One might think that after 92 years, some wisdom may have leaked into the brain of Zimbabwean president Robert Mugabe. But no. As the world’s oldest head of state, he has overseen the demise from a post-colonial success to a pariah state wrecked by hyperinflation. However, having apparently learned no lesson from his prior experiences, The Reserve Bank of Zimbabwe has decided to print a new national currency for the first time since 2009.
As Simon Black pointed out a month ago, some people just don’t learn.
After becoming the most famous case of hyperinflation in modern history roughly ten years ago, Zimbabwe is about to have another go at conjuring paper money out of thin air.
I’m sure this time will be different.
You know the story. Starting in the late 1990s, the Zimbabwe government’s policies under Robert Mugabe began to have some devastating effects.
He confiscated private property from established (mostly white) farmers and redistributed the land in very tiny tracts to his supporters, most of whom had no experience in farming.
Unsurprisingly, Zimbabwe’s once-booming agriculture exports collapsed almost overnight.
This destructive, authoritative control pervaded across nearly all industries, and by the early 2000s, the economy was in dire straits.
Unemployment and inflation skyrocketed.
In 2001 alone, retail prices doubled. But that was just the beginning.
Inflation rose so quickly that the government was having to constantly print new denominations of currency– thousand Zimbabwe dollar notes, then ten thousand Zim dollar notes… then million dollar notes… even trillion dollar notes.
By 2007, the hyperinflation was so bad that prices were doubling roughly every day.
My friends here in Zimbabwe tell me stories of going out for drinks at a bar; they’d drink a few beers for an hour or so, after which the bartender would inform them that the price of a beer had just increased by 50%.
People learned very quickly to spend money as soon as possible, and long lines formed at grocery stores as an entire nation desperately tried to turn their paper currency into something useful.
Even a simple loaf of bread became a store of value.
One friend told me how we would buy a loaf of bread in the morning with his spare change, and then sell it in the afternoon so that he would have enough money to pay the bus fare back home.
Some economists estimate that Zimbabwe’s hyperinflation peaked at more than 500 BILLION percent– an incomprehensible figure unless you’ve lived through it.
In 2009 it all ended. The government stopping printing money, and Zimbabwe became a ‘hard currency’ economy.
US dollars, euros, pounds, South African rand, and even Chinese renminbi have been circulating here ever since; merchants and consumers basically use whatever currency they can to engage in transactions.
Essentially there is no Zimbabwe dollar anymore.
But that hasn’t solved any of the country’s problems.
In the late 1990s, Zimbabwe’s GDP was roughly $30 billion. Today it’s just $13.5 billion, than $1,000 per capita.
Independent agencies estimate the unemployment rate here at over 80%, and the average worker makes just a few dollars per day.
It’s not hard to understand why. Taxes, fees, and absolutely insane regulations abound in Zimbabwe.
And even at age 92, Robert Mugabe still maintains dictatorial power and a tight (albeit arthritic) grip over the economy.
