Lord Actons famous observation that, power tends to corrupt, and absolute power corrupts absolutely is once again being confirmed in Zimbabwe. The President has usurped all the power, none is left with the people, and all the institutions of democratic governance have been corrupted.
Why, then, should anyone thank him for acting in such an autocratic, brutal, unprincipled and economically ludicrous manner? Why when he has pulverised the Zimbabwean economy, destroyed its agriculture, caused famine in a country that was once called the bread basket of Africa, and inflicted terrible harm on its people? Why when those of us with any humanity in our souls are filled with horror at the consequences, with compassion for the children, women and men who are caught up in this ghastly decades-long tragedy, and with frustration at our inability to do anything about it?
We must thank Mugabe because he is graphically illustrating for us once again the consequences, not of adopting really bad policies, but of taking bad policies to extremes. It is only in their extreme state that the foolishness of bad policies becomes crystal clear.
Examples of the destructive consequences of debasing currencies are easily forgotten. We are being reminded at the expense of the unfortunate Zimbabwean people.
A stable currency played an important role in the growth of the Roman Empire but in 54-98 AD Emperor Nero began debasing the currency by reducing the silver content of the denarius to 90 per cent and slightly reducing the size of the gold aureus. Debasement continued under successive emperors until the silver content of the denarius was reduced to 0.02 per cent by the third century AD. During this time price inflation accelerated and the empire became increasingly unstable.
Emperor Diocletian (284-305 AD) decided to try and stop the inflation, which is estimated to have been about 15,000 per cent in the third century. Diocletian, like Mugabe, blamed suppliers for the rising prices and set maximum prices for a vast number of goods and services, with penalties for disobeying the law which included death. The merchants fled into the country with their goods and great shortages ensued. Currency debasement and high taxes destroyed productive enterprise and was a major cause of the disintegration of the Roman Empire.
Successive Roman governments expected the suppliers to provide the same quantity of goods and services for a coinage bearing the same name but with a radically reduced precious metal content. Today, theft of currency value by stealth is not as easy to detect; biting paper money does not provide the answers the ancients got when they bit gold coins.
To pay for the excesses of government, the Reserve Bank of Zimbabwe, the custodian of the Zimbabwean dollar, printed more and more notes, of larger and larger denomination, stealthily appropriating and spending the wealth of the unsuspecting holders of the currency, to the point where its purchasing power halved in April, the CPI rising 100.7 per cent in one month. Shameful, is it not? Shameful, yes, but not unique! Debasing the currency, the modern equivalent of which is printing too much money, is the fundamental cause of all general price increases.
When the extreme is reached and the consequences of bad government are revealed for all to see, the dictator becomes frenzied. As Winston Churchill said, Dictators ride to and fro upon tigers which they dare not dismount. And the tigers are getting hungry. The consequence of extreme debasement of the Zimbabwe dollar is that merchants have demanded more and more of the devaluing currency in exchange for their goods. And acting exactly as Diocletian did, President Mugabe blamed the suppliers and instituted price controls and extreme penalties. As happened with Diocletian, Mugabes tyrannical action will not only fail, it will make the situation infinitely worse. It is increasingly worthless money that is at the root of the problem.
In the Economic Freedom of the World report (EFW), co-published by the Fraser Institute and the Economic Freedom Network, Zimbabwe was ranked 130th of the 130 countries rated for their levels of economic freedom. The Index of Economic Freedom co-published by the Heritage Foundation and the Wall Street Journal placed Zimbabwe at 154th out of the 157 countries measured. Libya, Cuba and North Korea are the three countries with the dubious distinction of being less free.
The EFW report describes the cornerstones of economic freedom as personal choice, voluntary exchange, freedom to compete, and security of privately owned property'. Zimbabwes ranking indicates that the countrys people enjoy very few of these freedoms. In fact their economic freedom was measured at a level of 2.8 out of 10; by contrast the rating of the worlds freest territory, Hong Kong, was 8.7 and SA s 6.7.
Next door to Zimbabwe we find Botswana, which is the most economically free country in Africa. On access to sound money Botswana has a rating of 9.4, with SA at 8.2 and Zimbabwe, not surprisingly at 0.0. Botswanas economy has grown at an annual compound rate of 5.8 per cent and achieved a per capita GDP of USD 10,000 (PPP) while Zimbabwes has shrunk at 5.7 per cent per annum over the same period and achieved a per capita GDP of USD 2,000. The 1.8 million Batswana produce a total GDP that is two-thirds that of the 12.9 million Zimbabweans. The stark difference between these two countries is the direct result of their divergent government policy decisions.
Zimbabwes CPI at the end of April of each year shows a startling progression: 2001 84.5, 2002 180.8, 2003 - 667.5, 2004 4038.8, 2005 9251.2, 2006 105,734.3 and 2007 4,032,633.7. It provides a record of an imploding economy and a culmination of all the human rights transgressions, the autocratic decisions and actions, and the erosion of the freedoms of the citizens of Zimbabwe. If others learn from the Zimbabwe example not to commit the same travesties of justice, liberty will gain.
Author: Eustace Davie is a director of the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author's and are not necessarily shared by the members of the Foundation.
FMF Feature Article/ 10 July 2007 - Policy Bulletin / 25 August 2009
Publish date: 04 September 2009
The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation. This article may be republished without prior consent but with acknowledgement to the author.