Robert Mugabe ignored Deng’s advice in 1985; SA should seize on it
The Chinese leader who introduced market-friendly reforms advised against ideologically based approaches to economic modernisation
SA is about to nationalise its central bank. A move that technicians generally agree will do little to enhance monetary policy but has the ability to strangle the country’s access to global financial markets and possibly lead to investor flight.
In 1985, reformist Chinese leader Deng Xiaoping gave economic management advice to then Zimbabwean prime minister Robert Mugabe on the importance of market-opening reforms in reducing poverty in China. It is advice that SA policy makers need to reflect deeply on — and be decisive. China was in its seventh year of implementing its “reform and opening-up” programme.
According to Zhang Weiwei, Deng’s interpreter, Mugabe registered misgivings on the wisdom of China’s market-seeking reforms. Mugabe argued that he felt China was pursuing capitalist policies and should pursue a “leftist” approach in managing its economy.
Deng urged Mugabe to pay attention to China’s unsuccessful experiences. China had learnt from being left and had been punished for the mistakes of such an approach, Deng is said to have told an astounded Mugabe. He then advised Mugabe that the reality on the ground motivated by the quest for “social modernisation”, not ideology, is what should drive economic development.
Based on this advice, the debate on whether to nationalise SA’s central bank requires sober reflection. Proponents of the nationalisation of the Bank argue this is necessary to ensure its objectives are in line with government policies. Critics, who include current central bank governor Lesetja Kganyago, have argued that it would be a fruitless venture.
In dealing with such situations, Deng urged Mugabe to pursue the principle of seeking truth from facts. Given SA’s admiration of China’s economic success, it is worthwhile reflecting on this principle. Applied to SA’s current debate, it may as well be that while it is a fact that it is odd to have a central bank that has private shareholders, the truth may be that it makes no difference to the government’s ability to drive economic development.
Applied more broadly, seeking truth from facts requires an understanding that China’s reform process has been in general pursuit of integrating into the market economy. In SA’s case, this necessarily calls for awareness of the extent to which the economy is dependent on the market to finance economic development. The truth is that spooking the markets by pursuing anti-market policies will have serious negative consequences that the country would have to prepare for.
Whatever path the country decides to pursue, it is also important that all the economy’s stakeholders are conscious of the fact that China’s economic reform process has not been as glossy as is often depicted in national development plans of countries that admire its model. It has had its fair share of painful decisions.
According to Richard McGregor, between 1989 and 1999 the Chinese government retrenched employees equal to the “combined workforces of Italy and France”. Following a principle of “grasp the big, let go of the small”, the state sector was streamlined and professionalised. State-owned companies had to “take responsibility of their own balance sheets” or face the prospect of being let go. Awareness and identification of “painful side-effects” will facilitate the planning and implementation of mitigation measures.
As Mugabe left his meeting with Deng, his host, realising how unconvinced Mugabe had been, sadly predicted the economic crisis that would later befall Zimbabwe.
In SA, a decision must be made and a path travelled. Hopefully, SA will be able to see the wood for the trees and make a decision based on realities. This includes an understanding of how interlinked the country’s sectors are with the markets. Failure to do so will lead to dire economic consequences. In Zimbabwe, for example, bank balance sheets were negatively affected by the invasion of commercial farms. One of the effects of this was an erosion of the value of pension funds of state employees since state pension funds had significant investments in banks.
As China’s experience has shown, seeking the truth from facts and implementing practical policies, steps and methods reaps handsome economic rewards. SA needs its Deng moment!
• Lwanda is a regional programme and policy adviser with the UNDP Africa Centre.