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A Very Short Political Economy of Malawi

Martin Prowse, University of Antwerp

martin.prowse@ua.ac.be

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1. Introduction

• Growing interest in how state/party/business relationships contribute to economic transformation and development (structural change, poverty reduction)

• Do authoritarian neo-patrimonial polities perform better at transformation/development than ostensibly democratic forms of governance?

• Numerous concepts describe relationships between and within elites and citizens which can lead to successful transformation/development (social contracts, social compacts, political settlements, active citizenship.....)

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Messages

• In essence, this research agenda is a quest to understand a country’s political economy:

How groups in a society (based on ideology, class, ethnicity, kinship, patronage or collective economic interests) competefor and use resources, rents and power

Key question: How can this competition for and use of resources, rents and power lead to transformation/development?

• To understand a low-income country’s political economy we need to focus on the most important industries

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Structure

1. Introduction

2. Aims

3. Structure

4. 1964 – 1994 Malawi Congress Party – Kamuzu Banda

5. 1994 – 2004 United Democratic Front – Bakili Muluzi

6. 2005 – 2011 Democratic Progressive Party – Bingu Mutharika

7. Neo-patrimonial developmentalism in Malawi?

8. Conclusions

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Key references

Chinsinga and Chirwa (forthcoming) The Political Settlement, Development Policy and Inclusive Development in Malawi

Cammack (2011) Malawi’s Political Settlement in Crisis

Cammack et al (2010) Developmental patrimonialism? The case of Malawi

Booth et al (2006) Drivers of Change and Development in Malawi

Van Donge (2002) The Fate of an African ‘Chaebol’: Malawi’s Press Corporation after Democratisation

Harrigan (2001) From Dictatorship to Democracy

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1964 – 1994 Malawi Congress Party – Kamuzu Banda

Economic policy

1964 – 1968

- Promotion of smallholder agriculture via extension, infrastructure and expansion of parastatal marketing board

- Lack of sustained supply response and balance of payments crisis led Dr Banda to turn towards estate production

1969 – 1979

- Large-scale estate expansion by the political elite, parastatals and youth league contributed to 6% economic growth pa

- Provision of estate licences and loans key form of patronage

- Rents from smallholders channelled into estate expansion and to cross-subsidise maize consumer prices

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1964 – 1994 Malawi Congress Party – Kamuzu Banda

Economic policy

1969 – 1979 cont.

- Success based on: (i) specific distribution of rents and assets to actors who would use them productively; (ii) an insulated, professional cadre of civil service technocrats

- Considerable growth in business development, manufacturing (7% pa) and service sector (financial services grew at 15% pa)

- Food security assured through fertiliser subsidies, high producer prices for maize and subsidized consumer prices

- Intrinsic flaws and exogenous shocks (drought, oil prices) undermined developmental model

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1964 – 1994 Malawi Congress Party – Kamuzu Banda

Economic policy

1980 to 1994

- Malawi’s malaise due to an anti-smallholder bias, low producer prices, a lack of competition in input/output channels

- National food security was not of great concern to the IFIs who argued shortages could be met by imports.

- Rapid expansion of small-scale estates, mainly by mid-level civil servant, previous estate managers, and ‘graduating’ smallholders

- Growth in 1980s at 2% pa. Agricultre at 0.8% pa. Developmental model? Rents not available for allocation to productive actors. Resources squandered on conspicuous vanity projects.

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1964 – 1994 Malawi Congress Party – Kamuzu Banda

Governance

1964 to 1994

- In 1964 MCP emerged as a de facto one-party state

- Power concentrated in Dr. Banda: party and state were the same

- Regime became deeply centralised, repressive and authoritarian: regionalist tendencies

- Civil society did not exist, nor did any other centres of possible countervailing power (incl. local government)

- “There was total retreat of the citizenry from the public arena” Chinsinga and Chirwa (2012)

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1994 – 2004 United Democratic Front – Bakili Muluzi

Governance

1994 to 2004

- Transition to democracy and new constitution in May 1994

- Regional voting patterns in 1994/1999 saw the populous Southern Region return a UDF president – Bakili Muluzi

- Succession battles at the end of the MCP era led to a continuation of power concentration in President Muluzi

- Traditional authorities co-opted by the new UDF government

- Informalisation of politics – achikulire (big men) stymied emergence of cadre of young politicians (Lwanda, 2006). Increase in clientelism and corruption.

