Tuesday, July 17, 2007

Starvation comes next 

It is probably only because people understand so little economics that Robert Mugabe will not be thought of as the perpetrator of democide. Just as surely as a bullet or machete, purposefully emptying your country's stores will kill your people.
Zimbabweans are shopping like there's no tomorrow. With police patrolling the aisles of Harare's electrical shops to enforce massive government-ordered price cuts, the widescreen TVs were the first things to go, for as little as �20. Across the country, shoes, clothes, toiletries and different kinds of food were all swept from the shelves as a nation with the world's fastest shrinking economy gorged itself on one last spending spree.

Car dealers said officials were trying to force them to sell vehicles at the official exchange rate, effectively meaning that a car costing �15,000 could be had for �30 by changing money on the blackmarket. The owners of several dealerships have been arrested.

President Robert Mugabe's order that all shop prices be cut by at least half, and sometimes several times more, has forced stores to open to hordes of customers waving thick blocks of near worthless money given new value by the price cuts. The police and groups of ruling party supporters could be seen leading the charge for a bargain.

Mr Mugabe has accused business interests of fuelling inflation, running at about 20,000%, to bring down his government. A hotline is in place to report "overcharging", and retailers who flinch at slashing prices are being dragged before the courts. Several thousand have been arrested for "profiteering" over the past week, including the chief executives of the biggest retailers in the country, some of them foreign-owned.

Economists say the price cuts will only deepen the national crisis, leaving many shops bare because they will not be able to afford to restock while official retail prices remain lower than the cost of buying wholesale or importing. Mr Mugabe has dismissed such warnings as "bookish economics".

Some businesses fear that Operation Reduce Prices is intended to pin the blame on the private sector for Zimbabwe's economic problems as a step towards seizing control of many companies in the way that white-owned farms were expropriated at the beginning of the decade, sparking the crisis.

Operation Reduce Prices comes after some classic hyperinflationary experiences, like this one by Moses Moyo.

I popped out for a Z$25,000 loaf of bread last Friday. It had gone up to Z$30,000 dollars. I ran home for the extra, ran back to the shop - and the price of my loaf had risen to Z$44,000.

That's life in Zimbabwe today - or at least it was, until this week [when ORP began] ...

An order went out to all manufacturers, wholesalers and retailers to slash their prices by half. Any who showed the slightest reluctance to do so were visited by the Green Bombers - young graduates from the Zanu-PF terror camps whose economic arguments are enforced with a smack on the head with a stout stick. ...

And the end result? Where it worked best, where prices were cut by a genuine 50 per cent, the government succeeded in reducing the cost of living to almost exactly what it was 10 days ago.

Craig Newmark, who provides the first link above, wonders how much longer this can go on. It won't be too long. As in Yugoslavia, the bakers will stop making bread, and the farmers will stop bringing produce to market. Of course it could be that Mugabe is creating a pretext to nationalize industry like he has the farm system. I doubt that will go well for him either. The only question that remains is how many will die, and when will Mugabe leave. I'm disappointed Intrade doesn't have a contract...