Green Rewards asked:

Some vegetables can be tough customers, admits Caspar van Vark. But with a little imagination, you can turn a hard tuber into a fabulous seasonal dish

Not all seasons are equal. The autumn months, for example, are a happy time for the cook. There are still some late raspberries and soft purple figs to eat with goat’s cheese or cured ham. Pumpkins appear in every size and shape, and there are crisp apples bursting with juice.

There’s a certain satisfaction to eating with the rhythm of the planet and catching things at their best. But the romance of seasonal eating starts to wane a bit once autumn has turned to winter. Sit at mother nature’s table and you have to eat what she serves.

Out go the vine-ripened tomatoes and golden ears of corn – instead, we are faced with muddy celeriacs, swedes and turnips. Even the most determined seasonal eaters will feel their heart sink when they open their food box and find yet another spooky, alien-looking root vegetable.

Eat ugly food

The easiest solution is to put the kohl rabi in the bottom of the fridge, wait for it go off and then throw it away. We’ve all done it, but there’s no need – all of these winter vegetables will reward you if you make a tiny bit of effort.

Take the Jerusalem artichoke – it sounds so exotic, but it looks like ginger and is the thing you usually find rattling around in your organic box after you’ve taken everything else out. Not only is this one ugly tuber, it also has a reputation for giving people flatulence!

But give it a chance – the Jerusalem artichoke has a good nutty flavour and really comes into its own if you peel it, slice it thinly and bake it with cream, like you would potato dauphinoise. It’s also a great source of iron, vitamin C, phosphorous and potassium.

To cut down on the windy effects, parboil the peeled artichoke and throw away the water. Callers to BBC Radio 4’s Veg Talk programme have also recommended a cup of fennel tea afterwards or, more bracingly, a shot of cider vinegar.

Root down

Our other staple winter vegetables, such as turnips, swedes and celeriac, have much in common – they’re starchy, need peeling and they’re a bit intimidating. Traditionally, these vegetables have been boiled and mashed. And they are very good like that – just add a good knob of butter, maybe some cream, and plenty of salt and pepper.

Still, it can all feel a bit too beige and bland. Fortunately, these vegetables respond well to a kick up the bum. Try cutting them into wedges, brushing with oil and roasting (like potato wedges) Add some fire chilli or other spices, such as cumin or hot paprika.

Top tastes

Similarly, you can cut them into chip-shapes and roast them like oven chips. Blanch them in boiling water first, then let them cool off and dry. Next toss them in some oil and then put them in a hot oven for about 20 minutes. If you have several of these vegetables knocking about, you can mix them all up.

You can also get more creative. There’s a lot to be said for grating winter vegetables because it brings out their sweetness and a new texture. Try grating celeriac and mixing it with sour cream or mayonnaise for a winter salad – think Waldorf and add some walnuts and celery if you want.

A cure for sprout phobia

Some more familiar winter vegetables include Brussels sprouts and pumpkin. While not as scary as swedes and celeriac, people harbour prejudices about these foods. The sprout, in particular, has an image problem.

If you just boil your sprouts, it’s no wonder if you get bored – try steaming them for a couple of minutes and then stir-frying them in a smoking hot wok. Add what you like – onion and garlic, bacon, chopped chestnuts – and finish with a splash of balsamic vinegar. The stir-frying gives a sweeter edge to the sprouts and makes them less cabbage-like.

World inspiration

It’s also helpful to look around the world for inspiration. Pumpkins can seem bland, but in Argentina it’s traditional to hollow them out and cook meat in them for a thick, hearty stew. The pumpkin is then baked in the oven for an hour or so and the stew is ladled out of it.

Pumpkins are also popular in some Asian cuisines – Nigella Lawson has a recipe for a yellow pumpkin and seafood Thai curry – and it appears in South Indian recipes too. In the Caribbean, pumpkins turns up in braises and in the Middle East they are often stuffed with meat, rice and spices.

The comfort zone

And finally, think of the carrot cake and extrapolate from there. There’s almost no end of possibilities for creating savoury – or indeed sweet – muffins and cakes using winter vegetables. It’s precisely their sweet, starchy nature that makes them get on well with butter and flour.

A basic muffin recipe can be adapted by leaving out the sugar and adding a few cups of grated vegetables – carrot, parsnip, potato – and some cheese to make a savoury batch. If you have kids, this is a sneaky way of getting some extra vegetables into their diet. Apple and carrot work well together in a muffin recipe.

Winter always feels like ages, but it will seem like an eternity if you eat boiled turnips. Open your mind, be creative and you might even find yourself looking forward to the swede season next year.

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Paige Green asked:

Want to go green but not quite ready to install solar panels? Try this tomorrow, wake up ten minutes earlier and run through this eco checklist. Just for one day make “green” your morning routine.

See the light – in the morning, open up your curtains and let in the natural light. It’s healthy and much more eco friendly than switching on lamps.

