Zimbabwe: Growth and Development Strategies

  • Harrod-Domar growth model
  • Structural change/dual sector model
  • Types of aid
  • Export-led growth / outward-oriented strategies
  • Import substitution / inward-oriented growth strategies / protectionism
  • Commercial loans
  • Fair trade organisations
  • Micro-credit schemes
  • Foreign direct investment
  • Sustainable development

Harrod-Domar growth model: economy’s rate of growth depends on.

  • the level of saving
  • the productivity of investment
  • quantity and quality of labour and capital

developing countries have the quantity but not quality

+increase in physical capital creates economic growth

+higher income means higher levels of saving

Structural changes: Fisher and Clark’s three stages of growth

Primary productions: tax extraction of raw materials through agriculture, mining, fishing, and forestry. developing countries are dominant in primary goods.

Secondary: industrial production form manufacturing and construction. middle income workers.

Tertiary: services of education and tourism etc. developed countries.

+others: migrate to urban areas or expand the urban area = productivity is higher.

-cost of educating and equipping the people.

Zimbabwe:

Zimbabwe will need a massive injection of cash for primary production so farmers can re-purchase machinery and other assests for further growth. Before the hyperinflation the commerical farming businesses were 4500 and has decreased to only 300. To improve this, they must first educate the people with proper equipments.

Types of aid: Humanitarian, Bilateral, and Multilateral

Humanitarian- (not a loan, aid for specific problems) individual country to country or a major organization

Bilateral- (loan, long term re-payment) one country to another

Multilateral- a large international agency chooses a country to support

+reduce dependency on private investment

+help reduce foreign exchange outflows = stabilizes domestic governments necessary infrastructure

Zimbabwe:

Zimbabwean President Robert Mugabe has asked for $5bn in international aid to revive his nation’s disrupted economy. However, Western governments have previously indicated that they would like Muagbe to step down and will only help the countries recovery is the democratic government is in place.

Export promotion:benefits

  • comparative advantage: efficiency in resources
  • increase investment: domestic productivity
  • economies of scale: increase in sale of exports = domestic level of production
  • equality of income distribution: increase in demand for labour will help increase wages
  • increase competition: increase productivity and efficiency during a long period of time

Protectionism

  • improve domestic markets and workers
  • can benefit over a short period but can hurt in the long period
  • its been recorded that countries who apply protectionism have a lower growth

Commercial loans: mostly from developing countries

 -problem: developing countries were extensively borrowing while commodity prices were decreasing and interest rates were increasing.

Fair trade organization:

-organization to protect the framers in the developing countries from multi-national cooperation.

-guarantee a surplus so the firms can re-invest to the market.

Micro credit schemes:

  • -lends small amounts of money to the poor
  • -helped mostly by NGO’s ($1)
  • directly helps the needed people

Foreign direct Investment:Multinational Corporations

+Merits

  • help the poverty cycle
  • raise productivity in the country
  • increase investment would raise economic growth
  • inject money to local economy
  • provide training and education

-Demerits

  • MNC’s emply many expatriate managers
  • invest in capital-intensive production methods
  • benefit form lower taxes

Sustainable development:

In 1992, the UNCED began a program for environmental responsible development. The project includes policies that receive help form international communities.

targets: improve environment, friendly farming, reduce over-population growth

Conclusion:

With the current situation of President Robert Mugabe pro-independence campaigner’s it makes it harder for large organization such as the humanitarian organization such as the NGO to give any aid. This is become aid agancies and critics partly blame the countries food shortages on the land reform programme. Furthermore what caused the most disruption between relations with other countries is when Mugabe accused Britain and its allies of sabotaging to economy in revenge for the redistribution progamme. The critical issue is how the government sees the economy and the relation with other countries and NGO to have a better relationship. Moreover Zimbabwe must appreciate the Humanitarian organization and only seek as a aid for the needy people and not just for government spending. The vital aspect is to change the president with the upcoming election and this will open doors as multinational (international community) will help out, with the exception of the change of the land reform which is hard to improve. Furthermore, even if the new president will appeal to more countries and revieve respect from EU’s and NGO such as unicef, amnisty international and red cross it will take a lot of work to change the economy 180.

 

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~ by scioneconblog on February 8, 2010.

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