This February, inflation in Zimbabwe hit a massive 100,000%, one of the highest rates of hyperinflation the world has ever seen, and it shows very little sign of slowing down. However, by that point, the numbers had simply ceased to mean anything; the economy had been declining throughout the 1990s, and there was very little actual difference between 100,000% and 60,000%; unemployment was still racing at 80%, GDP had fallen from $2,193 per capita in 1996 to $500 per capita in 2007*, the economy was shrinking on a daily basis, and when it came down to reality, it was still as difficult to buy food, water and fuel as it was in 2007. Medicine and healthcare were just as difficult to get hold of under the economic conditions of early 2008 as they had been for the last few years. However, 100,000% had quickly become a figure emblematic of Mugabe’s economic governance of Zimbabwe, just as the accusations of racism and British neo-imperialism had become emblematic for the rest of the world of his political rhetoric. 100,000% perhaps symbolises the point where an economic crisis becomes something instantly recognisable, something difficult to reverse, but perhaps more than anything, something where the numbers have ceased to matter. From once being the ‘breadbasket’ of Africa, the Zimbabwean economy has been shrinking at drastic rates since the mid 1990s and has accelerated in doing so since 2000.
How did that happen?
The reasons behind this drastic transformation lie in several significant changes in the way Mugabe managed the economy, as well as an unfavourable, volatile and violent political atmosphere that got more severe during the 1990s and into the 2000s. During Mugabe’s first decade in power, when he was following a strict Marxist-Leninist approach, the economy grew by 2.7% a year, which still meant a decrease in real income and an increase in unemployment, but by the standards to come, this was remarkable.
However, after the collapse of the Soviet Union in 1990, like many other socialist governments in the Third World, Mugabe moved away from socialism, but he did it grudgingly so. During his first ten years in power, he had borrowed extensively, so there was very little confidence in Zimbabwean government bonds. This meant he needed the support of the International Monetary Fund (IMF) and thus accepted the terms of Structural Adjustment Programs (SAP), which meant the trade unions of Zimbabwe felt betrayed, as he had agreed to terms of floating the Z$, privatising industry and deregulating trade. Despite the fact he hardly implemented these plans, it would lead to Mugabe, in time, blaming the economic decline of the next two decades on the IMF. The 1990s were a decade of steady economic decline, the situation worsening year after year, by 1998, unemployment had reached 50%.
The second serious event in Zimbabwe’s economic crisis grew out of a political one. In 1997, the veterans of the guerrilla war, under the leadership of Chenjerai Hitler Hunzvi (who, ironically, was not actually a veteran), were demanding payment for putting Mugabe in power and liberating Zimbabwe, and Mugabe saw the need to keep a vital group of his support, so put a generous, but very corrupt, fund in the charge of Hunzvi, which only served to drive inflation up even more drastically and sink the economy into a deeper recession. However, perhaps the most drastic cause of economic instability, which led to the massive and rapid economic downturn since 2000, was Mugabe’s decision to seize, by force, the white Zimbabweans’ farms in the aftermath of the 2000 referendum on that subject. It was perhaps not the act of doing this in itself, but the way it was carried out which had serious implications for the Zimbabwean economy.
White farming land was not seized through the law, as the population had rejected the constitution with the land redistribution clause in a referendum in February 2000. This meant that the ‘war veterans’, who believed they had a right to the land, formed gangs of squatters and forcefully took the land, effectively taking it out of production, as the white farmers could no longer farm it, and the squatters would not farm it. Mugabe’s and ZANU PF’s reaction to this was to at first support the squatters, then when the High Court ruled it illegal, to basically place the squatters above the law, often claiming that ‘No matter the law, we will take the farms…where was the High Court when Rhodes came?’. This not only had huge humanitarian implications, but also meant that a huge amount of farms and workers were put out of production across the country. This was not rectified by the fashion in which the land was redistributed officially by the government, as instead of being distributed to black people with farming knowledge, who were generally black farm workers for white farm owners, thus considered MDC supporters and part of the ‘conspiracy’ against Mugabe’s government, it was given to supporters of ZANU PF in his ‘Fast Track’ system, again, using very similar methods as to those used by Rhodes in the 19th Century. There was a lot of ceremony about the redistribution of land, but very few of the people given the land knew how to farm it, they were given very little other support from the government, and many left the land they were given, which the government then redistributed again which led to a huge decline in food production and many displaced people who could not afford to either farm their new land, or return to where they lived before. A series of droughts and bad weather has compounded the situation, but the World Food Program has squarely placed the blame on what it calls ‘poor agricultural policies’.
