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Impact of "Shock Doctrine" on a future Zimbabwe
Patrick Bond
July 15, 2008

The challenge of ending the world's worst inflation will not be met by Robert Mugabe or Gideon Gono, since printing money is the only strategy available in the short term that allows Mugabe to meet three objectives:

• maintaining a patronage state with associated corrupt deals for select elites;
• keeping the povo beneficiaries of state spending - including the police and military - from revolting;
• and maintaining any economic activity in the face of the meltdown of the capitalist economy

But at 9 million percent reported inflation, the reversion to informal hard currency calculations is apparently well underway, and inevitable. Not grasping the gravity of this situation, those in Pretoria, London and Washington promoting one or another versions of a "deal" - in which a reformist wing of Mugabe's Zanu (PF) fuses with the more opportunistic forces in the opposition, such as Makoni, Mandaza, Moyo and Mutambara, with Tsvangirai and Biti either suckered or pressured into the mix in coming weeks - would probably entail the World Bank resident representative in Harare coordinating donor inputs, as is already underway.

Then comes the impossible job: killing enough of the civil service and Mugabe's social programmes to slow the printing presses.

Naomi Klein's "Shock Doctrine" is a good guide to the military and torture tactics that typically proceed the economic pain yet to come - which may make the 2007-08 hyperinflationary period seem like "the good old days". Even a couple of US$ billion promised per year can't solve the problem of Gono's nonstop printing press, because state spending is what will have to be cut to stop inflation.

Ah, to the rescue comes a Chicago-school quick-fixer, who has been advising the MDC's neoliberal wing for at least a year. His name is Steve Hanke, and he had a Fortune magazine column for many years and a professorship in the department - the Johns Hopkins University Department of Geography and Environmental Engineering - where I studied nearly a quarter-century ago. Hanke argues that "Any one of three alternatives can rapidly slash the inflation rate and restore stability and growth to the economy", but each of the three requires removal of monetary sovereignty from the Zim state through technical means.

He disguises the shift in control that this will entail - i.e., little or no subsequent ability of a future democratic Harare government to set interest rates, control financial inflows/outflows, or direct credit to reindustrialisation strategies - and his case rests in part upon a fib: "Prior to the introduction of central banking, the country had a rich monetary experience in which a free banking system and a currency board system performed well."

To try setting that record straight, the material below his article in today's main SA business newspaper contains sections from the two chapters on Zimbabwean monetary history from my JHU PhD thesis, which I guess Hanke never glanced at. The chapters show the history of financial crises, inflation and foreign domination that the Southern Rhodesian small capitalists and white farmers/workers suffered under the system he recommends, and the way they dealt with these problems. Black workers/peasants suffered yet more, but I've left those sections out in order to simply let the story of how "free banking" and the "currency board" were unsatisfactory, and required replacement by a central bank.

To get rid of inflation in Zimbabwe will, of course, be a class project - requiring ridding the economy of a powerful parasitical class several thousand strong. The notion that if Mugabe goes the country can recover, without addressing this elite, is a dangerous illusion, as Biti pointed out to me long ago. But that illusion is what probably will be developed in coming days to make it appear that a deal entailing dramatic cuts in the rock-bottom standards of living of poor Zimbabweans will cure inflation.

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