Turn the tap off while you brush your teeth – there’s no need to have the water running while you brush. Use a cup to rinse instead of running the water.

Ditch the electric toothbrush – since when did moving your arm back and forth require too much effort?

Use a bucket to collect warm up shower water – while you wait for the water to warm up, you can use a bucket to collect the “grey water” from your shower and use it to water your plants and garden.

Have breakfast at home – instead of getting “take away” which often involves excessive packaging, buy your breakfast foods in bulk. If you are in a hurry, grab something to go in a re-usable container. (While you’re at it why not pack something up for lunch as well?) Turn off your power points – NOW is the time to do it! Check the lights, kitchen appliances, entertainment systems, computers, microwave – everything you don’t need running while you’re at work! Eco your commute – just today, try public transport, cycle or just walk. You might find you’ll enjoy it! If you have to drive, try and arrange a car pool just for today, it will help you save on petrol and parking too! Morning coffee – bring a mug down to the café, or if your work has the facilities (and to save some $$) make your own.

Congratulations! You’ve just run through a more eco friendly morning routine. (That wasn’t so hard was it?)

Living a more eco friendly lifestyle starts with small behavioral change. Now that you’ve done it once, can you do it again tomorrow?

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John Kozy asked:

Alan Greenspan’s The Age of Turbulence contains a chapter titled The Modes of Capitalism which is full of revelations which Mr. Greenspan unfortunately failes to recognize. The chapter describes the various forms Capitalism has taken in a number of countries, mostly North American and European. Of course, that such various forms of Capitalism have been implemented in different countries is not news. But what Mr. Greenspan fails to notice is that similar chapters could not be written about physics, chemistry, geology, meteorology, astronomy, physiology, botany, astronomy, etc. but could easily be written about Christianity, Islam, Hinduism, Buddhism, and even astrology. The point is, science does not have sects, but ideologies do. Of course, economists shun the word sect, preferring instead the euphemism school in an attempt to gloss over the non-scientific nature of economics. Mr. Greenspan’s modes of Capitalism are nothing more than sects, and no endeavor that is comprised of sects is a science.

Mr. Greenspan’s attempts to explain the existence of these sects begins to reveal just how unscientific economists can be. He writes, “To me, the degree of willingness to take risks is in the end, the major defining characteristic that separates countries into the various modes of capitalism.” Mr. Greenspan ranks “the United States as the most ‘free’ of the larger economies” and believes, apparently, that therefore, Americans are less risk averse than people elsewhere. But there is not a lick, jot, fleck, or speck of evidence to support this belief. So although it may be true that the United States is the most free of the larger economies, other reasons for which there is considerable evidence can be cited as more likely explanations. The most obvious of these is differences in educational systems. It may be, for instance, that Americans support this freer economic system because they are poorly educated and therefore more gullible than people in countries that have better educational systems.

There is no question that the American educational system is inferior to the educational systems in many other countries. The will-publicized country-by-country comparisons that invariably show that American students are less competent in many areas of study need not be repeated. But there are far more telling examples of American educational inferiority. When graduates of some of America’s most prestigious universities, such as the current crop of presidential candidates, can openly reject evolution and when various branches of the national government routinely rewrite scientific studies to make them conform to the administration’s political ideology, the failure of the American educational system becomes evident. In America, ideology trumps truth.

An explanation of the failure of even America’s universities to educate their graduates is not hard to find. That America has had a long-standing anti-intellectual culture has been well documented. See Richard Hofstadter’s Anti-Intellectualism in American Life, for instance The American educational system is fractured. Local control of primary and secondary schools, often controlled by school-boards made up of poorly educated people who seek to promote personal agendas, is a tradition dating back to the nation’s founding. The makeup of state school boards is not different, and there are fifty of these. No common standards exist and even state-by-state comparisons are difficult to make. Then, too, American universities were not generally founded to educate people. They were founded to train people for professions; in effect, they were founded as vocational training rather than educational institutions. After the Civil War, the creation of the land-grant university system was explicitly designed for vocational training. As a result, students are taught how to carry out techniques, but rarely taught to critically examine the theories from which those techniques are derived. This description characterizes what goes on in most of the professional schools and colleges attached to our universities. It especially characterizes our graduate departments of economics. One small but revealing example provides anecdotal evidence that supports this view and the view that America’s universities promote ideology over truth is this: Gilles Raveaud, I believe, commenting on Greg Mankiw’s teaching at Harvard has written, “Some of the students I had at Harvard have described Mankiw’s course to me during private conversations as ‘massive conservative propaganda.’ One of them told me that he thought that Mankiw manages to ‘indoctrinate a whole generation.’ In 2003, a protest against a similar course then proposed by professor Marty Feldstein, an ex-adviser to President Reagan, led to the creation of an alternative intro economics course, taught by radical economist Steve Marglin. But while Mankiw’s course gives the required credits to students, Marglin’s does not.” Just as there is no honor among thieves, there is apparently no honor in universities that get huge donations from America’s capitalists who have gotten their fortunes by picking the pockets of consumers and employees and who would be loathe to see their ability to continue to pick those pockets restricted by some idealistic idea of truth.