Political violence in general, but especially in Zimbabwe, always tends to have an impact on economics when it is extended over a long period of time. It is, and always has been, quite difficult to run an economy when violence and rioting is rife, but this was especially the case in Zimbabwe, where the violence was specifically targeted against the main source of prosperity in the country, agriculture. This has meant political violence, the Third Chimurenga and the economic crisis have become dangerously entwined.
What is being done?
Mugabe’s government policy has so far been to revalue the Zimbabwean dollar several times, hacking 0s off the currency, but to no avail, inflation has kept rising, unemployment seems immoveable, and 45% of the population are still starving. The ZANU PF policy of devaluing the currency and halving prices on certain goods has not led to a decrease in inflation or made food more available to the population. He has also placed the blame squarely on Western sanctions of his government,
"When government embarked on the land reform programme, the dark forces of imperialism sought to strangle our agro-based economy through the spiteful closure of financial loans and grants to us. They tell us that the sanctions are targeted - lies!” - Robert Mugabe, 10th of March 2008
The World Food Programme is currently providing up to 2.5 million Zimbabweans with the food they need to survive, but there is much concern about several million more still being undernourished, despite the help of the WFP and other agencies. This is, of course, only a way of mitigating mass starvation, and not a workable solution to the economic crisis in general.
The economic crisis is one of the main causes of the humanitarian crisis in Zimbabwe, and no matter the result of the election in March, it will be a difficult one to reverse. Morgan Tsvangirai’s MDC, as mentioned above, have suggested new land redistribution, based on the ability to use the land productively, and his policies rely heavily on international aid, but this would face difficulties, as those holding the land would be reluctant to give it up without a fight. The scale of unemployment and inflation is at a scale where it will be exceedingly difficult to reverse.
ETA: As shaogo pointed out, Germany in 1923 did reach higher figures - namely 194,000%
* Figures have been amended, after discovering the Guardian really fluffed them up quite badly. New figures are from the 1996 Human Development Report (the UN can't be wrong...) and the good ol' CIA World Factbook for 2007. Many thanks to Apatrix.
(Political disclaimer: I am a politics student and not an economics student, just so you know. This is also lifted, mainly, from the committee guide I wrote for a conference our Model United Nations society is hosting here in Aberystwyth)
Blair, D.(2003) Degrees in Violence, London; Continuum.
Chan, S. (2003) Robert Mugabe, London; I. B. Tauris
Nordlund, P. (1996) Organising the Political Agora – Domination and Democratisation in Zambia and Zimbabwe, Uppsala; Uppsala University.
Shaw, A. (2008) ‘Zimbabwe inflation passes 100,000%, officials say’ The Guardian, 22/02 (http://www.guardian.co.uk/world/2008/feb/22/zimbabwe) (accessed 28/02/08)
Shaw, A. (2007) ‘For second time, Zimbabwe cuts face value of currency by 99.9%’ 24/11, The Guardian, (http://www.guardian.co.uk/world/2007/nov/24/zimbabwe.international) (accessed 28/02/08)
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McGreal, C. (2008) 'We are facing food crisis, admits Mugabe' 11/03 (http://www.guardian.co.uk/world/2008/mar/11/zimbabwe)(accessed 11/03/2008)