Today is Zimbabwe Currency Exchange Day
From bad to worse
Today is the last day the government (?) of Zimbabwe will allow people to trade their old ZWD (zimbabwe dollars) for new. Zimbabwe, which ten years ago was doing pretty well for an African country, has been on a steady decline. A country needs three main things to have a sound economy; 1) a rule of law, and sound 2) monetary and 3) fiscal policies. Zimbabwe has almost willfully destroyed its economy by ruthlessly negating these laws.
First Dictator Mugabe took the white people's farmland, setting up his cronies to mostly leave these productive assets to non-use. Then in order to forestall the rapid decline of the then non-productive economy, he printed enough money to make it look like the people could buy stuff. Of course this didnt last very long once people realized what was going on (the benefits of inflationary economic pump-priming never does last very long). Currency controls means black markets, and just makes the decline worse when it comes.
Of course agrarian reform is the key to reform in any 'underdeveloped country' where the imperalists helped themselves to the most productive farmland, leaving the people naught. But this occured many many years ago, and a way to have reformed the correct way, would been to have buy the people out, if thats what Mugabe thought best (of course that idea is not best, government ownership of the means of production is just a slow slide as well). But negating the rule of law and chasing away the technological knowledge base of his country was just economic suicide.
But a bright-side of this story is that a change in government is usually the ending to every hyperinflation currency collapse. Of course a worse government could be put in place (eg Germany in the 30s and China in the 40s) but in this case not many people could do worse for the people of Zimbabwe than Mugabe has.
Today is the last day the government (?) of Zimbabwe will allow people to trade their old ZWD (zimbabwe dollars) for new. Zimbabwe, which ten years ago was doing pretty well for an African country, has been on a steady decline. A country needs three main things to have a sound economy; 1) a rule of law, and sound 2) monetary and 3) fiscal policies. Zimbabwe has almost willfully destroyed its economy by ruthlessly negating these laws.
First Dictator Mugabe took the white people's farmland, setting up his cronies to mostly leave these productive assets to non-use. Then in order to forestall the rapid decline of the then non-productive economy, he printed enough money to make it look like the people could buy stuff. Of course this didnt last very long once people realized what was going on (the benefits of inflationary economic pump-priming never does last very long). Currency controls means black markets, and just makes the decline worse when it comes.
Of course agrarian reform is the key to reform in any 'underdeveloped country' where the imperalists helped themselves to the most productive farmland, leaving the people naught. But this occured many many years ago, and a way to have reformed the correct way, would been to have buy the people out, if thats what Mugabe thought best (of course that idea is not best, government ownership of the means of production is just a slow slide as well). But negating the rule of law and chasing away the technological knowledge base of his country was just economic suicide.
But a bright-side of this story is that a change in government is usually the ending to every hyperinflation currency collapse. Of course a worse government could be put in place (eg Germany in the 30s and China in the 40s) but in this case not many people could do worse for the people of Zimbabwe than Mugabe has.
posted by Cameron Weber at 11:23 AM
