allAfrica.com: Zimbabwe: Social Contract Essential to Economic Recovery (Page 1 of 2)

IN his 2008 first quarter Monetary Policy Statement, the governor of the Reserve Bank of Zimbabwe (RBZ), Gideon Gono deplored Zimbabwe's failure to implement a social contract with conviction and constructiveness, perceiving so doing to be a prerequisite of a comprehensive economic recovery.

He said: "As monetary authorities, our hearts are heavy at the realisation that well over 16 months down the road since we first advocated the urgent adoption of a social contract in early 2007, this virtuous path has not been fully followed through.

Had we collectively shown maturity, tolerance and a burning desire for a better Zimbabwe through the adoption of the social contract, we would not be having today's widespread shortages of basic commodities and other economic ills afflicting us."

He justly contended that had a social contract been pursued with determination "our inflation level would have by now receded to single-digit", and that "by now we would not be suffering from the scourge of price controls". He stated that, in contradistinction "we allowed sectoral and personal bravados and selfish interests to rule the day and now we are paying the price, and it is a very heavy one indeed.

We allowed political expediency to override the virtues of a noble programme which was meant to deliver a better Zimbabwe for all Zimbabweans."

In particular, with great forthrightness, he said: "Events over the past years, and more so over the past few months and recent weeks, have clearly shown that it is not just naïve, but utter folly, to separate the economy from the politics of the day."

Pursuant to these forcefully expressed views, he submitted that what therefore "is needed is a radical political maturity by all Zimbabweans, and an audacious policy shift" by all social partners in Zimbabwe to break away from the shackling "business as usual" mindset, and appealed to "all stakeholders, comprising government, labour, business and civil society to put Zimbabwe first and go back to the negotiation table for the establishment of a mutually agreed and implementable social contract."

To reinforce his contentions (the validity of which cannot credibly be disputed), RBZ published a supplement to the Monetary Policy Statement, detailing "The role of social contracts in macro-economic stabilisation and achievement of national cohesion".

It noted that a social contract is an agreement by all stakeholders which, in the case of Zimbabwe, should be targeted at inflation reduction, macroeconomic stability, recovery and growth. In particular, the social contract would be "underpinned by several protocols, prominent of which is the Incomes and Prices Stabilisation Protocol." The objectives of those protocols would primarily be:

*Management of prices and incomes movement;

*Promotion of macroeconomic stability, economic recovery and sustainable socio-economic development;

*Ensuring that price restraining measures have regard for cost factor developments;

*Improvement in productivity levels and enhanced production capacity utilisation;

*Employment creation;

*Skills development, retention and attraction;

*Attraction of local and foreign investment;

*Ensuring availability of foreign currency within formal system, for all legitimate transactions, with reduced exchange rate price distortions;

*Driving export growth, with assured exporter viability;

*Reduction of smuggling and "other leakages";

*Restoration of foreign lines of credit.

The focus upon a substantive social contract, which is one that all stakeholders "buy into" without reservation, and with unqualified conviction and determination, is not an exercise into hypothesis, without foundation.

Over the past 80 years, almost every recovery of economies that had been horrendously decimated had a cornerstone of a social contract. Such contracts have been the foundations of the economic recoveries of innumerable countries.

Thus, Gono was proposing recourse to a tried and proven vehicle to restore Zimbabwe's economic wellbeing.

The examples of success driven by social contracts are very many. They include Germany's Weimar Republic which, from 1922 to 1924, suffered inflation exceeding 800 billion% (which makes Zimbabwe's horrific hyperinflation seem insignificant!). After it, admittedly belatedly, resorted to a comprehensive social contract, inflation fell to single digit levels within less than three years.

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