Mr. Greenspan ignores completely one salient difference between American and Continental educational systems. In the American educational system, analytical thinking prevails. Everything is considered in isolation from everything else. Economic phenomena are examined as though they had no consequences to society in general. In Europe, however, phenomena are considered together as a gestalt. The consequences of changes in one social environment are related to the effects those changes have in other social environments. Whereas American economists think almost exclusively in terms of economic growth, Europeans think in terms of society as a whole. American economists can always find ways of excusing the adverse human consequences of an economic process; the Europeans emphasize the adverse consequences to society as being more important than the economic process. This distinction has been evident in economic circles since the formation of the so-called historical school, and Mr. Greenspan should have recognized it.

But Mr. Greenspan reveals something else about economics that is rarely called attention to—the delusions economists labor under in relation to the real-world economy. When Mr. Greenspan makes risk-taking the characteristic of the American economy, he is delusional. Certainly America has its share of risk-takers. Whether it has more or fewer risk-takers than other nations is questionable. But risk-taking does not characterize the American or any other economy. Economic risk-taken may be thought of as a characteristic of entrepreneurs. But entrepreneurs alone cannot make an economy; if everyone was an entrepreneur, no workers would exist to carry out entrepreneurial ventures. Kurt Wicksell in his Lectures on Political Economy nicely defines the entrepreneurial process: “He who borrows money at interest does not as a rule intend to keep it, but to exchange it at the first suitable opportunity for goods and services, by the productive use of which he hopes to be able to acquire not merely the equivalent of their price but a surplus value. . . .” Although that may be true of entrepreneurs, it is not why most people in today’s real economy borrow money. When people borrow to buy homes, automobiles, appliances, etc., they do not intend to use their purchases in ways that will create surplus value. In fact, these people are not investing at all. The money they borrow is a sunk cost for a place to live, a means of transportation, and other such uses. And although Americans have become a nation of borrowers, they have not become entrepreneurial risk-takers. Any economist who thinks of the economy in terms of entrepreneurial risk-taking is engaged in self delusion.

Mr. Greenspan is also delusional when he writes about creative destruction. Certainly, creative destruction does happen, but not nearly as often as Mr. Greenspan and other economists seem to think. As examples of creative destruction, Mr. Greenspan mentions the telegraph industry’s demise because of the introduction of the telephone, the tin can’s demise when the aluminum can became feasible, which he relates to the demise of the steel industry. Certainly some workers were displaced when the telephone industry replaced the telegraph industry and then the aluminum industry reduced the steel industry. And certainly such displacements cannot be avoided and no attempt should be made to avoid them. But that is not what is happening in America today. When Fisher-Price offshored the manufacturing of toys to China, it was not because the Chinese had developed new toy-making technology. In fact, those Chinese employ older technologies than those what would have been used in America to manufacture the same toys. When computer related industries offshore their helpdesks, it is not because new helpdesk technologies have been developed in the offshored countries. The technology used in offshore places is exactly the same technology that is being used in America or Europe or anywhere else. So although there is a phenomenon known as creative destruction, what is happening in America today is mere destruction. The other half of Mr. Shumpeter’s thesis is entirely absent, and for Mr. Greenspan to think otherwise is delusional.

Again, Mr. Greenspan writes, for instance, that “in a free society . . . the vast majority of transactions must be voluntary, which, of necessity, presupposes trust in the word of those with whom we do business. . . .” And “It is remarkable how much trust we have in the pharmacist who fills the prescription ordered by our physician.” But this is sheer delusion. People don’t trust the businesses they buy from. In the case of the pharmacist, people buy from him because there is no alternative. And does anyone trust the pharmaceutical firms that market the medicines we are prescribed? If they do, they must be wholly ignorant of the revelations that such firms hide from regulators, physicians, and consumers data of adverse effects and even life-threatening dangers. Do I exhibit trust in Microsoft when I purchase one of its operating systems or applications, knowing full well that what I am getting are poorly coded programs containing innumerable bugs and security lapses that Microsoft will attempt to patch by incessant releases of what it euphemistically calls Service Packs? Trust is something that does not exist in business; that is why contracts exist, and why firms such as Microsoft exempt themselves from all liability for damages within their contracts. If Mr. Greenspan trusts the firms he does business with, he is delusional.

