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Zimbabwe Experience - Part 2
André Carrel
November 02, 2007

Continued from Part 1

http://andrecarrel.com/cms/modules/news/article.php?storyid=112

When CBC Radio reported that Canada's annual rate of inflation had climbed from 1.7 percent to 2.5 percent in September, the increase was described as a leap. Zimbabwe experiences such leaps on an hourly basis! Inflation is not talked about much anymore in Zimbabwe: There are more pressing issues to debate in that beautiful but wretched country. When the annual rate of inflation is somewhere between 7,000 and 9,000 percent, the exact number does not matter anymore.

We rarely are conscious of the fact that money, the paper in our wallets and the numbers on our bank statements, does not have value; it only represents value. When we sell an apple for a dollar, the value of that dollar is not in the paper we stick into our wallets; the paper only represents the value of the apple we sold. When later we use that dollar to purchase a loaf of bread, we are not trading the paper we pull from our wallets for a loaf of bread; we are exchanging the value of the apple we had for the bread we now want. The purpose of money is to enable us to temporarily store the value of goods and services we produce so that we may later exchange it for goods and services produced by others. Paper money works only when the amount of money being printed by a government's central bank does not exceed the value of all goods and services produced in the nation. Inflation as we see it today in Zimbabwe robs money of this singular purpose.

How did it come to this? By the late 1990s Mugabe's years of autocratic rule began to stir unrest in the country. His solution was to print money to buy friends, to buy his way out of his troubles. When governments do this, they are said to be pursuing a reckless monetary policy. When private people do it, we call it forgery. When money is printed in excess of the value of goods and services produced, it does not matter who does the printing, be it a crook in his basement or the government in its central bank; the impact on the economy is the same.

Mugabe's solution to the inflation he himself had created was to impose price and wage controls. A law was passed to freeze retail prices of basic groceries and to forbid the increase of employee wages by employers. Prices had been changing with such frequency that they were no longer printed on packages; they were written on strips of paper and pinned to shelves. When the law forcing businesses to roll back their prices was passed, police officers walked into stores and paraded up and down the aisles dictating new prices for wares to owners. At the whim of a police officer an owner could be ordered to reduce the price of an item from ZWD$500,000 to ZWD$200,000. The item's replacement cost and the store's operating expenses were of no concern to police.

Hungry crowds gathered outside whenever police entered a store to enforce price controls. As soon as the police left, the crowd would rush in and clean out the store. This left businesses with neither the cash nor the inclination to restock their shelves. The situation created an instant black market for everything from soup to nuts.

Effective enforcement of price control laws is impossible. Items appear and disappear from store shelves without notice or warning. I saw tomatoes priced at ZWD$160,000 per kilogram in one store and at ZWD$260,000 on the same day in another store only a short distance away. One store I visited had a few eggs for sale at ZWD$30,000 per egg. These eggs were soon gone. A few days later more eggs appeared in that same store at the new price of ZWD$75,000 per egg.

One has to be lucky, very lucky, to find a loaf of bread in a store in Zimbabwe today. At whatever price, the purchase of a loaf of bread is a good investment because a loaf of bread bought today can be sold for a lot more money in a few days. Perishable is a relative concept. When the percentage measurement of inflation is in multiple thousands, money becomes a perishable good while bread, eggs, butter, milk, and tomatoes become durable assets!

Mugabe continues to pass more laws in his vain attempts to battle the inflation he unleashed, but when everybody, including police officers, is forced to participate in the black market just to eat, laws become irrelevant. Breaking the law becomes a necessity or, as my friends explained, a matter of having to be practical. Being practical includes being willing to pay a bribe to avoid being hauled away to jail. A few Zimbabweans, those with connections and access to hard currency, cope reasonably well under these difficult conditions. The unfortunate many, however, go hungry. The next column in this series will be on the subject of health care.

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