Drawing Lessons for Austerity Policy Initiatives in Africa

Abstract

This article examines the concept of austerity and its evolution as a policy tool in public affairs in order to identify sustainable factors for the implementation of austerity policies in Africa and elsewhere. To that end, lessons from Greece, the three European Baltics, Portugal, Italy, Argentina, and Spain were examined in order to draw lessons for Zimbabwe and Africa in general. The term austerity refers to economy, frugality, thriftiness, stinginess, and prudence in the use of resources by an individual, corporation, or nation, and has intellectual roots in the neoclassical school of economics. Austerity becomes a national policy in which governments impose restrictive and difficult economic conditions in order to resurrect failing economies by reducing government spending, debt, and deficits.

Austerity policies have become the dominant global wisdom for dealing with economic and fiscal stress in recent years. Cuts in social welfare budgetary allocations, as well as cuts and freezing of positions in the public sector and state enterprises, characterize countries implementing austerity policies.

The article proposes an interplay of factors such as strong political will, buy-in and ownership of the policy by business, labor, and civic society; bailouts to support the reform; strong regulatory frameworks for the supervision and surveillance of the banking and financial services sector towards market stability; institutional policy consistency and coherence, and embedded institutional fiscal discipline, among others, for austerity policies to be effective.