But the unavoidable problem with Classical/Neoclassical economics, which Mr. Greenspan glosses, is its immorality. He writes that, “Clearly, not all activities undertaken in markets are civil. Many, though legal, are decidedly unsavory.” But he also writes, “When I was a child, jokes about the scruples of used-car salesmen were widespread, but in truth a flagrantly (italics mine) unscrupulous used-car salesman is one who will be out of business before long.” Mr. Greenspan fails to recognize that this statement is entirely meaningless. It does not say that businessmen are not unscrupulous; it does not say that competition puts unscrupulous businessmen out of business; it does not say just how unscrupulous a businessman must be to be flagrantly unscrupulous.

Everyone knows that businessmen routinely break even the most fundamental moral maxims, and any economist who denies this must explain the neologising and persistent existence of such phrases as Caveat Emptor, a pig in a poke, and letting the cat out of the bag. In an honest economy, these expressions would have no use. As a matter of fact, there is absolutely no reason to believe that people in business are any more honest than the population in general, and there is good reason to believe that business in a free-market promotes crime and vice, both of which are epidemic in the United States. It is no mere coincidence that when the Soviet Union collapsed and when Israel was persuaded by the Reagan administration to abandon its socialist traditions and free-market practices were introduced, both crime and vice emerged as important social problems.

In fact, free-market economics institutionalizes immorality, which is proven by the mere fact that puffery is an acceptable practice. Businesses that employ puffery to market products will, without batting an eyelash, discharge an employee who is found to have puffed up his resumé. I’m not talking about sophisticated moral philosophies such as Kant’s Categorical Imperative, but those simple maxims embodied in the Decalogue and the Golden Rule. These immoral practices of business are widespread and far-reaching and they contradict many of the favorite clichés of economists.

Mr. Greenspan claims, that free markets increase material well-being to a greater extent than regulated markets. But tell me, how does the marketing of bottled water, which is never tested and whose source is rarely identified, increase the well-being of the people who are snookered into buying it, especially when ordinary tapwater is regularly tested, comes from a well-known source, and is considerably cheaper? In fact, doesn’t it reduce that well-being, since the money wasted on it could have purchased something that provided a real material benefit? The same questions can be asked about numerous other products—the McDonalds hamburger, Taco Bueno’s tacos, pizza from numerous pizza vendors—the list is endless. But there’s more. The Fox affiliate in Dallas regularly runs a feature called “Deal or Dud.” The channel buys products heavily advertised on television and has them tested by ordinary viewers. If a product works as advertised, it’s called a Deal, if not, it’s called a Dud. Every so often the channel comes up with Deals, but most products tested are Duds. As a matter of fact, Mr. Greenspan’s book is itself a dud. It was not published because of the merit of its content; it was published merely because of the notoriety of its author. Mr. Greenspan’s name on the title page can be likened to other forms of puffery. So how does manufacturing and marketing products that don’t work increase the material well-being of consumers? And consider the snake-oils people are sold that are classified as dietary supplements? The manufacturers of these products could easily have them double-blind tested to determine their effectiveness. But they don’t. Is it because they know that if they did, the products couldn’t be sold?

Mr. Greenspan and other economists claim that the free market results in the most efficient allocation of capital. But how can anyone claim that the capital expended on the products mentioned in the previous paragraph is efficiently allocated? In fact, one could easily claim that it is completely wasted, as is the capital lost during economic downturns. So anyone who believes that American business are generally honest are as deluded as the insane person who believes he’s Napoleon.

Not only is free-market economics immoral, there is some evidence that it could not exist if the immorality were removed. In an impressive new book, The Social Conscience, Michel Glautier asks whether a caring society can exist in a market economy? His analysis suggests that recent and continuing changes to the market economy are putting the achievement of a caring society beyond reach. And the following passage comes from an abstract of a paper by Andrei Shleifer: Explanations of unethical behavior often neglect the role of competition, as opposed to greed, in assuring its spread. Child labor, corruption, “excessive” executive pay, corporate earnings manipulation, and commercial activities by universities all promote censured conduct. When unethical behavior cuts costs, competition drives down prices and entrepreneurs’ incomes, and thereby reduces their willingness to pay for ethical conduct. Unfortunately, both authors are ambivalent when it comes to drawing hard conclusions.

In a rational society, a distinction would be made between scientific enterprises, always keeping in mind that all science is a work in progress, and enterprises grounded in mere belief. The political system would defer to scientists in matters involving the former and allow the people to decide the kind of society they would prefer in matters involving the latter. So the choice of an economic system ultimately comes down to what kind of society people not only want for themselves but for their progeny in future generation. Do we really want an economic system that institutionalizes prevarication and encourages greed, crime, and vice? Those who answer this question affirmatively should, perhaps, have 666 tattooed on their foreheads.

In the second chapter of The Age of Turbulence, Mr. Greenspan writes that he “discovered that some of the scientists in the Manhattan Project subscribed to a philosophy called logical positivism. . . . The mathematician in me embraced this stark analytical credo. . . . The world became a better place, I thought, if people focused exclusively on what was knowable. . . .” Unfortunately somewhere alone the way, Mr. Greenspan lost this focus and became an apologist for the free-market system when he “decided to engage in efforts to advance free-market capitalism.” We are all now faced with the consequences of his decision.

