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A brief account of our Economic Past

An excerpt from, “Economics from my Father’s Land,” by Professor Chanda Mpundumwaume

Mulenga, University of Tulatwakane (UoT)

‘The hour has come’ was a political dictum of the Movement for Multiparty Democracy
(MMD). At the turn of 1991 the party had won support against United National
Independence Party across the whole country. When one wakes up in the summer of
1991, you are accosted by the smell of the wind of change in the air. You have to have
been there to appreciate the unstoppable political zeal that characterized the Zambian
political landscape and set it on fire. The wind of change was precipitated by the visible
frustrations among the large population both urban and rural communities. This
frustrations was on the backdrop of the chronic shortages of various critical
commodities which are essentials to the fundamental wellbeing of the people of Zambia
under the UNIP hegemony led by Dr David Kenneth Kaunda (DKK). In fact, the
problems began when the copper prices tumbled on the London Metal Exchange.
Copper mining was still, to this very moment remains the economic back-bone of
Zambia, accounting between 65%-to-75 percent of the nation’s GDP. Lack of
processing capabilities at home so as to add value to the commodity has been one of
the major challenges to the growth and diversification of the economy. Therefore, since
independence Zambia’s economy is still operating in the primary industry exporting
unfinished goods.

The food riot of 1988 on the copperbelt following an increase in the price of mealie
meal from K15-to-K16 added salt to the injury that there was widespread riots against
the regime of UNIP. These dissentions and riots culminated into the UNZA riots. The
then President, in his efforts to abate the riots, brought in Lt. Mwamba Luchembe,
somewhat his relative to deal with the rioting students. However, in the midst of the
whole chaotic thriller, Mwamba turned out to be the most famous dissident this country
has ever seen against the UNIP hegemony by staging one and only successful coup
ever recorded in the history of Zambia and Northern Rhodesia in 1989. During this time
MMD was making serious in-loads into UNIP strong holds and by 1990, it was written

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everywhere that change was imminent, it was just the matter of time. UNIP had
outlived its usefulness.

On the contrary, we need also to appreciate the strides UNIP made in its efforts to
contribute meaningfully to this great nation in their 27 years of reign. Their political and
economic choices can be traced from the post-colonial epoch which ushered in pan-
Africanism movements. Everywhere where freedom was won, socialism became the
alternative system of governance. In Zambia, the then President promulgated
humanism and became indoctrinated into the national curriculum. Humanism is the
philosophy which celebrates ‘man centeredness’. UNIP provided free education, free
transport to children and school pupils, built industries in all nine provinces such as the
Mansa Battery, Chipata bicycle, mwinilunga pineapples, Tata Livingstone, Dunlop, and
Serials etc. All these were state-owned enterprises. He further created cooperation at
district levels and so forth. Even a grade seven had a job! Actually some of the creame’
de la crème’ of the nation’s human resource are a product of UNIP’s free education
policy.

The MMD came on the backdrop of political and socio-economic collapse of the UNIP
hegemony. In 1990, David K Kaunda signed the act which gave birth to the return to
plural politics. In 1991, General elections were held and MMD led by Fredrick T.J.
Chiluba won by a landslide. He immediately introduced three major policies;
democratization of politics, Liberalization of the economy and the privatization of SOEs.

During the privatization era, many SOEs were sold off to private owners who had to
turn them into profit making entities. They undertook structural Adjustments programs
(SAP) in order to position the newly acquired institutions for profit generation. These
programs resulted in massive job losses. The privatization itself meant that the MMD
regime was re-configuring the economic system to embrace capitalism. This shift
caught many Zambians by surprise given that they were coming from a background
were most essential commodities were being provided for rather free of charge.

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The MMD had to improve its foreign policy and enters into several multilateral, bilateral
and multilateral agreements with several countries. For instance, Zambia was and is a
significant member of the SADC community and is a host country to COMESA REC with
its current serving Secretary General being a Zambian. No doubt, the country has
consolidated its benefits from its exports and imports from its partner countries such as
DRC and RSA, the country has benefited enormously from these agreements and have
remained the engine for our social and economic emancipation. Currently, Zambia
serves as chair for Politics, defense and Elections on the SADC supreme board.

The high levels of poverty cannot be tolerated in a country that is so richly endowed
with valuable natural resources. One of the reasons is that the country has failed to
marshal its capabilities properly and benefits from its participation in international trade.
However, at a time when its currency is facing a bullish suppression from green bucks,
predatory policies from its Donor communities and low productivity have all led to high
level of uncertainties and ambiguities regarding the current performance of the
economy. Truly, it will take a gallant leadership and collective national resilience in
order to try and steer the economy back on track and stimulate an upward trajectory in
its performance.

Today many questions are being asked concerning the real deal that the PF regime has
brought to the economic fore. Yes, it is admitted that several infrastructures have and
are being built across the country but the real question still remains. To what extent all
these are trickling down to the common man on the street? The answer to this
fundamental question, definitely cannot be found in an economist, not a politician
neither in a Pastor, who can answer then? The answer lies within the common man on
the street who feel social and economic pangs everyday burgeoning on him as if they
were heartbeat of life.

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SECTION A: MANDATORY QUESTIONS

This section is worth 40 marks: Answer all the questions

( a ) Define an economic system; 2 marks

( b ) From the case excerpt above the author reveal that one of the MMD policy soon
after they assumed office was liberalization of the economy. Explain the meaning of
liberalization of economy in regards to the case study above? 5 marks
( c ) The two major types of economic systems are command economy and free market
system. Explain the differences between the two systems in regard to the excerpt
above. 10 marks
( d ) 1. Define inflation? 2 marks
2. Explain how inflation affects the performance of the economy in a country? 5 marks
( e ) From the case, the author indicates that Zambia is a member of both SADC and
COMESA. Discuss the benefits an economy can derive from belonging to a regional
economic community (REC)? 10 marks
( f ) Write brief notes on the following as espoused in the case;
1. Privatization (2 marks)
2. Nationalization (2 marks)
3. Democratization (2 marks)

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SECTION B: ANSWER ONLY THREE QUESTIONS

QUESTION 1
( a ) Define “price elasticity of demand”? 2 marks
( b ) Explain factors which influences price elasticity of demand? 10 marks
( c ) discuss how the concept of price elasticity of demand is applied in business? 8
marks

QUESTION 2
( a ) Differentiate between accounting costs and economic costs? 2 marks
( b ) Complete the table by calculating TC, AFC, AVC, ATC and MC. 18 marks
Q TFC TVC TC AFC AVC ATC MC
0 60 0
1 60 20
2 60 30
3 60 45
4 60 80

QUESTION 3
( a ) Outline the functions of the Central Bank? 10 marks
( b ) Discuss the techniques Central Bank uses to control money supply in the
circulation? 10 marks

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QUESTION 4
The President of the World Trade Organization (WTO) in his address to the African
Union Colloquium on Stimulating Economic Growth, urged African governments to open
freely their markets to foreign firms where he held that, “Free trade is beneficial to
everyone” Discuss this statement? 20 marks

QUESTION 5
The concept of circular flow of income is one of the most prolific contribution to
understanding how the economy works.
( a ) With the help of a diagram explain injections and leakages to the economy? 10
marks
( b ) Define per capita income? Discuss the three approaches to GDP determination? 10
marks

QUESTION 6 Discuss the following concepts;

( a ) Market externality 5 marks
( b ) Factors of production 5 marks
( d ) Normative economics 5 marks
( e ) Monopoly 5 marks

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