Printing our way to totalitarianism
Inside Liberty Watch Today - March 13, 2006

With the Oscars over and March Madness heating up all seems right with the world other than a certain little issue to address come April 15th. According to our government's numbers the economy is rockin'. Everyone that wants a job has one, and inflation is tame. Deep down we know better, but at least we can take some comfort that we're not in Zimbabwe.

Maybe the government number crunchers and disseminators in that African country need a lesson from Michael Boskin, but Yahoo! reports, "inflation for the 12 months to February soared to an all-time high of 782 percent in Zimbabwe, the Central Statistical Office has announced." And the situation may get worse; the BBC reports that some economists expect 1000 percent price inflation in the next couple of months.

In a broadcast Saturday, Zimbabwe's state radio announced that prices rose 27.5 percent just in February alone, and February is only 28 days long. Imagine prices going up, or the value of your money going down, at a rate of one percent a day.

According to the Associated Press an average family of five needs Zimbabwean $9 million just to meet basic food needs. "Trade unions say that those still in formal employment — about 20 percent of the work force — were earning an average of Z$5 million to Z$6 million a month," reports the AP. The official exchange rate is Z$100,000 for just one less than rock sold US dollar. Recently the so-called "bearer cheque" worth 50,000 Zimbabwean dollars - 50 times the highest available banknote was introduced, but it is only good enough to buy a loaf of bread.

Committed Marxist Robert Mugabe took over in Zimbabwe in 1980. In addition to running the printing presses, Mugabe and the Zimbabwe parliament pushed through an amendment, to their constitution in 2000 allowing for the seizure of white-owned farmland, despite voters turning the measure down just two months prior.

Situated just north of South Africa, Zimbabwe is rich in natural resources and the country's literacy rate of 90.2% is the highest in Africa. But the disastrous economic policy of out of control money creation—inflation—is turning the country into an economic basket case, with the people of Zimbabwe paying the price.

One businessman told the BBC: "I don't even know if I'll have a job at the end of the week, because there is so much uncertainty. There are so many companies closing down. It is quite interesting to see people going in banks with bags and sometimes even suitcases. You know that there are large amounts of money in there - which unfortunately are not going to buy much."

"The things that we buy - the groceries at home, the things we get for our two children - we have to buy immediately, as soon as we get the money," according to one woman. "We know that if we wait a bit, the prices are going to go up again. If we wait another week, we will not be able to afford anything."

The country was for many years a major food exporter to the region. But now, according to United Nation agencies, three million Zimbabweans are now dependent on international food relief. That's almost a quarter of the population.

Ever the optimists, those at Zimbabwe state radio are forecasting inflation to fall to only 200 percent by the year end in the wake of a predicted "bumper harvest by new farmers." But an all-party parliamentary committee warned last fall before the start of the rainy season that production would be at an all-time low due to shortages of diesel, seed, fertilizer, chemicals, functioning farm machinery and skilled labor.

Of course, the Zimbabwe government didn't create the blueprint for this kind of economic catastrophe. In post-WWI Germany: "The masses had believed inflation money to be real money," Ludwig von Mises wrote in Economic Policy, "but then they found out that conditions had changed. At the end of the German inflation, in the fall of 1923, the German factories paid their workers every morning in advance for the day. And the workingman who came to the factory with his wife, handed his wages-all the millions he got-over to her immediately. And the lady immediately went to a shop to buy something, no matter what. She realized what most people knew at that time-that overnight, from one day to another, the mark lost 50% of its purchasing power. Money, like chocolate in a hot oven, was melting in the pockets of the people. This last phase of German inflation did not last long; after a few days, the whole nightmare was over: the mark was valueless and a new currency had to be established."

All governments ultimately make their currencies worthless; some do it quickly some take more time. But there is no greater evil perpetrated by government than the inflating of the currency. "Inflation is the fiscal complement of statism and arbitrary government," von Mises wrote. "It is a cog in the complex of policies and institutions which gradually lead toward totalitarianism."

Zimbabwe has made it to totalitarianism quickly while the US is getting there more slowly, but just as surely.

Doug French, Liberty Watch Columnist


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