Tuesday, July 03, 2007

Mugabe's comatose economic policy

Zimbabwean dictator Robert Mugabe is living proof why octogenarian Marxists have absolutely no business trying to manage a nation's economy. Consider Mugabe's classic Marxist response to his country's eye popping, regime threatening, hyperinflation, to wit, unleashing the state security services on shopkeepers who violate state price controls. Mugabe's blamed the British government for hatching a devious plot to undermine his regime by somehow getting shopkeepers to ignore government price controls and has instituted a crackdown by the "inflation police" to remedy the problem.

If you're the sort of person whose eyes glaze over when the topic of economics comes up, pay attention to this painless summary of what caused Zimbabwe's hyperinflation. Due to horrendous economic mismanagement and scandalous public corruption, the value of the Zimbabwean dollar has plummeted as the reserves of foreign "hard" currency in Zimbabwe's central bank dwindled to nothing. Without any hard currency to back up the value of the Zimbabwean dollar, the Zimbabwean government found itself unable to pay for imports of things like oil, food, and so on. With no cash on hand, the government simply printed more money. When you have a growing supply of worthless money chasing an ever dwindling supply of goods, inflation is born. When the government's printing presses outstrip the supply of goods by an enormous margin, you wind up with hyperinflation.

Mugabe's fetish for implementing halfassed Marxist economic policies have left him unprepared for dealing with the world's worst hyperinflation. The classic economic view of inflation states that inflation is always a monetary phenomenon. Mugabe himself probably knows this, but for whatever reason, he continues to ignore the reasons the Zimbabwean dollar is worth less than a square of toilet paper. Why institute economic reforms when you can have the cops rough up shopkeepers for failing to adhere to prices concocted at random by government bureaucrats?

"Do not distort our prices. Stop it or we will force you to close or we take over your factory!"
-Warning to Zimbabwean shopkeepers in government newspapers

Mugabe is doubtlessly aware that even if shopkeepers sold their goods at the official price, the actual value of the currency received at the end of the day will be worth much less by the end of the next day, precipitating the need for yet another set of "official" prices on a daily (or more!) basis. The merchants lose money on every single transaction, and when they're out of goods, they're out of business, thereby reducing even further the number of goods available to buy with the still skyrocketing supply of banknotes. As always, Mugabe's solution is making the problem infinitely worse.

It's impossible to imagine that Mugabe actually believes he has any chance of succeeding, which prompts the question of what Mugabe intends to do when his police and soldiers are getting tired of being saddled with mountains of worthless money that can't buy them food or clothing. A real economist would have stopped the bleeding years ago by implementing government austerity plans and tackling corruption. Mugabe, however, relies on extravagant perks to his minister and access to stealing public monies as the cement that holds his ever increasingly shaky government coalition together. In other words, when beating the crap out of store owners fails to fix the problem, Mugabe's going to need one hell of a Plan B.

UPDATE: Archbishop Ncube is begging Great Britain to invade Zimbabwe and overthrow Mugabe. I think this qualifies as a "discourse on post-colonial power", don't you?

1 comment:

My Wacky Friends said...

The guy is totally just, and there is no skepticism.