Wise men know the importance of periodically asking themselves, What if what I believe to be true is wrong? It is time that our economists start asking themselves this question.

© 2008, John Kozy

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Vladimir Gonzalez asked:

The Importance of Understanding Economic Terms

The term “Economics” is commonly defined as “The science of how people make choices for the allocation of scarce resources to satisfy their unlimited desires.”

Though a major concern, which analysts should pay more attention to, the distribution of wealth has lately become less important than it used to be. The science dealing with this is political economy, which is the science that has to do with the nature of and of economic value, together with the production and distribution of valuable goods and services.

It is very important for everyone to thoroughly understand a set of highly used economic terms, such as wealth, production, value, labor, land, etc, and here are some of the definitions of these economic terms:

· Wealth – all material things produced by labor for the satisfaction of human desires and having a certain exchange value.

Moreover, wealth is material and is produced by workforce and it can satisfy human desires. However, contrary to common belief, money is not considered wealth, if not a medium of exchange, because of which, one can acquire wealth, which also has exchange value.

Production – all the processes by which human labor creates valuable goods and services and brings them to the ultimate consumer.

Production includes not only the producing or manufacturing of goods, but it also has to do the process of bringing them directly to the consumer. The factors that help produce wealth are land, labor and also capital.

· Value – the quantity of labor or products of labor that people are generally willing to give in exchange for something.

The economic value of an item is just what it will exchange for, under normal circumstances.

· Land – the entire material universe exclusive of people and their products.

Land includes not only the dry surface of earth, if not all other natural materials, as well as forces and opportunities.

· Labor – all human exertion in the production of wealth and services.

Both entrepreneurs along with blue-collars are part of this category; labor does not only refer to physical strength, whereby finished products are produced, if not also to mental work, whereby wealth is also produced.

· Capital – wealth used in the process of production, or in the course of exchange.

· Distribution – The division of wealth among the factors, which produce it.

Rent, wages and interest are the avenues of distribution are, and here is also their definition:

· Rent – that part of wealth, which is the return for the use of land.

· Wages – that part of wealth, which is the return to labor.

· Interest – that part of wealth, which is the return for the use of capital.

These factors involved in production all work together and produce a “pie”, called “wealth.”

Further reading on www.economywatch.com and www.economypedia.com:

Economic Terms on EconomyWatch

Encyclopedia of Economic Terms – Economypedia.com

Definition of “Global Economy”

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Francis Mulenga Muma asked:

CHAPTER 1

INTRODUCTION AND THEORETICAL BACKGROUND

Economists through out the world are searching for what really are the major determinants of growth of an economy and different policies have been used in pursuit of the answers. The world as large has gone through a lot of economic problems, such as depressions of 1930s, 1970s and 1980s. The 1930 depression led to employing of the Keynesian policies of strict government intervention. However, the 1970s depression made policy makers lose faith in Keynesian economics. Nevertheless, most Third World countries continued with their central planning type of economic policies. There was strong disenchantment with this type of policies, which led growing number of economists and influential international development organisations to begin, in recent years, to advocate the increased use of the market mechanism that is to liberalise the markets, as the key instrument of promoting greater efficiency. In this regard economic liberalisation implies minimisation of government intervention in allocating economic resources and letting the market forces play the cardinal role, doing away with all forms of government distortions in running the economy. The market forces should play a leading role in financial, trade, labour, commodity markets and other sectors, increasing reliance in market forces is normally accompanied by stabilisation programs, (Krueger 1978,1985).

There has been an increasing call for the private sector to take up the challenges of national development. According to Robert Barro (1996), most empirical facts point to primacy of government choices; countries that have pursued broadly free market policies, in particular trade liberalisation and maintenance of secure property rights, have experienced higher growth, than those which pursue central planning type of policies. For this reason, there have been calls for the privatisation programs.

On the other hand Rodrik, (1992) argues that trade reforms is frequently met with scepticism on the part of the private sector and may lack support, the country implementing them suffers from terms of trade deterioration which may result into reduction of capital inflow and increase capital flights. He goes on to say that this is coupled with inflation and low zero growth. Krueger (1978) points out that to avoid this, appropriate macroeconomic policies need to accompany the increase in price of foreign exchange (devaluation), or else domestic inflation would soar and affect the intended benefits of liberalisation. That is why stabilisation programs, such as reduction in government expenditures, accompany liberalisation by cutting on government consumption, which is often negatively related to the growth of an economy.

