Update on Zimbabwe

The troubles in Zimbabwe are continuing, despite the power-sharing agreement from September last year. While it is easy to dismiss Mugabe & friends as just a bunch of evil thugs, and conclude that the solution to the world is having fewer evil thugs… it is interesting to note that their primary reform that has ruined Zimbabwe was land reform.

The original rule was that when a farmer wanted to sell their land, they must first offer their property to the government at market rates (unless they have a certificate stating the govt wasn’t interested). It’s not exactly a libertarian law, but it was generally well accepted and could have lead to some land redistribution to black Zimbabweans, as was the plan.

But funny things happen to government plans. Occasionally, politicians get in the way. In an accelerated attempt to bring on asset redistribution — a goal so admired by the left — Mugabe started simply taking the land.

Writing for CATO, Eddie Cross (an opposition MP in Zimbabwe) explains the cost of land reform:

The combined costs of the land reform are staggering— they include US$2.8 billion in international food aid on an emergency basis, nearly US$12 billion in lost agricultural production over 10 years, and a potential US$5 billion in compensation—a total of some US$20 billion.

This might not sound like much for for Australians who have just seen a nearly $60 billion deficit… but to put it in context the Zimbabwe economy is only about $5 billion per year.

With unemployment at 94% and inflation running at nearly 90 sextillion% (ie 90,000,000,000,000,000,000,000), Zimbabwe is a shining example of what a government can do to a country when they have the wrong ideas.

14 thoughts on “Update on Zimbabwe

  1. Zimbabwe is the worst by far, but the story of post-colonial Africa is mostly one of governments making things worse. With very few exceptions they have been protectionist, reluctant to embrace local capitalism and resistant to foreign investment. At the same time the governments of developed countries have contributed by imposing trade barriers and snuffing out local entrepreneurs with aid.

    Even if the government of an African country sees the light, as the government of India did a decade ago, it will struggle to succeed in a world of trade restrictions, market distortions and guilt-based foreign aid.

  2. The trouble is- people will make the wrong conclusions!
    Libertarians will conclude that governments should not be in the business of acquiring land to give to supporters.
    Socialists and central planners will think, “Just because it went wrong for them, doesn’t mean I’d get it wrong!”
    They see it as a challenge, to be the first functioning socialist economy.
    How can we help the average citizen come to our conclusion, that markets should be left alone?

  3. Whilst the power of fiat is vastly over rated the fact that their currency can lose value at an annual rate of 90 sextillion% and still be regarded as a currency is somewhat impressive.

  4. “despite the power-sharing agreement from September last year”

    If you compromise with the devil, you always lose. You cannot give your moral sanction to a dictator.

    Re: Land reform most damaging:
    Abso-positvely.

    Zimbabwe is a classic example of how removing property rights is absolutely catastrophic.

    I think Libertarians need to be able to argue that ANY loss of property rights is harmful.

  5. I think David’s comment is a particularly good one.

    And it’s important to highlight how damaging the continual international aid has been to the African people.

    People like Bono shouldn’t be winning awards and adulation.

  6. Even worse than dollar figures the sextillion percent inflation is the stats on life expectancy. It’s dropped from mid-70s, one of the highest in Africa and comparable to the West, to 37, the lowest in the world in a few short years, thanks to Mugabe. Socialists sometimes dismiss economic arguments saying that money is just a capitalist tool, but they can’t hide from this devastating direct result of their policies being implemented, albeit in extreme form.

    I know a journalist based in Africa who travels to Zim regularly and in secret to report on the situation. He hates Mugabe obviously but warns not to underestimate him. They guy is an evil Marxist thug, but also a wiley old fox. He’s set things up very carefully so that no-one can topple him. Power sharing is not working, and a coup or a targeted assassination is not an option as it would result in even more bloodshed than currently. About the only way he’ll go is if he’s guaranteed immunity and a comfortable living for the rest of his life, something that would be unconscionable but maybe in the best interests of the people.

    I agree with David on the damaging effects of aid, but turning that off in Zim will merely punish the people even more – it’s emergency humanitarian relief that’s needed.

  7. I think that the best thing for the people of Zimbabwe would be foreign investment. They have a very low wage and could be paid in silver (an ounce coin would be worth $20) to prevent workers from being totally vulnerable to inflation.

  8. Dambisa Moyo (http://www.youtube.com/watch?v=HIPvlQOCfAQ) makes a lot of sense to me in regards to Africa in general and “dead aid”. Emergency humanitarian aid is one thing but decades of institutionalised money throwing doesn’t seem to have worked.

    “Foreign aid might be defined as a transfer of money from poor people in rich countries to rich people in poor countries.”
    Douglas Casey

    Terje @ 3. Yes very impressive indeed! Does anyone know if a common underground currency has surfaced there?

  9. Jaz – everything is done in US dollars as the currency is effectively useless. Some locals are using gold as well as USD is hard to come by.

    I agree with all the points on dead aid and the need for foreign investment, but none of that is relevant to Zimbabwe until Mugabe goes. Before that the ‘best thing for the people of Zimbabwe’ is to get rid of him and the rest of the ZANU-PF thugs.

  10. Didn’t Bono sponser food and essential supplies? For that, I thank him. But other aid seems to do damage. We can coin a new name- aiddiction. African countries are aiddicts!

  11. Nicholas – food aid often does damage also. If somebody foreign was dumping free food in our domestic market we would probably slap a tariff on them to protect our producers. So it should not surprise that dumping free food in the way of aid into other countries is going to inflict considerable pain on certain sectors of their economy.

  12. Bono did sponsor some food but most of his lobbying consists of trying to persuade world leaders to make more unconditional cash donations to Africa

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