Saturday, December 02, 2006

Socialist haven in trouble. Surprised?

One memory that I have always enjoyed was a cruise on the Zambezi at sunset. Zimbabwe was a beautiful nation destroyed in a very short time by dictatorial socialism. The dictatorial aspect meant the people had no ability to vote out the tyrant and the socialism meant they starved to death (much as socialism did in the Ukraine and China).

We get this report from the Financial Times on the current state of the Zimbabwean economy. Their deficit last year amounted to 43% of GDP! In other words the state wouild need to confiscate about half of everything produced in order to just pay the deficit. Of course if they did that then production would drop so dramatically that even then they'd have a deficit. One of the biggest errors of uninformed socialists (yes, that is redundant) is that they believe the level of production is not connected to the distribution of wealth. So they falsely conclude that a change in wealth distribution will not negatively impact wealth production.

Mugabe confiscated private farms and turned them into collectives. The result was that Zimbabwe went from a food exporter to famine in about two short years. The collective farms are so badly managed that many of them don't produce enough food to feed the farmers.

To try and pay for the nonsense of Mugabe the Zimbabwean government prints more money. Of course the printing of money merely reduces the value of the money in circulation. Since the value is being diluted the cost of goods has to rise to compensate for this. That is called inflation. Inflation, strictly speaking is not rising prices as much as it is a decline in the value of the currency. Politicians like to speak of inflation as rising prices because that makes it look as if the private sector is responsible. But a declining currency is the domain of politicians. Inflation is a result of bad government policy. It is a political problem. And Zimbabwe is awash in currency.

Zimbabwe's finance minister Herbert Murerwa said that "inflation" last year was 1,070 percent. He also said that the government increased the money supply by over 1,000 percent. Hmm, do you think there is any connection? Murerwa says that this coming year they only intend to increase the money supply by another 400 percent.

Zimbabwe, which was once relatively prosperous, has been bankrupted by Mugabe in a very short period of time. The thriving tourist industry was destroyed. Private businesses went bankrupt. And Mugabe, taking his clues from every bad socialist policy in the book, has made every situation even worse. The government now admits that poverty is widening. No surprise. Socialism may promise a redistribution of wealth but it is piss poor at that job. However, they do seem to be able to share the poverty quite nicely.