Hyperinflation in Zimbabwe

The downward spiral continues:

WSJ.com - Inflation Rate Tops 1,000% For First Time in Zimbabwe: Zimbabwe's annual inflation rate topped 1,000% for the first time, underlining the economic collapse of a country crippled by shortages. Moffat Nyoni, director of the Government's Central Statistical Office, said that inflation for the 12 months to April 2006 was 1,042.9%, according to a state radio report Saturday. A package of the cheapest candy costs 57,000 Zimbabwe dollars and a loaf of bread 100,000 Zimbabwe dollars. But the maximum denomination note is 50,000 Zimbabwe dollars, forcing shoppers to carry bags full of money for basic daily purchases.

Since mobile phones went into service in 1996 as fixed-phone services crashed, the price of the most inexpensive phone has increased 5,000 times. The price of a single car battery this year could have bought 14 brand new cars 10 years ago. There is a joke that toilet paper costs so much -- 125,000 Zimbabwe dollars a roll ($125) -- that it would be cheaper to use 500 dollar notes. And the money needed 12 years ago to buy a house -- three million Zimbabwe dollars, or an entire life's savings -- doesn't even cover a family's monthly expenses today.

The economy has been in free fall since President Robert Mugabe's seizure of 5,000 formerly white-owned commercial farms in February 2000. "We are living with the consequences of [the government's] destructive policies of the past," said economist John Robertson. "They cannot raise the necessary taxes from our shrinking economy."

Inflation in March was 913%. Figures released by Mr. Nyoni's office showed 21% inflation for the month of April alone, fueled by a 27% increase in the cost of basic foodstuffs, 25% in rents, 35% in fuels such as gasoline and kerosene, and 48% in motor vehicle and health insurance.... The lowest-paid workers in formal employment -- domestic gardeners -- earn 2.5 million Zimbabwean dollars a month, but 70% of the work force lack regular jobs due to waves of bankruptcies and earn hourly wages for informal work like bookkeeping, maintenance or cleaning....

An estimated four million Zimbabweans, many of them skilled professionals, are living outside the country. Most remaining Zimbabweans make ends meet by growing sweet potatoes and corn alongside roads and railways or on vacant land. Mr. Robertson said the point of "meltdown" had already been reached for pensioners and others living on small fixed incomes. Money from charities or from relatives living abroad is the only means of survival for many elderly. The United Nations estimates at least three million of the 12 million population are in need of emergency food aid ahead of next month's harvests...

Comments

[Arun Khanna]

After Mugabe's regime collapse IMF and World Bank should stay out and hand over the task of turning things around to World Socialist Forum. Let us see for once, what the alternative to World Economic Forum has to actually offer.

[mvei]

> Most remaining Zimbabweans make ends meet by growing sweet potatoes and corn alongside roads and railways or on vacant land.

Sounds like land seizuers weren't just stupidity.

[radek]

"After Mugabe's regime collapse...World Socialist Forum...Let us see"

Ah yes. Let us use the poor people of Zimbabwe as laboratory rats in another grand experiment to test worn out theories that proved seriously destructive in the past. Maybe this time it will work! And if it doesn't? Well, they're just poor people of Zimbabwe.

[Tomas]

The really sad part of the story (besides the suffering of the Zimbawan (sp?) people) is that the destructive policies of Mr. Mugabe will discredit the idea of a more equitable system of land ownership in Africa. Something which is sorely needed in many countries.

[Slocum]

What amazes me is that Zimbabwe dollars have ANY value at all. I would think that at this point commerce would be either in barter or foreign currency.

"The really sad part of the story (besides the suffering of the Zimbawan (sp?) people) is that the destructive policies of Mr. Mugabe will discredit the idea of a more equitable system of land ownership in Africa. Something which is sorely needed in many countries."

Definitely not--what is sorely needed is for the idea of land redistribution to die. The last thing Africa needs is large numbers of small, inefficient farm plots. All developed countries have gone (or are going) in exactly the opposite direction and with good reason.

[andres]

"what is sorely needed is for the idea of land redistribution to die. The last thing Africa needs is large numbers of small, inefficient farm plots. All developed countries have gone (or are going) in exactly the opposite direction and with good reason."

Err, no. The assertion that land reform only creates small, inefficient farm plots is one of the oldest reactionary arguments in the book. The sad part is that it too often becomes a self-fulfilling prophecy either because developing country governments believe that all they have to do is reshuffle land ownership and sit back, or because the government deliberately underfunds and isolates the newly created small farms. It doesn't have to be that way.

Under concentrated land ownership, most developing countries tilt way too heavily towards export agriculture, especially luxury crops such as coffee, cocoa, bananas, sugar, etc. and away from food self-sufficency. Makes it tough on the old debt rating if a drought or other natural disaster completely destroys your limited food crops from undercapitalized small farms.

The idea that land redistribution can be combined with large-scale farming, _provided_ that the government and foreign NGO's are willing to provide funding and advice, and to enforce and monitor cooperative management and income sharing, is one that most opponents of land reform prefer to sweep under the rug. Either I don't read enough or I don't read the right development literature, for I've never seen a counterargument that's even slightly better.

[anne]

Well done, Andres, and much more need be added in support, for from China to Mexico to Niger to Zimbabwe sustaining small agriculture amid large is essential for developmental well-being.