However Wha Lee (1993)’s findings in the case of Korea are very interesting, Korea gave subsidies to some firms manufacturing exports, managed to grow faster. He argues that the theoretical predictions about the link between growth and open trade may be ambiguous and misleading. According to critics, tariffs can either enhance or decrease growth rates, depending on which sector is protected. This is the argument of infant industry. Krueger (1985) notes that LDCs have been protecting infant industries for decades, but they have still remained infants; this is an indication that there is something wrong with the economics of protectionism. Nevertheless Wha Lee (1993) notes that since the current theory of liberalisation is inconclusive, as is the empirical evidence, the link between trade policy and dynamic efficiency is vague, depending on the industry considered.

Kirkpatrick (1995) argues that the orthodox arguments concerning the role of trade policy as the determinant of industrial performance are seen in the major role of creating price incentives. This is because liberalisation and a neutral incentives structure between import substituting and export activities is expected to yield both static and dynamic effects, static in form of technical efficiency and dynamic in the form of switching process. However, many models, both for planning and explaining the development process, according to Krueger (1978), have made a foreign exchange central to determination of the growth rates. This focus is on the role of foreign exchange (forex) in complementing domestic savings needed to support domestic investment. The effect on economic growth will be via an increased volume of exports and reduced imports due to liberalisation and devaluation respectively. It is argued that if trading partners removed tariffs, we expect the market to expand which will ultimately lead to growth of exports. Exports are also viewed as a stimulus to greater capacity utilisation, greater horizontal specialisation, increased familiarity with absorption of new technologies transmitted through trade, greater learning by doing, as a result of the increased market size and output levels and stimulation effects of having to achieve international price and quality. Expanded market economies of scale enable a producer to cast or spread a “net” widely on various consumers who may be helpful by sending back comments on how to improve the quality of the products. Since tariffs tend to be reactionary, if a country adopt liberalisation policies, its trading partners will also do away with tariffs the moment one country scraps trade restrictions, so the market size will expand.

However, Trade liberalisation alone is not an answer. For this to be successful, there is a need to liberalise the financial sector, so that exporters can have ready capital for re-investment; nuisance taxes have to go, so that most of the foreign exchange earnings are retained by the exporters. This creates incentives to them. Macroeconomic stabilisation also has to be enforced so that inflation will not impede planning, and if this creates confidence in investors, exports should increase.

Pro-liberalisation economists have argued that more open economies are more efficient in absorbing exogenously generated innovations, since, without barriers, not only will this increase the volumes of essential imports, but it will also facilitate the entry of new technology which developing countries are able to absorb and assimilate easily in order to expand their manufacturing base. Edwards (1992), finds strong evidence supporting the hypothesis that, with other things being equal, more liberal economies tend to grow faster than those which are not. He calls this learning by doing type of process, “technical progress ” where more contact with new commodities and technology enhances efficiency, which result in higher production. He argues that if the rate of technical progress is positively affected by the gap between the stock of the world and domestic knowledge with respect to the foreign source of technological improvement, then the country’s ability to appropriate world technical innovations depends positively on the degree of economic trade liberalisation. Therefore more open economies have an advantage of absorbing new ideas from the rest of the world. He finds that countries with more open and less distortive trade policies have tended to grow faster than those with more restrictive commercial policies. His results are in conformity with the catch up theory effect. Wha Lee (1992), points out that international trade is perceived as a vehicle through which foreign inputs are provided to domestic production. According to him trade distortions caused by tariffs and exchange rate controls decrease the long run growth rates more significantly in a country that needs to import more.

Therefore, it can be summarised that liberalisation enhances international trade which provides comparative advantage and also provides an additional source of competition to domestic firms. Subsidies to ailing industries, no matter how much they may alleviate economic distress in the short run, represent an effort to decelerate growth, reduce incentives for mobility and lock in resources in the inefficient industries that should contract in the process of economic growth.

However, there is a problem of measuring the benefits of trade liberalisation, which even Kirkpatrick (1995) acknowledged. Kirkpatrick admits that measuring of trade liberalisation benefits is a difficult and frustrating task. It involves two considerable methodological problems; it is important to assess the extent to which the World Bank’s conditions have been adopted. This is because most of the liberalisation policies of LDCs are not unilaterally adopted, but imposed, and therefore may lack consistency. The other problem is the assessment of the reforms that were implemented. It is complicated by problems of separating causality from association. According to him, it is difficulty to establish counter factual, and separating out the effect of multiple influences on economic performance.

