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1 Explaining Zambian Poverty: A History of (non-agriculture) Economic Policy since Independence  Alan Whitworth The paper attempts to explain why, despite abundant natural resources, fifty years after Independence Zambia has some of the worst poverty in Africa. High copper prices meant the UNIP government enjoyed substantial fiscal resources in the decade after Independence, facilitating a rapid expansion in social infrastructure. However, investment undertaken in response to Rhodesia‘s UDI (oil pipeline / refinery, TAZARA) led to a permanent increase in costs. Much was also wasted on an extraordinary expansion of the state‘s role in the economy and a vain attempt at industrialisation through import substitution. Nationalisation of the copper mines in particular proved disastrous. Increased public service wages and subsidies were no longer affordable once mineral prices and taxation collapsed in the mid- 1970s. Anticipating a rebound in prices, government chose to borrow rather than cut expenditure. As prices continued falling, fiscal deficits and debt became unsustainable. Lack of foreign exchange, compounded by political interference, led to financial losses by parastatals – adding to fiscal pressures. By the 1980s public expenditure was largely confined to debt service, wages and subsidies  – crowding out expenditure on basic social services of most benefit to the poor. The reforms of the MMD government from 1991 eventually succeeded in reversing the downward spiral. Trade liberalisation, elimination of most subsidies and a major privatisation programme stemmed the fiscal haemorrhage. Though controversial, privatisation of the mines was a turning point. Substantial investment in mining triggered a sustained period of rapid growth, boosted by rebounding copper prices from 2004. With debt relief and increasing mineral taxation, this helped establish fiscal and macroeconomic stability – creating real fiscal space. While this facilitated increased expenditure on basic services, much of the proceeds of the secon d copper boom were wasted on uneconomic road projects and poorly targeted agriculture subsidies. Poverty reduction was limited to the urban population. The PF government since 2011 has revived a number of populist UNIP policies, suggesting that the lessons of that era are poorly understood. I. Introduction  At Independence in O ctober 1964 Zambia had the fourth highest GDP per capita in Africa (w ww.NationMaster.com). As the fiftieth anniv ersary of Independence approac hes it has some of the worst social and poverty indicators on the continent, despite sustained GDP growth since the turn of the century. This paper attempts to explain why, despite a rich natural resource endowment and relative peace and political stability, poverty has increased in Zambia. The history of Zambian economic policy is of more than just academic interest. It will be argued that, while external factors - notably Southern Rhodesia‘s UDI and the collapse in copper prices fr om 1974 – contributed significantly, Zambia‘s poor economic performance is largely explained by misguided macro and micro economic policies adopted during the Kaunda era. The damage cau sed by these policies, s ome of which persist to this day , is poorly underst ood by the Z ambian public a nd politicians. As a result, rather than learning from past mistakes, the Patriotic Front government elected in 2011 appears to be repeating some of them. The paper has one conspicuous omission. The majority of Zambians are dependent on agriculture, and the unambiguous failure of successive governments‘ agriculture policy is arguably the single most important reason for increased poverty. However, this is such a large subject that it merits a separate standalone paper.

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http://minerals.usgs.gov/minerals/pubs/commodity/copper/index.html
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http://www.postzambia.com/post-read_article.php?articleId=28959
http://www.postzambia.com/post-read_article.php?articleId=28959
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http://etheses.whiterose.ac.uk/461/1/uk_bl_ethos_341205.pdf
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