Abstract

In 1964 Zambia emerged as ‘Black Africa’s’ richest newly independent state. Endowed with plentiful natural resources, substantial foreign reserves, and a peaceful political history, its new ‘Humanist’ government soon oversaw a ‘reversal of fortune’. By 1980 Zambia had become the poorest and – by many measures – most indebted country on the planet. How did Zambia’s government allow this to happen? Well-publicized accounts have focused on the longer-term effects of colonialism, falling terms of trades, and regional political instability. This paper will introduce a further potential cause: the systematic degradation of institutional constraint on the power of the executive, and the financial disruption this caused through the reorganization of capital financing. This paper presents a fresh historical narrative of Zambia’s 50 year economic history by bringing together unpublished political archives with financial decision-making theory, and investor reactions.