Eric Bloch Column

Ills of excessive economic regulation

SOME years ago, I came across a modern, updated version of the children’s renowned story of the little red hen, and had occasion last week to be reminded of it, for it so explicitly illustrates the economic polic

ies of the government, its ludicrous enunciations on economic issues, and thenever-ending damage that the government inflicts upon the economy and Zimbabweans.
 
That revised tale clearly illustrated how a governmental inability to think can have disastrous consequences, and bears reproduction in this column:

Once upon a time, there was a little red hen who scratched about the barnyard until she uncovered some grains of wheat. She called her neighbours and said: “If we plant this wheat we shall have bread to eat. Who will help me plant it?”

“Not I,” said the cow.

“Not I,” said the duck.
 
“Not I,” said the pig.

“Not I,” said the goose.

“Then I will,” said the little red hen, and she did.

The wheat grew tall and ripened into golden grain.

“Who will help me reap my wheat?” asked the little red hen.

“Not I,” said the duck.

“I’ve got the day off,” said the pig.

“I’d lose my seniority,” said the cow.

“I’d lose my unemployment compensation,” said the goose.

“Then I will,” said the little red hen, and she did.

When at last it came time to bake the bread, the little red hen asked: “Who will help me bake the
bread?”

“That would be overtime for me,” said the cow.

“I’d lose my welfare benefits,” said the duck.

“I’m a dropout, and never learned how,” said the pig.

“If I’m to be the only helper, that’s discrimination,” said the goose.

“Then I will,” said the little red hen. She baked five loaves and held them up for her neighbours to see. They all wanted some. In fact, they each demanded a share.


But the little red hen said: “No, I can eat the five loaves myself.”
“Excess profits!” yelled the cow.

“Capitalist leech!” cried the duck.

“I demand equal rights!” shouted the goose.

The pig just grunted. Then they hurriedly painted “UNFAIR” picket signs and marched around for several hours shouting obscenities.

The government agent arrived and said to the little red hen: “You must not be greedy.”

“But I earned the bread,” said the little red hen.

“Exactly,” said the agent. “That is the wonderful free-enterprise system. Anyone in the barnyard can earn as much as he or she wants. But in terms of government regulations, the productive workers must divide their products with the idle.”

The agent then distributed four loaves among the five barnyard inhabitants and took one loaf for himself which he claimed was “taxation”. And they all seemed to live happy ever after. But the little red hen’s neighbours wondered why she never again baked any bread.

Industry and International Trade minister Samuel Mumbengegwi and his deputy Kenneth Manyonda (in the dissolved cabinet) should hearken to the underlying message of the story of the little red hen, for their total inability to recognise realities, concurrently with their recurrent recourse to authoritarian, heavy-handed methods of economic control, is a primary cause of continuing and intensifying economic decline. Those methods and actions are also the ever more frequent causes of deprivation.

Their most recent demonstration of inability to be aware of actualities, and usurping their mandates by seeking to enforce non-existent laws, was evidenced last Tuesday when Mumbengegwi informed a news conference that the government had not sanctioned increases in the prices of basic commodities. He demanded, therefore, that retailers should revertto previously prevailing prices.

Then, as he does so often, he underscored his demand for downward price adjustments with a threat. He told the news conference that price control monitors would descend on all retailersunilaterally increasing prices of basic commodities.

Two days later, Manyonda stated: “As a ministry we are going to find out what happened to the commodities’ supply, and we will supply them with the original price.” He continued that retailers who did not heed the government’s call to revert to the old prices would be punished.

These statements reveal the belief of the two that they are omnipotent. There is presently no legislation which empowers them to act as threatened by them. The dismal failure of price control legislation only a few years ago resulted in that legislation being repealed, butnevertheless Mumbengegwi and Manyonda had no qualms in demanding price regulations and in threatening “punishment” for those who did not yield to the demand.
 
As bad, or even worse, is their inability to learn from experience. When, only three years ago, draconian price control laws were enacted and enforced, their sole achievement was to worsen the circumstances of consumers.

Manufacturers could not afford to produce if the prices they were permitted to charge resulted in losses.

In like manner, retailers found it to be unsustainable to sell goods at less than their cost to them. The result was empty shelves, and the only sources of supply were the black market where prices were even higher, for demand far outweighed supply.

Last week’s events were consistent with those experiences. As soon as some prices began to rise, and as soon as Zimbabwe’s indomitable rumour machine became activated, shelves began to empty. All of a sudden shoppers in supermarkets were buying not 1kg bag of sugar, but hundreds or thousands. Similarly, they bought many, many litres of cooking oil and numerous bags of maize meal.

Some did so in order to hoard, so that they would not be affected by the anticipated shortages. But many others did so for no reason other than entrepreneurship. They realised that in the flea markets and the backstreets of high-density areas, they would be able to sell their opportunistic purchases for considerably more than they had paid.

The combination of the rumour machine and of those vast, bulk purchases would be the catalysts of self-fulfilling prophecies of shortages, with consequential opportunities of windfall profits. And the ministerial statements added grist to those profit-making endeavours. If it was Mumbengegwi’s intent to contain inflation, he did exactly the reverse!

It was, and is, also naïve in the extreme not to recognise the unavoidability of price increases in the present Zimbabwean economic environment. Manufacturers and retailers have been faced with NEC-determined wage increases in January and again in April.

Operating costs are rising, especially those which relate to services provided by parastatals. It is clearly in order, in the government’s judgement, for Zimpost, Tel*One, Zesa and may others to increase their charges almost quarterly, but it is unacceptable for the private sector to do likewise!

Top