The missing links in Zimbabwe’s drive for a successful China-like State capitalism

by Chido Makunike

Today’s China is perhaps the most successful example of ‘State capitalism.’ There are those who caution that the model is not all it seems, and that it is not sustainable. Even if that were the case, there is no doubt that China has become a dynamic global economic power under a type of controlled free market economy largely run by the State. Why has China’s model of State capitalism worked, while those of countries like Zimbabwe flounder?

This is the question that Albert Nhamoyebonde tackles in an article (Linking State politics and the economy, 1st February 2012) featured in the Herald. Nhamoyebonde is that rare combination of a deep thinker/philosopher and a usually very good, clear explainer of issues and concepts. Over the years he has occasionally contributed thought-provoking letters and articles on all manner of issues to the Press.

Excerpts:

“Political ideology has been shown to be subservient to the profit motive. A case in point is that of China, which purports to stick to the ideology of communism while practicing what many experts term ‘State capitalism.’ China is practicing capitalism rooted in the belief that capital must produce profits. The State decides on the exchange rate of their currency to enhance their earning power through exports of cheap goods rather than succumb to the volatility of the market forces.”

“Nationalization, in actual fact, is trying to advance State capitalism. The major draw back of this kind of politics is the lack of capital to exploit the abundant resources available to the country. What China did was to open up its economy to the outside world to attract investors that brought in capital as well as advanced technology.”

“All these investors wanted was cheap labor abundant in China. China welcomed these capitalists, especially their technology, and transformed it to build their nation.”

With that as an introduction, Nhamoyebonde then asks, “What about Africa?”

He replies his own question thus: “Firstly, Africa was colonized for the purpose of providing cheap resources to be shipped to Europe to build their economies. This was different from the Chinese experience where capital and technology was shipped to China.”

He then gets around to his real interest, how poorly Zimbabwe’s various State-run or championed ‘empowerment’ measures have benefited the nation, compared to the China example. He harps on about the importance of the profit motive, implying that its absence in State-run companies is one major reason for their poor performance. Zimbabwe, unlike China, he suggests, has refused to acknowledge the importance of the profit motive as a driver of human effort.

Nhamoyebonde writes, “The politics of indigenization and empowerment to the people is premised on the assumption that individuals, previously marginalized by a colonial political system, will have a burning ambition to make profits from the political dispensation. Are there any of these individuals with such profit motive burning in their bellies? If this policy of indigenization and empowerment is combined with that of State

capitalism, only then can the country move forward in developing a sustainable economy.”



He then identifies what he terms the “prevalent incompetence in the system,” which “no amount of political correctness can overcome.” As an example of that incompetence, he cites the disastrous corporate example of wholly State-owned Air Zimbabwe, whose failings and decline have been dramatic and very public.



“Even selling off State companies will not cure the disease of incompetence in running either State or private sector companies. The collapse of even companies in the private sector cannot entirely be blamed at the door of our politics but at the incompetence of individuals and management of these companies,” says Nhamoyebonde.



He writes, “Academic results show clearly that the country has talented children. What is lacking is the capacity to utilize this abundant talent being churned from our education system from the high school and university or college levels.”



He then asks rhetorically, “Where can engineers go and work if Air Zimbabwe is not flying? Where can engineers go and make a difference if municipalities are badly managed with sewerage flowing into the streets while some high ranking officials are helping themselves to the money paid by residents?”



Somewhat confusingly, he ends up blaming greed, which is merely an extreme form of the profit motive that he started off by saying Zimbabwe needed more of , for the “get rich quickly syndrome of the business people in the country.” If the profit motive is the key driver of business/economic success, and Zimbabwe has excess amounts of it in the form of the ‘get rich quickly syndrome’ of greed, one would think that by his own premise the country should have seen much more progress, whatever negatives the vice of greed would also bring.



It is not obvious that the many Chinese State-run enterprises are driven more by the ‘profit motive’ than Zimbabwe’s. There are countless examples all over Africa of big infrastructure projects that China has undertaken that clearly don’t make ‘profit’ in the purely business sense that Nhamoyebonde presumably means. China’s donation of a new headquarters building to the African Union in Addis Ababa, Ethiopia is just the latest example. The companies actually doing the work may (perhaps) be ‘profitable’ in that the Chinese government pays them, but obviously it is a net ‘loss’ for the nation of China in financial terms.

But then China does not measure ‘profit’ in purely Western-style capitalist terms. What may be a ‘loss’ in those terms may bring other, harder to measure benefits, such as influence and access to other, more profitable deals. It is a holistic attitude that does not recognize a rigid dividing line between narrowly business and other State activities/benefits. Politics, business and diplomacy are all wrapped together, and what appears to be a ‘loss’ in one area is compensated for by gain in other areas.

Nhamoyebonde’s conclusion of ‘incompetence’ as the reason for the failure of State enterprises like Air Zimbabwe is also questionable. As he points out, a basic lack of talent and potential is not Zimbabwe’s problems, as private sector successes like international telecommunications giant Econet Wireless have shown. Many would argue that a key problem is that none of the airline’s many managements over the years have been given the freedom and room by government to run it profitably, not the lack of managerial or technical competence.

One senses a veering off from the issue he started off by tackling: why China works and Zimbabwe doesn’t, despite both being run by governments that believe in strong State intervention in the economy.

Here is the crux of the issue: State-owned enterprises in which the individuals running them are obviously workers, not entrepreneurs or owners, cannot be expected to have a ‘profit motive’ in the same sense as a private company. Perhaps the awarding of performance bonuses would be the closest approximation they could have to having private-sector like motivation.

Using Nhamoyebonde’s own Air Zimbabwe example, if it were a private company, it would have gone out of business ages ago for being a perennially loss-making company. That it has barely hung on so long is not because of profitability but because of a political decision by government to keep it alive, although just barely.

