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Eric Bloch Column

Obdurate disregard for realities

THE government is so driven by its anxiety to win the next parliamentary election and to eclipse its arch-enemy the Movement for Democratic Change that it has such a fixation as to its perceived causes of Zimbabwe’s economic traumas — as distinct from the actual causes — that the country’s economic decline is a continuing one.

Tragically, there are not only no signs that the government is willing to recognise that the realities of Zimbabwe’s economic morass are markedly at variance to its perceptions, but there are also recurrent and clear indications that the government is wholly unconcerned at any negative effects its policies and actions have upon the economy.

So great is the governmental disregard for the facts of Zimbabwe’s deplorable economic circumstances, that it actually progressively worsens those circumstances. Even the very admirable and diligent efforts of Reserve Bank of Zimbabwe governor Gideon Gono cannot counter the deleterious repercussions of the government’s economic acts of omission and commission.

As sound as most, but not all, of Gono’s monetary policies are, they can only slow down the economic decline, instead of reversing it, in the absence of compatible and complementary fiscal policies and political actions. Regrettably, there is no evidence of any such compatibility, while there is untold evidence of incompatibility.

This is not a new condition, but has prevailed since 1997 when the government embarked upon its foolhardy and catastrophically disastrous land reform programme and upon its economically unsustainable compensation for war veterans and ex-combatants (real and pseudo).

The government continued to do so by its economically devastating military foray in the Democratic (sic) Republic of the Congo (DRC), which allegedly brought peace to that troubled country, but where there are frequently repeated conflicts between state and rebels. The militaristic actions resulted in massive expropriation of the DRC’s mineral and other wealth.

The government’s politically driven, and ideologically misguided, policies which have contributed to the stressed conditions of the Zimbabwean economy also included ruinous price controls and spurious valuation of the Zimbabwe dollar.

This has also seen the alienation of most of the international community, including donor states, the International Monetary Fund, the World Bank, potential foreign direct investors and many others, and contemptuous dismissal of any statistics and other facts which were at variance with its real, or politically required perceptions.

In the past week there have been increasing indications that the government is seriously considering reinstating price controls which will either be all-embracing or, at the least, will be applied to all basic consumer products, with especial emphasis upon foodstuffs. In doing so, it will be yielding to the pressures and demands of consumers in general, and the Consumer Council of Zimbabwe in particular.

It cannot be denied that the immense inflation of recent years has had devastating effects upon most of the populace. Most have been reduced to extreme poverty, unable to afford many of the basic essentials of life, and are suffering intensely.

In such circumstances, it is natural that the distressed seek someone to blame, and inevitably blame is placed almost exclusively at the feet of the government — where, in fact, such blame should lie. The government cannot but be conscious that it is, or will be, held culpable for the destitution which confronts so many, and it fears that as a result it will lose much electoral support.

The president and his minions are determined not to lose the votes of the oppressed consumers but, instead of addressing the root causes of hyperinflation, they repeatedly resort to ineffectual palliatives and to attribution of blame to others. One of those palliatives is the application of price controls.

The tragedy is that the government is unable to learn from experience. Not only in Zimbabwe but in many other countries, price controls have been near or total failures. Even when they worked in part, the concomitant effects upon the economy have been deplorable in the extreme.

The consequences of price controls are invariably that producers discontinue production, or considerably reduce production levels, occasioning vast shortages that create new stresses and hardships for the consumer. Such limited quantities as are available are invariably purchased by black marketers who then sell the commodities to the desperate consumer at prices well above the controlled prices.

Thus price controls very often are the cause of increased inflation, instead of targeted reductions. In many other instances, in endeavours to preserve operational viability, producers lower product quality so as to minimise costs. Yet again, the consumer suffers.

Price controls have, in many instances, forced business closures, with resultant increased unemployment and loss of downstream economic spending and activity. They have also been a major deterrent to investment, for few are desirous of investment in an overly regulated economy.

Thus not only are the intended benefits not forthcoming, but the associated economic prejudicial effects are considerable. The only price controls that are effectual for any reasonable period of time are those implemented on a reciprocal basis by the government, labour and the private sector under a negotiated social contract.

The consumer is helped by the government when the catalysts of inflation are addressed, and not by price regulation. And the consumer is assisted by governmentally stimulated competition for, when competition exists, producers are forced to enhance production efficiencies and expenditure controls in order to be price-competitive.

But the government has demonstrated over 24 years an infinitely great ability to disregard these proven facts. Its interest is short term, being to garner votes for the next election, and it resorts to whatsoever measures it believes will realise that objective, irrespective of the medium and long-term adverse consequences.

Its attitude is to gain votes, no matter how adverse the effect of its actions may be, and that after winning the election, it can then try to reverse the ill effects or, if they be irreversible, can then blame others. Re-imposition of price controls will be catastrophic, will have cataclonically harmful effects upon the population and upon the economy, and therefore it can virtually be taken for granted that the government will apply them.

The government is equally adept at challenging any statistics as do not support its policies or its actions, or at misconstruing and misinterpreting those statistics. When, very recently, the Central Statistical Office issued statistics demonstrating a significant fall in Zimbabwean exports, the government immediately claimed that the statistics were incorrect.

But commerce and industry, economists, the independent media and many of the population are aware that exports have fallen substantially. This year’s tobacco crop is much less than produced at any time in the last 50 or more years, thanks to the government’s destruction of agriculture.

Mining output has fallen sharply, as costs have risen but revenues have not increased in tandem to the cost escalations. Manufactured exports have also been substantially reduced, for exporters have been unable to meet continuously rising wages, electricity charges, finance costs and other production and overhead expenses, while the rates of exchange keep their revenues almost static.

They are forced to subsidise the government by a mandatory sale of part of their export proceeds at a ludicrous rate of exchange of $824 to US$1, whereas purchasing power parity with Zimbabwe’s principal trading partners requires an effective rate of exchange of about $6 000 to US$1.

But the government deludes itself and uses the full force of its propaganda resources to pretend that Zimbabwe has an increasing export performance. Only the naïve believe that propaganda, but the government realises that many voters are naïve. Unfortunately, by denying the statistics, the government also does nothing to address the crisis that those statistics reflect.

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