the fusion of elements that compose existing social conditioning in different economies result in desirable outcomes on livelihoods or not?

In Zimbabwe, we are culpable of similar fault. We have separated our social conditioning from economic consequence; in some cases ignored it entirely. Perhaps it makes easier conversation for us to say that “we have a liquidity crisis” than it is for us to say “pervasive self-interest and greed have caused financial instability”.

I suppose it is unpleasant for us to point out regressive economic impulses that have subtly become contagion amongst us. Maybe it becomes much harder to justify who amongst us has the right to pass such condemning judgment — though as a republic, I suggest that we all do! Notwithstanding, as a nation we have become so far removed from putting our social conduct under scrutiny, much to our own economic detriment.

The RBZ Debt Assumption Bill which passed the National Assembly this week is a case in point. Under the bill, Government will assume over $1,35 billion of RBZ debt.

I cannot say for sure the composition of this debt; it is highly unlikely that the Governor and Finance Minister are comfortable being any more informative. Anyhow, the Debt Assumption Bill in itself is a matter with profound social conditioning significance for our community. It’s very important that this Bill be framed within an inquisitive narrative of what exactly does it reveal about the social conduct prevalent in our community? It offers a few points of sombre reflection.

First, we must question whether incumbents have been conditioned into partisan fanaticism? Looking at the manner in which the Bill was argued in parliament, it revealed concerning levels of partisan fanaticism.

It seems our incumbents are unaware of how defective political fanaticism is on impartial critical analysis that is essential for them to be entrusted with economic discretion. Real considerations were left in the periphery as political allegiance carried the vote. No inquisition was made about what was the process behind these loans? Could it have been lending conditions were infeasible? Are respective debtors unable to refinance their loans? Such due diligence is not unheard of to us. Non-performing loans under ZAMCO are recent examples, of which we went as far as seeking IMF advice to scrutinize loans valued significantly less than the ones in this Bill.

Also, it has become typical fashion for Government to appoint commissions of inquiry were diligence is needed, but just not in this instance. So much due diligence was superseded by political fanaticism. The potential implications are concerning. Has our economic decision making ultimately become overcast by political amenability? And if so, to what purpose does politics retain credible utility if it comes at the price of responsible custody for economic livelihoods? Political observers would do well to interrogate the social conditioning within our political sphere.

Second, how well are we upholding our social contracts? If legislators approach economic decision making unmindful of implications on citizens’ welfare, then we need to reassess incumbent obligations. National debt has been the principal cause of economic hardship right into households. Adding extra burden without rigorous inquisition on welfare effects was simple negligence of duty. This money has to be paid for!

Over 92 percent of Government revenues are from tax collections from citizens. By assuming RBZ debt is there any other option but to service these arrears through tax hikes on present generations, especially with Government lacking creativity to expand fiscal capacity in the near term?

What legislators have overlooked is that by inflating national debt, they have committed citizen incomes to debt obligations reducing investment for future generations. The implications on citizens’ welfare were meant to be the cornerstone consideration by legislators, and those who failed to realize this breached their social contract.

Third, social capital in Zimbabwe is on a steep decline. Social capital is the sentiment that citizens have towards their representatives and public institutions.

It tends to be founded on the confidence that citizens’ best interests are upheld by their institutions. Regrettably, trust in our institutions has been eroding over the last year tracing back to scandals such as Salary-gate. This is an undesirable occurrence as economic policy is often dependent on social capital, for instance, the roll out of bond coins. Such was the deficit in social capital that Governor Mangudya analogized Zimbabweans mistrust of a local currency with the mental state of a rape victim.

Perhaps an acute observation, how then do our central banker and Finance Minister imagine the mental state implanted in citizens by handing them receipts of unaccounted fiscal burdens, especially at a time when seven out of ten Zimbabweans are scraping for a living on under $500 a month?

A bonus point is we must interrogate the conduct of those involved in these loan transactions. Public institutions, even the RBZ, must always act with a social consciousness in its decision making. Was the bank prudent and socially equitable in terms of its lending practices? Was there a moral hazard within its lending? Likewise, on what impulses were respective debtors acting on when taking out loans? Unfortunately, this will all be missed as passing of the Bill excluded such inquisition. It seems a sad chapter in our young economic history.

The Debt Assumption Bill is a black hole in our sociology. If it is kept framed within a rigid economic context, understanding will be inadequate. This Bill provides a case in which we can identify clear flaws in prevalent social conduct that has become acceptable yet very detrimental to us as a community.

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