If by their nature State-owned companies, in China or in Zimbabwe, are not propelled by the ‘profit motive’ in quite the same way as private companies, why the apparently big difference in the success of those government-owned companies in the two countries?

Here are a few key ways in how State-run companies serve China better than they do Zimbabwe:

In China there is a real cost to be paid for non-performance, in Zimbabwe there largely isn’t. China and Zimbabwe are both run by crudely autocratic governments, but China’s is willing to use that autocracy to compensate for the inevitable lack of motivation and the ‘incompetence’ that creeps into State-run enterprises because they are ‘everybody’s’, and therefore nobody’s.

Every now and then, the Chinese government will take some ruthless action, including execution, against malfeasance in State-run companies. Zimbabwe has nothing at all similar in its State enterprises to concentrate minds in quite the same way as a fear of being disgraced for life, or even jailed or killed for running down a company. In short, China has a ruthless system of accountability in the running of State enterprises which Zimbabwe does not even pretend to have.

In China a State company manager may not have personal profit as a motivator any more than one in Zimbabwe does for making sure you run the State-owned company well, but there are other viciously effective ways the shareholder, the government, makes sure you stay on your toes! This is one way an autocratic government can make State capitalism work where a ‘democratic’ government could not.

Zimbabwe, like China, also has an autocratic government, but those repressive tendencies are not used in ways that are ‘profitable’ for the nation like China does. The ‘standard’ of autocracy, in the sense of the expectations of its national ‘benefits,’ are simply vastly lower in Zimbabwe than they are in China.

In China the ruling autocrats have a driving, great ambition for the nation which they are willing to ruthlessly enforce if necessary. Despite all the talk of ‘empowerment,’ in Zimbabwe the autocracy is not used for anything much more than keeping the ruling elite in power. Little beyond that really matters to that ruling elite, as the condition of so many State-run companies and institutions shows.

China’s autocrats are hungry and in a hurry for their country to be great, powerful nation in the world. Zimbabwe’s autocrats have a far smaller, limited primary ‘vision,’ if you can even call it that: staying in their positions.

If anything, Zimbabwe tends to lean more towards tolerating, perhaps even encouraging managerial sloppiness in State companies as a way of patronage; of keeping the pampered people running them loyal to the ruling dispensation, in return for those people not having to fear any consequences for driving those companies into the ground.

There is another glaring fault in Nhamoyebonde’s analysis of Zimbabwe’s troubles. It is the implicit expectation that the managers of State-run companies can think and act like entrepreneurs. By and large, they most definitely are not entrepreneurs. They think, act and run those companies as employees, certainly not as entrepreneurs and many times, not even ‘merely’ as businesspeople in any private sector sense.

There is the inherent contradiction of their being there for the relative security of their jobs, and there also being no sanction/consequence to fear from poor performance. It is a system that encourages laziness and a secure apathy even amongst those who may be intrinsically ‘talented.’ There is no particularly strong incentive to perform beyond a low bare minimum, and yet there is also nothing to particularly fear for job performance even worse than that low minimum. In China you could very well pay for it with your life, a rather effective negative motivator!

That is one key difference accounting for the relative effectiveness of Chinese State-capitalism and a half-hearted one like Zimbabwe’s.

In mentioning the talent and potential that exists in Zimbabwe and asking where the country’s engineers, for example, can aspire to work when leading potential employers like Air Zimbabwe are jus waiting to be officially declared dead, Nhamoyebonde neglects to ask a critical question: why should all those engineers be waiting for/expecting someone to give them a job? Why does the system churn out so many who want/expect to be employees, and so few who want to be self-starters and entrepreneurs?

Strictly speaking, Air Zimbabwe probably needs more mechanics than it needs ‘engineers. ’ The talents and training of the country’s engineers ought to be applied more usefully than maintaining planes, as useful and honorable a job as that may be. Zimbabwe’s engineers should be ‘engineering’ new services or other innovations; creating new opportunities for others less well gifted or trained, and wealth and development for the nation.

By its very nature, entrepreneurship means not waiting for a perfect situation to create a new idea, service or business. It means making a way even where there seems no way. This is not a theme of Nhamoyebonde’s article, but it follows from his implication that State capitalism, having largely been the failure it is in Zimbabwe, the country’s pool of top, elite talent (which engineers certainly are an example of) should simply not raise their hands in despair and lament the lack of opportunities to work for someone else.

Any Zimbabweans with “a burning ambition to make profits from the political dispensation,” as Nhamoyebonde puts it, will surely not aspire to work for State-owned companies like Air Zimbabwe, even if it were healthy. That would almost be a contradiction in terms. In this regard Nhamoyebonde is mixing up two related but distinctly different issues of how nations get ahead: the State necessarily has a vital part to play and needs competent people with one type of ‘burning ambition’ to run it. But there is a need for another type of competent citizen whose ‘burning ambition for profit’ drives them to take advantage of any opportunities the State avails (or doesn’t); but to work outside it, independently, to create new wealth.

A clever ‘State capitalism’ is not just about how well the internals of a government (including its companies) work. It is also about how well it creates conditions for citizens with a burning profit/entrepreneurial motivation to realize it for themselves. The Zimbabwean State manages the amazing feat of arguably failing on both counts.

If State capitalism has failed, and yet that failure has not spurred a high level entrepreneurial culture, what else is there, other than nothing? It all suggests multiple failures in the society that go way beyond just the ‘incompetence’ of the State.

Nhamoyebonde may not have ventured into some of the key areas where his basic question would seem to have automatically suggested, but his posing of the question at all is his usual good, selfless and thought-provoking national service.

The Zimbabwe Review