Monday, April 07, 2008

Were sanctions the cause of Zimbabwe's collapse?

An odd article by Brendan O'Neill over at Spiked in which he puts the blame for Zimbabwe's economic collapse squarely on the shoulders of Western intervention.
A key driver of Zimbabwe’s economic crisis has been the West’s attempts to bring down Mugabe by turning the financial levers. Relentlessly, the American and British governments, and the European Union, economically punished Mugabe’s Zimbabwe for what they considered to be its political disobedience.
As to whether internal economic policy might have had anything to do with this:
It is true that foreign exchange earnings from these former white-owned farms have plummeted, causing major economic problems; but there is more to Zimbabwe than tobacco and the other cash crops once produced by the white farmers.
So, the belief that it was Mugabe’s seizure of colonial-era, white-owned commercial farms eight years ago that cause the crash is erroneous.
This is a catastrophically simplictic view - as simplistic as the view that it was only the seizure of the farms that caused the collapse. Incidentally, the majority of commercial farms in Zimbabwe had changed hands since independence, hardly surprising when one considers that the European population plummeted from 250,000 to about 50,000. In every sale of land post independence, the Zimbabwean government had the right of first refusal. Most of these farms were not 'colonial-era'.
Be that as it may, the causes of Zimbabwe's economic collapse are internal, not external. They really began in 1997, when after political agitation the veterans of the chimurenga - both real and imaginary - won traction in their campaign for financial reward. Panicked by the sight of their natural supporters turning against them, ZANU PF issued ex gratia payments of up to Z$50,000 - at a time when the exchange rate was Z$10:US$1. To pay for this unbudgeted splurge they printed extra money. The inflation that this caused led the currency to depreciate - when I was teaching there in 1997 beer, bread and newspapers (the essentials of civilized life) were still bought with coins, by the time I returned in 2000, the (real) exchange rate was already something like Z$100:US$1 - and the Z$100 note was the largest in town.
The economy was already rocky from this depreciation - apart from anything else it made imports much more expensive, and the Zim Government started defaulting on payments for oil, leading to the petrol shortages that plagued the country from about 2000 onwards. It was at this point that, alarmed by the loss of the constitutional referendum, Mugabe played the anti-colonial card and orchestrated the farm invasions. It has often been said, but it bears repetition, that agricultural exports were responsible for something like 50% of Government revenue, and 90% of hard currency. The indigenisation programme (being charitable) inevitably led to the death of the export market - landless African peasants do not have the necessary capitalisation, nor the business knowledge to continue a commercial farm.
So, with inflation already progressing, Mugabe was now faced with plummeting tax revenues. To pay the army, the civil service and doctors, teachers and so on....Mugabe printed more money. It got silly. The Government was issuing 'bearer cheques' instead of money - banknotes witrh an expiry date. They refused to print sufficiently large denomination notes 'because that might increase inflation'. Gregory Elich, quoted in Spiked, puts some of the blame on the restriction of Zimbabwean imports caused by sanctions:
The supply of oil fell sharply, and periodically ran out entirely. It became increasingly difficult to muster the foreign currency to maintain an adequate level of imported electricity, and the nation was frequently beset by blackouts. The shortage of oil and electricity in turn severely hobbled industrial production, as did the inability to import raw materials and spare parts. Business after business closed down and the unemployment rate soared...’
But this is to ignore three salient points: the first is that people were refusing to invest in Zimbabwe for good, solid business reasons: they were defaulting. The second is that Zimbabwe should be a net exporter of energy. The hydro-plant at Kariba has enough capacity to provide energy for the entire north of the country - including the energy-intensive mines at Wankie colliery. The second is that the bulk of the public power providers were coal-fired, not oil-fired, and, see above, Zimbabwe has massive coal deposits at Wankie. The third is that, even as the cash-strapped Zimbabwean Government 'couldn't afford' oil imports, they were spending a fortune in the Congo, a war in which the benefit was entirely personal - to Leo Mugabe, to Vitalis Zvinavashe and to Emerson Mnangagwa - never to Zimbabwe.
There's a nice counter-factual that suggests that a government in Zimbabwe, led by people with a basic understanding of economics, can perfectly well manage international hostility, up to and including economic sanctions significantly more onerous than the hodge-podge of ineffective and personal sanctions that have been imposed recently, without seeing their economy collapse into a death spiral of hyper-inflation, unemployment, disease, death and emigration. Because the illegal government of Rhodesia did precisely that for fourteen years of UN sanctions.
O'Neill complains that restriction of credit to a bankrupt Government have made it difficult to import oil - UN sanctions made it illegal to export oil to Rhodesia. The point about Zimbabwe is that its economic strife is entirely of its own making. In the same breath O'Neill states that the Zimbabwean Governmented was bankrupted by brutal Western sanctions, and then blames those sanctions on Mugabe's 'cheekiness' to interfere in the Congo without a green light from the US.
Zimbabwe has been destroyed by its leaders' staggering economic incompetence, and their willingess always to prioritise their personal interests over those of the country as a whole. Sanctions have, as ever, been entirely ineffective. A couple of posts back I gave an infallible method of answering articles that have questions in them: Were sanctions the cause of Zimbabwe's collapse? No.

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