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Mon. September 24, 2018
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A Sold State
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By Darlington Chisenga The January edition of the Financial Times (2007) reported that China earned U$ 55.5 billion from trade with Africa particularly Nigeria, South Africa, Angola and Zambia. It then used part of that money¬¬, U$3 billion, to make more money from Africa by offering it as soft loans to be repaid in future. On his recent visit to Zambia, where his country has carved out a U$ 800 million economic zone, Chinese president Hu Juntao failed to visit the mining areas where his country has invested millions of dollars fearing civil unrest. However, such unfavourable public reaction to Chinese investment is not, unlike this paper, restricted to Zambia; Sudan is another example. So why has the resurgence of China as an economic powerhouse been dogged by social unrest in its partner countries, Zambia in particular? This is a profound question in that (overwhelming) capital investment, if seen to be socially repressive, could spark revolt anywhere. This, in fact, is the litmus test for the double-movement thesis postulated below as a framework for this presentation. China simply happens to be the progenitor in this case. A follow-up question could be: has the power of capital turned socialist China into an international capitalist? Capital gives investors a degree of power over poor governments. This is neither capitalism nor socialism but, essentially, a question of power. Zambia needs Chinese investment and China needs Zambian copper. It is partly the resurgence of China as an economic powerhouse that has, after all, pushed copper prices up. Theoretically, social unrest caused by the power of capital is well encapsulated by Karl Polanyi (1944)’s Double-Movement thesis. He explains that capital, in the form of unregulated finance or haute finance, has the propensity to undermine society. He asserts, firstly, that states are composed of three main structures: the political structure (government, state-owned institutions including central banks); economic structure (private firms and individuals) and the social structure (land, labour and non-governmental organisations). Secondly, that the social structure is primary because the other two depend on its components to function: land, either as mines, real estate or its other commercial forms; and labour as intellectual property, etc. are essential to the existence of both the economic and political structures. Knowing this, then, he posits that the overstatement of capital is a ‘commodity fiction’ designed to undermine the social structure through deregulation which, in essence, keeps capital in the hands of few wealthy elite. Polanyi argues that the economic structure cannot assume importance over the social structure because it is the latter which provides the basis for the (financial) significance of the former. This is how the double-movement thesis is developed. Phase one: deregulation causes an influx of capital thus undermining the social structure. Phase two: social revolt against unregulated capital and its negative effects. Polanyi justifies mutiny to capital because its excessive power creates an unnatural order in society, a form of hierarchy that displaces society to the very bottom. It is a predictable action-reaction theory more solidly applied at the domestic than international levels. Well documented examples of social reaction to overwhelming capital influence include the 1960s riots by Malaysia’s majority ethnic group, the Bumiputera, and the Chiapas revolt in Mexico in the 1990s. In Zambia, the inflow of Chinese capital has been aided by government regulation erasing (capital) tax payable on dividends and profits (stage one of the double movement). Social reaction to such capital inflow could be ignited by the high tax regime for local citizens, unfavourable working conditions imposed by the investors, or even apparent government disconcern for citizens in these areas (stage two of the double movement). Already, the 2006 elections highlighted some of these concerns. There is an unspoken truth about Zambians among themselves that they are politically passive. Indeed, the political adage that voters forget all-too quickly has a resounding truth in Zambian politics. One could almost argue, based on Zambia's own political history, that reaction to individual-led plans, as opposed to the novelty of truly collective action haunts that country’s economic progress. Put differently, they do not act, they react. In 1991, Zambians reacted to, and rejected Kenneth Kaunda’s personal dreams of life presidency. In 2001, they reacted to former president Fredrick Chiluba’s third-term bid. Whereas the two ex-presidents’ exit from power was largely due to socio-political flaws, the current administration’s exit will most likely result from economic short-termism. The government is seen to have a visible sympathy for foreign capital than upgrading the standard of living; the political economic argument is such that government intervention in the economy, via the central bank and other tools, has failed to impress citizens’ living conditions. Furthermore, there seems to be nothing genuinely convincing about government interventionism beside the usual rhetorical proclamations. There is no clear ideological direction from the higher echelons of government. The eminent social reaction to the power of capital has its roots, in Zambia, to the resurgence of China and India as global economic powers. This has led to the favourable value of copper on the international markets. Domestically, it has exposed one of two things; firstly the weak bargaining positions of the Zambian government; and secondly the deliberate lack of visionary management to take advantage of favourable external conditions. The price of copper has increased considerably from U$ 800 per tonne in the mid-1990s to about U$ 8000 per tonne from 2002 onwards. On the 9th February 2007, the national budget delivered live on state television left the impression that there were good statisticians in the finance ministry, but little else. Zambia has a progressive tax system. This means that only high income earners have the net pay to afford a consumption basket prone to VAT and other taxes. Additionally, and according to the Jesuit Centre for Theoretical Reflection (JCTR 2007) study, whatever the income group, the consumption basket has remained relatively unchanged and unsympathetic to low income households. This leaves the burden of government financing to low income groups earning slightly above U$ 150. In a country were the food basket attracts no tax breaks, exemptions to lower income households are a ruse designed to disguise governments ineptitude towards to worse-off in society. What the tax regime has in fact done is create two income groups that are tax exempt, but on extremely opposite sides of the spectrum. The first group consists of local low income earners that take home between U$ 50 to U$150 per month. The other group are the mainly Chinese investors earning millions of dollars. The relevance of Polanyi’s double-movement thesis here is not necessarily that government imposes a stricter tax on investors; it is whether that influx of capital trickles down into the social structures in the form of better take-home pay, better health care and general services. At the moment, middle income households shoulder the government’s tax burden. It does feel, to a great extent, that the country is owned by capital investors who, unlike the locals, do not vote. This, of course, is not to blame government incompetence on foreign investors. So how do people manage? They get by, and according to the double-movement thesis postulated above, frustration among the masses stems from this kind of exclusion from opportunities. The commodity fiction principle is resonant also; mines as a part of the social structure would be expected to, at least, upgrade that structure. Instead the income revolves within the financial system to earn interest for elites. Arguably, the first phase of the double-movement has occurred; phase two can occur either via the electoral system or through demonstrations. It is thus more difficult to ascertain the second stage of this thesis. Indeed, the electoral system can be imperfect; rigging is not uncommon. Obviously, government denies offering tax breaks to foreign investors. It is a political blame game where government merely talks to act interested in real issues concerning the masses. The relevance of the title, A Sold State, is more compelling because, on the one hand, there is a massive influx of capital into Zambia and a real opportunity for the country to grow; and on the other, a clear understatement of the role and place of the social structure. This goes back to the question of vision and leadership within the government. While the emergence of China and India has reignited the demand for copper on the international market, it has also given rise to a class state within Zambia. One with inherited dictatorial proclivities of the second republic (1973-1990), disguised personal grudges as guiding economic principles. By way of conclusion, I want to review the theory to practice regarding the selling of states to foreign investment. In line with my theoretical position, the onslaught of capital into Zambia has added to the displacement of the social structure to the bottom, or necessarily below the economic structure. During the first and second republics, 1963-1972, and 1973-1991 respectively, the social structure was displaced by a security structure as an illusion to keep the elite safely—and eternally-- in the corridors of power. One could argue, therefore, with some precision, that the social structure has before been subservient to the political structure under the post independence dictatorship; and most recently to the economic structure. The difference now is the extreme nepotism within the elite and their immunity to the anti-venality flagship of government. From a purely historical perspective, capital is the second stage of social displacement in Zambia. Unlike the security structure of the past, capital dominance is not home-grown and this directs the blame to investors and government ineptitude. I did mention in the opening remarks that social revolt has occurred against the political structure; to end the dynastic ambitions of the first president and against the third term bid of 2001. The question, then, remains will the same revolt take place against the economic structure? In other words, could Polanyi’s theory of social reaction to economic dominance ring true for Zambia? In time, yes, I believe so.

