Global Wealth and Poverty: Zimbabwe

Global Wealth and Poverty: Zimbabwe and the United Arab Emirates Recent innovations in telecommunications and transportation have created new opportunities for many of the seven billion people in the world today, but in some cases, the stark differences in wealth between the affluent nations of the world and their impoverished counterparts in developing nations has never been greater. This is certainly the case with the United Arab Emirates, one of the richest nations in the world, and Zimbabwe, which is currently among the poorest.

To gain some fresh insights into why such drastic economic disparities exist between these two countries, this paper provides a review of the relevant peer-reviewed and scholarly literature, followed by a summary of the research and important findings in the conclusion. Review and Analysis Zimbabwe Like many African nations, Zimbabwe experienced a rocky transition during its transition to African majority rule following its independence in 1980. The newly installed black majority government sought to continue many of the macroeconomic policies of the past, with some mixed results (Mumbengegwi, 2002).

Like many other African countries as well, Zimbabwe has significant deposits of natural resources, including diamonds and other minerals (Zimbabwe, 2011). Despite some encouraging signs of economic growth during the transition period following independence, an increasingly massive public sector and large government investments in education and infrastructure resulted in unsustainably large deficits that adversely affected further development during the 1980s and 1990s (Mumbengegwi, 2002). According to Mumbengegwi (2002), the economic growth that immediately followed independence was short-lived, due to a combination of two consecutive droughts and diminished global demand for Zimbabwe products.

As a result, "Agricultural output declined by almost 20 per cent, reducing incomes and effective demand for manufacturing sector output. Gross fixed capital formation (GFCF) as a percentage of GDP declined after 1982 and stabilized at around 12 -- 13 per cent throughout the decade, which was hardly adequate to cover replacement capital" (Mumbengegwi, 2002). More recently, and despite the lingering effects of the global economic downturn, Zimbabwe's economy has experienced rapid growth notwithstanding ongoing political instability (Zimbabwe, 2011). In this regard, U.S.

government analysts report that, "Following a decade of contraction, Zimbabwe's economy recorded real growth of 5.9% in 2010" (Zimbabwe, 2011, para. 2). Nevertheless, a number of significant challenges confront continued economic development in the country, including widespread corruption, uncontrolled inflation, a staggering 95% unemployment rate and a population that is forced to subsist on less than $2 a day (Zimbabwe, 2011). While Zimbabwe experiences its first solid economic growth in more than 10 years, U.S. analysts caution that future success will depend on a resolution of the country's political problems (Zimbabwe, 2011).

United Arab Emirates With a population roughly half the size of Zimbabwe's (see Table 1 below), the United Arab Emirates' (UAE) gross domestic product per capita is almost one-thousand times as high ($49,600 versus $500). Moreover, the UAE is just a fifth of the size of Zimbabwe, but it does have something that Zimbabwe does not have: proven reserves of oil and gas. According to U.S.

government analysts, "Since the discovery of oil in the UAE more than 30 years ago, the UAE has undergone a profound transformation from an impoverished region of small desert principalities to a modern state with a high standard of living" (UAE, 2011, para. 3). Not content to rely on these proven reserves, though, the UAE government has taken aggressive steps to diversify the country's economy further to the point where the oil and gas industry represents just a quarter of UAE's GDP (UAE 2011).

For instance, according to Siddiqi, "The United Arab Emirates boasts a prudently managed and successfully diversified economy and the country continues to consolidate and build on its achievements of the past two decades" (35). Unlike its counterpart in Zimbabwe, though, the UAE has not been immune to the global economic downturn and its economic growth has been hampered in recent years as global demand for its products and services has decreased (UAE 2011).

Currently, analysts expect continued slow economic growth for the UAE (Siddiqi 41) but further challenges remain including an enormous expatriate workforce and inflationary growth (UAE 2011). Likewise, unlike Zimbabwe, the UAE has enjoyed a stable political history that has helped attract international investment. In this regard, Heard-Bey emphasizes that, "Above all, it is the combination of the adopted federal form of government with the inherited role of the tribal rulers, which makes the UAE unique in terms of political structure and reality of governmental administration" (358).

Comparison of Zimbabwe and UAE Development and Economic Metrics As can be readily discerned from the data in Table 1 and with selected metrics graphically depicted in Figures 1 through 3 below, Zimbabwe and the UAE are at two ends of the economic development spectrum -- indeed, Zimbabwe appears a just a blip compared to the UAE.

Not surprisingly, the UAE's oil and gas resources have helped contribute to the country's transition into a modern free market economy, but there are also significant differences in the types of industries in each country, with Zimbabwe remaining a largely agricultural economy while the UAE has radically diversified its economy into a service industry that adds value rather than relying on harvest-based resources as with Zimbabwe.

Table 1 Comparison of Key Development and Economic Metrics: Zimbabwe and the UAE Metric Zimbabwe UAE Population 12,084,304 5,148,664 Area 390,757 sq km 83,600 sq km Inflation rate (consumer prices) 3.7% 0.9% GDP (purchasing power parity): $5.457 billion $246.8 billion GDP (official exchange rate) $7.474 billion $301.9 billion GDP - real growth rate 9% 3.2% GDP - per capita (PPP) $500 $49,600 Unemployment rate 95% 2.4% Labor force - by occupation: Agriculture: 66% Industry: 10% Services: 24% Agriculture: 7% Industry: 15% Services: 78% Population below poverty line 68% 19.5% Source: CIA World Factbook, 2011 Figure 1. GDP (purchasing power parity): Zimbabwe vs. UAE Figure 2. GDP (official exchange rate): Zimbabwe vs. UAE Figure 3.