Larry Sjaastad (1982) noted that the economic liberalisation that swept Southern cone during the 1970s and 1980s was a clear reaction to the failures of preceding economics of protectionism. Uruguay and Argentina, once prosperous nations had fallen on hard times by the mid 1970s. Real per capita income in Uruguay had been declining at a rate of 1 percent in 20 years. Chile, though never a prosperous country, was crippled with a continuos fiscal deficit and an inflation of 1000 percent. Their economies were characterised by inefficient state enterprises, which despite massive tariff protection, regularly required subsidies to sustain their operating loses. Price controls, tariffs, subsidies and export taxes severely distorted relative prices with much of the private enterprises devoted to production of luxury goods. Regulatory bodies administered import duties and quotas, interest rates, credit allocation and wages. The monetary and financial sectors were dominated by the state banks with special rediscount privileges at the central bank. Their economies were in a bad state. Therefore all these countries introduced liberalisation programmes in the1980s, but their results were disastrous. The Southern cone experiences, according to Sjaastad (1982) are widely interpreted as evidence of the failure of economic liberalisation.

Zambia like Argentina, Uruguay and Chile had almost the same type of economic policies, with nationalised economy before the liberalisation program which swept the country in 1991. Its economy was characterised by inefficient state enterprises with massive tariff protection in order to enhance import substitution industries. Price controls, nuisance custom duties, subsidies on production and consumption, export taxes, foreign exchange controls. Private enterprises had to declare all their export earnings to the central bank, as it was illegal to hold forex. Zambia, before privatisation and liberalisation, had regulatory bodies to administer import quotas, interest rates, credit allocation and wages. All the macroeconomic factors were determined by political decree. The monetary and financial arenas were dominated by the state banks, with special rediscount privileges to the Bank of Zambia. According to the advocates of the liberal markets, poor rates of growth, massive inflation and balance of payment problems experienced by LDCs, and Zambia in particular, during the 1970s and 1980s were because of the rising burden of public spending through parastatal companies, excessive price distortion and inward looking trade policies which are the order of the day in the planned economy.

Zambia today, according to the World Bank Report (December, 1997), has the most liberal and least nationalised economy in Africa. In 1991, more than 80 percent of the economy measured as a percentage of GDP was state owned. Now, as at 1997, more than 80 percent of the economy is in private hands. The one party state, which ruled Zambia since independence in 1964 from the British, chose the path of nationalisation and centralisation. According to the World Bank report (Dec., 1997), this was ruinous. The government and international organisations such as the World Bank and IMF believe that macroeconomic stability and growth are being achieved after years of inflation and decades of stagnation. According to them, the foundation for higher growth have been laid by liberalising the markets, broad tax and tariff reforms, financial sector reforms and by privatising the state enterprises. The key element in the government’s programme has been the reduction of inflation, which has fallen from 200 percent in 1990 to 20 percent in 1997. This helped the GDP to grow by 6.4 percent in 1996/7 period.

This dissertation investigates whether there are genuine reasons behind economic liberalisation and related austerity measures, using Zambia as the case study, by describing and comparing its economic performance before and after liberalisation. We then use panel data and cross-section regression analysis on selected African countries to see if the econometric analysis results support the calls for liberalisation measures.  The dissertation is organised as follows Chapter 1 has provided introduction and theoretical background to economic liberalisation. In chapter 2, Zambia’s detailed account of its pre-liberalisation economic policies is presented. Chapter 3 looks at post-liberalisation economic policies of the country. Chapter 4 presents econometric analysis and empirical results, and Chapter 5 concludes the findings.  It should be borne in mind that this study is not about the direct measurement of the effects of liberalisation policies on economic performance. This is due to the problems cited by Kirkpatrick (1995) and the unavailability of many of the data required for undertaking a more detailed study of the country.

CHAPTER 2

THE PRE-LIBERALISATION ECONOMIC POLICIES OF ZAMBIA

Zambia’s economic history traces back to the colonial era. Zambia a former British colony was known as Northern Rhodesia. The British’s main emphasis was the mining of copper, which they exported as a raw material. Zambia obtained independence on 24 October 1964 with an economy characterised by an industrial enclave based on copper mining using British and USA capital (Hawkins, 1991). During this time there was little or no significant investment apart from the mining sector, and before independence most of the copper profits were expatriated and very little was re-invested. However, in the first years of independence 1964-69 the economy unfolded and great progress was recorded (Turok, 1979). The country had a GDP per capita that was amongst the highest in Africa; according to Turok, 1979, it was just below that of South Africa. Copper prices were high and the industry was profitable, so every indication was towards rapid growth and development. The economy was more of a capitalist than a state led.

2.1-Post-Independence Economic Reforms

Few years after independence in 1968 and 1969, President Kaunda, with the then ruling United Nation Independence Party (UNIP), initiated reforms. According to him, this was to lead state control of the whole economy to enhance growth and equal distribution of income. It was also aimed at empowering the indigenous people to control and decide the destiny of their country’s economy. This was characterised by developmentalist philosophy (command economy) and recognition of political realities (Turok, 1979).

The 1968 and 1969 Mulungushi and Matero economic reforms were meant to repossess the foreign economic and business interests, which now became under the state control. The UNIP government also introduced indigenous import substitutions in the industrial sector, this was aimed at reduction in the dependence on foreign manufactured goods. Although a small indigenous and foreign private sector was left, a large public sector was created and maintained by copper revenue and protected and supported by government controlled markets. As a result of the state controlled type of the economy, which emphasised the creation of industrial capacity, commercial agriculture perished and the private sector was crowded out.