Comments in Chronological order (3 total comments)

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Thu, December 24, 2009 11:32 PM (about 76693 hours ago)
Those British and France journalists behave so foolish yet so childish. They forgot their country's despicable colonial history in Africa. the cooperation between China and Africa are on the base of mutual beneficial . China never enforce any African state to accept its investments. African states have power to decide whether rectify China's investment appeal. This is totally different from British and France 's colonial government. THose European guys should know African states have power and intelligence to make judgement by themselves. Africa is not someone's backyard any more, any longer. why tone down you boisterous voice and gaudy perfermance, Let African people say for themselves.
 
Thu, December 24, 2009 11:48 PM (about 76693 hours ago)
In African state's mind ,the point is China's involvement in Africa bring them an option. Those European states like Britian and France are suzerain states to African states. They think Africa is their backyard and they possess some kind of privileges there.
Look at what British government did to intervene zimbabwe's interal affairs. We can know why African states welcome outside strengthes to balanance Britian and France 's pressure. I wonder how British government can explain to African people that their one-sided policy of supporting zimbabwe's white-racists .For decades these racists carried out bloody murdering towards native zimbabwe people.
 
Thu, December 24, 2009 11:48 PM (about 76693 hours ago)
In African state's mind ,the point is China's involvement in Africa bring them an option. Those European states like Britian and France are suzerain states to African states. They think Africa is their backyard and they possess some kind of privileges there.
Look at what British government did to intervene zimbabwe's interal affairs. We can know why African states welcome outside strengthes to balanance Britian and France 's pressure. I wonder how British government can explain to African people that their one-sided policy of supporting zimbabwe's white-racists .For decades these racists carried out bloody murdering towards native zimbabwe people.
 
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