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Endgame in Zimbabwe?

There is an economic crisis in Zimbabwe. Slow decline over the last few years has tipped over into what looks, according to the International Herald Tribune, like ‘freefall’. What has happened and is there a way back?

Robert Mugabe’s regime looks as if it is in serious political difficulties. Last week it was reported that the Zanu PF politburo refused to endorse a policy that would extend his rule to 2010. His term of office is therefore still due to end on March 2008. For the first time the contrived system of political economy that has kept him in power is not providing him with unquestioned support. It is not hard to seek the reason: the economy is in chaos and the annual rate of inflation is the highest in the world. Mugabe holds that if he quits the party would disintegrate. It increasingly looks that if the present policies continue, the country itself will disintegrate although as with all periods of hyperinflation there are some winners, such as those in the informal sector and those with direct access to foreign exchange, as well as many losers. Annual inflation was reported to be 1,281% by December 2006. Brazil recovered from 6,000% inflation by tough action and the Governor of the Central Bank of Zimbabwe believes that he can achieve the same outcome. This is greeted with skepticism by many of the middle-class in Harare.

With fears of a collapse of the electricity supply, problems with water supply and continued problems in the business sector, there has been a split of sorts in the party. The hardliners are still loyal but the moderates within Zanu PF fear that the country is on the edge of ruin. The Movement for Democratic Change (MDC), the main opposition, is arguing that Mugabe is on the way out and that the transition to a new system of government is on its way. Mugabe deprived commercial farmers (members of the white community on Zimbabwe) of their land and divided it amongst his supporters. Many farms stand idle whilst the new owners are in receipt of subsidies. Senior government officials have allegedly been given access to foreign exchange on favorable terms and so help them to stave off some of the hardships imposed on the population as a whole, according to the MDC. The MDC was formed in 1999 and thereafter continuously harassed by the Government. Dairy production has dropped dramatically and commercial beef farming has become insignificant. Ordinary Zimbabweans are finding it difficult enough to survive and high-valued foods have dropped out of their diet. The health of the population is at risk. The Government has run out of any growth areas from which to derive tax revenue and has resorted to the printing press to bridge the gap between revenues and expenditure and this has led to inflationary results. In an effort to sustain itself, it continues to harass any opposition.

Those with economic knowledge of Zimbabwe doubt that the government has the economic skills and the political capacity to quickly set the economy on a path to recovery. To get commercial farms back into production would require rethinking the recent land re-allocation and challenging directly the government’s own supporters (including according to John Robertson an economist in Harare, withdrawing subsidies from very inefficient small-scale farmers) . There are no significant and legitimate sources of new taxation. The wage and price control measures proposed by the Central Bank are unlikely to succeed even if there was the social will for them to work. Such measures tackle the outcomes and not the causes. The cause is the policy-inspired contraction in the the tax base and the huge growth of the government deficit and the means chosen to finance it. Market forces could help constrain corrupt practices but the market is still treated with suspicion. More and more government control in a situation where electricity supply cannot be guaranteed or other basic services nominally under government control are under stress, is not likely to bring a solution.

Whilst some of the problem can be directed at the withdrawal of international aid, Zimbabwe’s economic troubles are self-inflicted. Politics have dominated over economics. Buying-off Mugabe’s supporters has been of greater significance that ensuring continued economic development and increased living standards. Unprincipled land reform is a significant factor. Contracted output and contracting exports has meant that imports cannot be so easily financed. When property rights are in doubt, capital takes fright. Falling real incomes and rising unemployment add to social unrest whilst under-investment and lack of imports puts strains on significant services. Death rates increase. Life expectancy is now alleged to be half what it was only a few years ago and so it goes on.

Mugabe’s policy of rewarding those who supported him during the liberation struggle and of punishing any opponents, have led to an acute economic mismanagement that many think now fuels a decline that is completely out of control. Whilst Mugabe is a skillful politician in the sense of ensuring his support within the Party, he seems to be running out of easy options. The lack of good governance is at the center of the crises. It looks to the MDC as if only a radical change in policy or in leadership and government will be required to get things right. A radical change in attitudes at the top, rather than on the streets, is certianly required and currently this seems unlikely. Even if Mugabe plays the China card, the problems will remain. There is no quick and easy solution to Zimbabwe’s ills.


Comments

What is the 'China card' you mention in the last paragraph? Sale of raw resources to China at low prices? Since you mention that there are 'no significant and legitimate sources of new taxation' and also that 'when property rights are in doubt' the available capital declines, it seems selling raw goods to China (which seems to be devouring the world's goods at the moment) would be viable. But doesn't this in turn have a chance of impoverishing Zimbabwe even more as they sell their goods instead of turning them into exportable finished goods which sell for more or using the goods themselves?

Well researched and reasoned article on Zimbabwe. It is obvious that there is a need for restoration of the rule of law before the country can reverse its misfortunes. The current government is incapable of doing this as it has lost all credebility.

It's something to do with African leaders. If you look through out Africa you will find that most of them have been removed by force or have died in those leadership positions. At least there are those like Nelson Mandela that are making us proud.

I've talked to people who were forced out of their farms in Zimbabwe some of them are living in Zambia and guess what? They are making a difference there in Zambia when it comes to food production. At the same time Zimbabwe now has a food crisis. So if was and still is a big loss for Zimbabwe.