According to Turok(1979), it is commonly accepted that the weaknesses of the economy, which levelled off in 1972 and then began declining, cannot be solely blamed on the falling copper prices, though this might have been one of the contributing factors. This is because, even by 1974 before the collapse of copper prices, foreign exchange had started posing a serious constraint on economic development. A major explanation lies in the economic policies of the day. Despite its inheritance of highly concentrated and buoyant foreign owned mining enclave, the Zambian government was determined to use the state for development. The state sector share of manufacturing output was growing almost every year. Four years after Mulungushi reforms in 1968, in which the government announced its acquisition of major companies it was 53 percent of total manufacturing output and this was concentrated on essential consumer goods required by Zambia. However, despite its size and scope, the state sector which included parastatals had not established an integrated economy with forward and backward linkages, parastatals, though they were import substitution industries (ISI) deeply depended on essential inputs from abroad. The government intervened extensively and imposed a number of restrictions on the private sector, while parastatals’ decisions were made by political leaders and ministers who sat on their boards. The parastatals were to be organised on lines of the country’s philosophy of ‘Humanism’, which was coined by the President as an African socialism. There was intervention in pricing policy, which seemed to be concerned more with social welfare than with pursuing economic development goals.

In 1970, barely two years after the Mulungushi and Matero reforms capital expenditure was only growing at a marginal increase, while consumption expenditure soared. Table 2.1 shows the higher government consumption and lower gross domestic consumption from 1964-90. Due to little emphasis which was made on capital expenditure, in 1973, value added in manufacturing recorded only a marginal increase from 106 Million Kwacha to only 107.5 Million Kwacha in 1976, compared to 480 Million Kwacha in 1965 a year after independence (GRZ Economic Report, 1977). Value added by manufacturing in 1978 real terms was 15 percent lower than 1974. Hence by the mid 1970s, the bells of economic doom were loud enough in politicians’ ears, but pretended to be deaf. They instead nurtured and guarded the inefficient parastatals and the command economy. To make the situation worse, some more parastatals were created and added to the list of inefficiency. After 1970, a substantial part of Zambia’s economy was dominated by parastatal organisation, about 60 percent of the economy in terms of GDP was now in parastatal hands. Most larger companies which had been run and owned by foreigners came under government control through Industrial Development Corporation (INDECO), an agency of a government holding company.

These newly nationalised companies were especially active in such industries as food processing, textiles, auto assembly and mining. Through large- scale capitalisation, using copper revenue, these parastatals became the pillar of the Zambian formal sector. They employed 1/3 of the workforce and maintained their employment levels even during the recession, for political reasons. For instance during recession, the number of employees in private manufacturing fell from 27,370 to 23,390 in 1977, about 14.5 percent reductions, while in the parastatals they remained constant over the same period (Turok, 1979). In these parastatal bodies there were rampant and continuing reports of corruption, inefficiency and mismanagement, but government decided to give it a deaf ear. The Kayope Commission (1976), revealed catastrophic failures in major parastatals and widespread misappropriation of funds, but still the government shelved the report, and continued to give subsidies and protection to these inefficient parastatals.  Real Gross domestic fixed investment declined as there was no significant capital formation. The emphasis was put on government consumption while the economy continued   to decline. This can be seen in the decrease in capital expenditure which fell in 1979 to its lowest since independence in 1964 as Table 2.1 shows. This shows that INDECO, on which the government relied as agency of intervention was performing poorly.

At independence, Zambia’s economy had poor foundation, domestic production supplied less than one third of the local market for manufactured goods, while total manufacturing goods accounted for only 6 percent, the same setting continued even 10 years after independence, domestic economy was not integrated lacking forward and backward linkages. In trying to enhance domestic integration the government after its 1968 Mulungushi and 1969 Matero economic reforms bought out the private share holders in INDECO which was established in 1965, but reinforced after these reforms, and obtained a larger share of profits from copper by means of higher taxation, which was then used for public investment.

TABLE 2.1: GOVERNMENT CONSUMPTION IN COMPARISON TO GROSS DOMESTIC FIXED INVESTMENT 1964-90 (IN KWACHA MILLION)

Year              Government consumption                     Gross domestic fixed

investment

1964

309.2

76.2

1965

383.4

120.4

1966

435.8

175.8

1967

558

225.8

1968

594

264.7

1969

589.4

253.6

1970

717.5

279.8

1971

801.9

264.7

1972

857.3

381.1

1973

900.7

426

1974

1083.1

560

1975

1241.8

510

1976

1337

483

1977

1547.8

437

1978

1789.3

450

1979

2045.6

65.8

1980

2473.5

566

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