- An open policy-making process

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1994 – 2004 United Democratic Front – Bakili Muluzi

Economic policy

1994 to 2004

- Period of lost economic opportunities

- Paradox of growth (5% pa) with limited poverty reduction: 11.5% pa smallholder growth based burley tobacco production

- Increase in ODA, but fiscal slippages led to stop-go flows

- Rapid increase in domestic and external debt

- Recurrent food security crises, especially famine in 2001/02

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1994 – 2004 United Democratic Front – Bakili Muluzi

Economic policy cont.

1994 to 2004

- UDF regime lacked a ‘developmental’ vision – rents were directed towards non-tradeables: construction (7% pa growth) and transport (5% pa growth). Manufacturing stagnated (-0.5% pa).

- Fewer rents available: cartel of leaf merchants on the auction floors depressed tobacco producer prices. Tolerated by Muluzi, who created his own cartel in sugar.

- Government unable to implement effective policy – civil service incapacitated

- Donors effectively settled policy but in an incoherent, fragmented manner

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2005 – 2011 UDF/DPP – Bingu Mutharika

Governance

2005 to 2011

- Muluzi handpicked Mutharika as UDF candidate with aim of retaining power as UDF party chairman

- But Mutharika was his own man - broke away from UDF to form the DPP

- Led to political stalement with the opposition

- But economic policies and ‘zero corruption’ drive won him support from citizens and donors. DPP won a landslide victory in 2009

- Since 2009 Mutharika became increasingly autocratic, paranoid, corrupt and cranky

- Relied on neo-patrimonialism to buy-off opponents

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2005 – 2011 UDF/DPP – Bingu Mutharika

Economic policy

2005 – 2011

- Growth averaged 6% pa based on an agricultural development strategy - input subsidy, infrastructure

- National food security achieved for the first time in decades

- Obtained HIPC debt relief and improved fiscal discipline

- Attempted to bust cartel on the tobacco auction floors: introduced minimum prices; state-supported leaf companies; deported the CEOs. But with no success.

- After 2009 elections, fiscal discipline disappeared, corruption increased, pegged the exchange rate to the US$, led to forex and petrol shortages

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Neo-patrimonial development?

1964 – 1994 Malawi Congress Party – Kamuzu Banda

Successful developmental strategy only between 1969 -1978

Rents from keeping producer prices for export crops, esp. fire-cured tobacco, below export parity channelled to productive people and investments: estates, manufacturing, service sector.

Led to considerable growth in business development, manufacturing (7% pa) and service sector (financial services grew at 15% pa). Food security was assured through subsidies.

Ended with exogenous shocks (especially oil prices), fiscal indiscipline and direction of rents to non-tradeable investments (vanity projects)

Kelsall et al (2010) Long-horizon, centralised rent relation – yes, but only between 1969-1978, not from 1964

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Neo-patrimonial development?

1994 – 2004 United Democratic Front – Bakili Muluzi

Despite influx of ODA, the UDF lacked development strategy. Investment directed towards non-tradeables

Despite smallholder growth from burley tobacco, food security was precarious.

Fewer rents available: leaf merchants cartel tolerated by the UDF regime. Possible rents not invested domestically.

Corrupt procurement with kickbacks – not the same kind of rents!

Civil service became incapable. Donors started to settle policy discussions in an incoherent, fragmented manner

Kelsall et al (2010) short horizon decentralised rent relationship. Yes, but recognise the cartel exported possible rents so less domestic investment potential!

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Neo-patrimonial development?

2005 – 2011 Democratic Progressive Party – B. Mutharika

Mutharika’s expensive agricultural development strategy -voucher-driven input subsidy programme, infrastructure.

National food security achieved but fiscal discipline eroded. Limited revenue base. Limited rents.

Attempted to capture more of the rents from tobacco cartel but failed. Leaf companies responded by reducing commitment.

Repression and human rights abuses alienated donors

Kelsall et al (2010) long term centralised rent relationship. Only developmental in reducing poverty and attaining food security. No transformation. Failed to secure rents for domestic investment. Alienated key development partners. Couldn’t control a source of rents.

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Thank you!

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martin.prowse@ua.ac.be