Ethan Zuckerman’s online home, since 2003

Zimbabwe: Where’s the breaking point?

When I visited Zimbabwe in September of last year, one US dollar bought $500 new Zimbabwean dollars on the “black market”. (The term “black market” implies a shadowy part of town with clandestine deals going down – I bought all my currency from friends, who’ve all been forced to become illegal currency brokers so they can buy dollar goods outside the country.) The official exchange rate was $250 zim dollars to one US dollar, roughly half the black market rate.

The situation four months later is far more dire – a US dollar buys you $5000 zim dollars on the black market. But the official rate hasn’t moved at all, and central bank governor Gideon Gono says that he won’t revalue the currency. Inflation is at 1600% a year, just below the 50% a month rate where economists declare “hyperinflation“, one of the strangest and ugliest phenomena in all of economics.

Hyperinflation happens when a government decides to print large quantities of money to keep up government spending despite a lack of tax revenues. Zimbabwe’s economy has been in recession for eight years and total free fall for at least the last year – with 80% of the workforce unemployed and the worst harvest in years predicted for this year, it’s unlikely that tax revenues are improving any time soon. But the Mugabe government keeps paying state employees and subsidizing farmers, which requires the government to print new money.

Printing money isn’t a panacea – governments can’t magically create wealth out of thin air. When they give themselves more money, other economies respond by valuing that currency at lower and lower rates. Anyone who needs to import goods from another country discovers they need to spend more Zimbabwean dollars to buy gasoline or flour. They, in turn, raise their prices to continue making a profit. The resulting inflation can happen very, very quickly when a government has given up even pretending that printing money is a bad idea.

Gono, who is either the most incompetent central banker in the world today or the most sinister and corrupt, has responded by illegalizing inflation. Betwen March and June, anyone who raises prices for goods or services, will be subject to arrest. The predictable result of this action will be a full shutdown of the Zimbabwean economy – if you can’t make a profit selling bread, why would you continue making it and selling it at a loss?

What you’ll likely do, instead, is sell bread on the black market. There’s money to be made in these markets, especially in petrol. The government is providing petrol to farmers at 330 Zim dollars a liter – roughly $0.08 a liter at the black market exchange rate – in the hopes that farmers will bring their tractors into the fields. But it’s easier for farmers to sell the petrol on the black market at massive profits to bus drivers… who, incidently, can’t purchase petrol legally.

This is Zimbabwe, a blog from the fine folks at activist organization Sokwanele, suggests that government officials are in on the scheme as well, purchasing petrol at this official rate and selling it clandestinely.

Rather than blaming inept fiscal policy and official corrruption for Zimbabwe’s economic problems, Gono is blaming gold miners, who he contends are smuggling $40m USD of gold and diamonds out of the country each week. (This figure is absolutely farcical – in 1999, before the government nationalized most mines, the country produced 28,000kg of gold. That production dropped sharply in 2000 when government seized control of private mining operations. At a current price of $22 per gram, total output for the whole country for the 1999 was worth $616 million. Gono contends that five times as much gold is being smuggled out this year. Or perhaps Zimbabwe’s magically become a major diamond producer with no one noticing…)

This is a classic example of blaming the victims: people are mining gold because there’s no point in working to earn Zimbabwean dollars, which are worthless, leading them to try to get the hardest of hard currencies – gold. Over 25,000 of these miners have been arrested as part of Operation Chikorokoza Chapera (“No Illegal Panning”), the latest operation designed to save Zimbabwe’s economy from exaggerated threats.

The results of hyperinflation are ugly across the board. The New York Times reports blackouts in Harare, a cholera epidemic and impending strikes by teachers and police officers, whose salaries – despite raises – are about $60 USD a month. Kubatana, an NGO support organization in Harare, seems to be collecting horror stories on their blog:

- A monthly pension for government employees of $13,000 (about $3 USD), which buys a sandwich.

- 300% – 2000% increases in university fees, which have led to student protests… which led to the university throwing male students out of the dorms, for fear that they would organize a strike.

- Strikes by doctors in public hospitals which has made medical care impossible to get other than in private clinics.

Most disturbing to me, at least, is a sense from some Zimbabwean bloggers that revolution would be better than watching the economy slowly collapse. A post a few days ago from Amanda Atwood looks nostalgically towards Guinea, where trade unions are demanding President Lansana Conte (who is aged, sick, corrupt and ineffectual) step down. The protests turned violent, and strikes have turned into clashes with police and looting of government buildings and businesses. (Atwood wrote her post before the situation in Guinea became violent.)

It makes sense for Zimbabweans to look towards Guinea – labor unions have been the source of most of Zimbabwe’s political change. The ZCTU (Zimbabwe Council of Trade Unions) is the main organization that seems to scare the Mugabe government, which helps explain why their protests are shut down so swiftly and violently. While doctors, nurses and electric company workers are on strike, much of Zimbabwean society seems to keep functioning.

What’s the breaking point? Many Zimbabweans now walk to work because paying for transport would cost more than they earn in a single day. The government is forced to ask private citizens to provide funding for Mugabe’s 83rd birthday party. Zimbabweans may be some of the world’s most resilient people, but there’s got to be a breaking point. Right?

4 Responses to “Zimbabwe: Where’s the breaking point?”

  1. sean coon says:

    what a friggin’ mess. how has mugabe survived to 83 with that type of horrible leadership? rhetorical question… jeez..

  2. quixote says:

    Sean, I guess by using the same tactics as the Shrub, on a grander scale in a poorer country: loot the treasury to buy votes and protection. As you say. Jeez.

  3. Dave Coventry says:

    Western governments were able to ignore the gukuruhundi against the Ndebele people in the 1980s because of the political goodwill that Mugabe had made during the first years of his rule.

    Initially he had concentrated on the things like education and reasonably good governance which were applauded in the West.

    However, Mugabe has always been a vengeful man, and the Ndebele people received his wrath for their perceived lack of loyalty.

    The current situation is the visiting of Mugabe’s revenge on the people of Zimbabwe for their disloyalty during the 1999 referendum.

  4. Jessica Towicz says:

    This has got to stop. I really feel ashamed when I think about how far we as a westernized nation have become and our counterparts are not even able to live life with the basic needs of a human being.

    I know someone in my life who suffers from mental instability on bad days and depression on good days and he said to me recently about how hurt he was when his family and girlfriend continually walk away from him in times of need because he is considered ‘too hard’. His comment: ‘This isn’t a joke to me, this is my life’. It cut me hearing that because I think that is the type of attitude we have when we have seen something or someone worse off than us. We don’t laugh at them and think its a joke but at the same time we don’t do anything to help them. It is someone’s entire world we are watching and feeling sympathy for.

    I really think that people in leadership don’t have as much empathy and courage as what we need for our countries to make a difference. I would rather that all of the election money that is spent on campaigns and advertisments be sent to people in third world countries with the end result being something tangible. Something to be proud of.

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  1. Global Voices Online » Blog Archive » Zimbabwe: the breaking point - [...] Blogging about Zimbabwe, Ethan Zuckerman asks, “What is the breaking point?”: Gono, who is either the most incompetent central …

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