Eric Bloch Column

It’s not so, Mr President!

By Eric Bloch

IT is becoming evermore apparent that the Zimbabwean presidential advisors are e

ither grossly ill-informed (and therefore do not inform the president correctly), or misguidedly or with ill-intent deliberately mis-advise the president.

Admittedly, this is not a totally new phenomenon, for it has prevailed to some extent ever since Independence, but it appears to be becoming more and more pronounced, with increasing frequency. Regrettably, not only does that occasion potential embarrassment for the president all too often, but it also impacts very negatively upon policy formulation to the potential great prejudice of all Zimbabweans.

Last week, if the state-controlled media is to believed, there were two prime examples of the president having either been the recipient of disinformation, or having been given appallingly poor advice, or both. The first evidenced itself when he spoke at Lupane where he launched a vicious attack upon his Minister of Finance, Dr Herbert Murerwa.

In his 2007 budget statement, the minister had intimated agreement between the Reserve Bank of Zimbabwe (RBZ) and government that the central bank would discontinue engagement in quasi-fiscal activities, and that the state would now, belatedly, meet its obligations by engaging in such activities.

However, he made it clear that government’s undertaking of quasi-fiscal activities would be continued to the extent that would avoid recourse to borrowings from the RBZ, and would not necessitate the printing of money, as such funding strategies are highly inflationary.

Undoubtedly on the back of advice received, the president vitriolically attacked Murerwa for qualifying the governmental expenditure intents by stating that they would be limited to available funding without resorting to the printing of money. The president accused the minister of adhering to “bookish” economics, for many of the world’s leading economists have oft written in their books that governmental printing of money fuels inflation. Instead, the president contended that printing of money is fully justified if the printed money is used to create productive resources. It would appear that he, or more probably his advisors, are resorting to “bookish” economics, for that concept is straight out of the misguided, ill-conceived, and destructive economic philosophies of Karl Marx, Lenin, Mao-Tse-Tung, Fidel Castro, and others of that ilk, all of whom very successfully destroyed their countries’ economies.

In contradistinction, countries that have pursued the economic theories enunciated by Keynes, Friedman, and other renowned Western economists, have had more economic successes than failures, and those economists have been outspoken as to the devastating consequences of uncontrolled, excessive printing of money.

They have been equally critical of central banks being engaged in quasi-fiscal activities, for such activities are the responsibility of governments and not of monetary authorities. Over the last three years the RBZ was so engaged out of desperation for the essential operations of the economy in the absence of government fulfilling its duties and obligations, but has energetically sought to have government do so, and one of the few positives of the budget speech was the minister’s declaration that the state would now do that which it should have done, but not to a counterproductive extent as would result from irresponsible printing of money.

But, instead of recognising the positivness of the minister’s statement, the president contends that productive usage of excessively printed money justifies such printing. Unfortunately, he was evidently not informed by his advisors that the consequential hyperinflation created by the over-money supply would wholly negate the benefits of the funded productivity and worsen further Zimbabwe’s distraught economy.

There was so much that was bad in Zimbabwe’s 2007 budget that it is tragic that one of its few positives should be so resoundingly condemned by one so authoritive as the president for, if his stated wishes are pursued, the world-record hyperinflation that is fuelling endless misery for most Zimbabweans can only become ever greater, and his Minister of Finance can only become totally demoralised and demotivated, in contradistinction to his present undoubted wish to halt and reverse the Zimbabwean economic demise.

The president also launched a scathing attack upon the Zimbabwean business community. He castigated the captains of commerce and industry for the endless price increases which are so manifest in the Zimbabwean economy. He accused them of profiteering, of exploitation of the helpless populace, and of intense avarice in complete disregard for the consequential hardships suffered by the masses.

Clearly his advisors are telling him that Zimbabwe’s inflation is a direct result of greed on the part of producers and retailers. That their costs are rising exponentialy and continuously has nothing to do with price increases if the presidential attack upon the business community is accepted.

The reality is that industry has suffered monumentally increased costs of production. First of all, volumes of production have unavoidably contracted immensely, in part due to lesser domestic market demand, and in part due to non-viability in export markets, but to the greatest degree due to inadequate availability of manufacturing inputs. But fixed costs and overheads do not decline when volumes of production fall, and hence the costs per unit produced unavoidably increase considerably.

Concurrently, the same inflation that impacts upon consumers also affects the manufacturer. Zesa regularly increases its charges for electricity. Local authorities similarly increase charges for rates, water, sewerage and refuse removal, and other services. Wages rise quarterly, or more frequently. Input costs soar upwards and especially so in the case of imported inputs. Wholesalers and retailers are similarly affected by continuously rising costs.

Thus, the alternatives available to business enterprises are either to increase prices, and to do so with very great frequency, or to close their businesses. The latter means not only great losses to the owners of the businesses, but unemployment for their personnel, prejudice to their suppliers, scarcities to the populace, and even lesser inflows to the fiscus. But government does not accept those realities. Instead, it persists with price controls, with the imprisonment of businessmen for doing that which is necessary for the survival of their businesses, and essential if the populace is to obtain essential commodities, and with its foolhardy intent to establish, at unaffordable costs, a national Prices and Incomes Stabilisation Commission.

All these negative, economically destructive, government policies are reinforced and intensified by presidential statements which fail to recognise economic realties (and does so discriminately, for he did not criticise parastatals for their equally endless raising of prices, or his own government for its increases in charges for health services, tourism fees and so forth. When the private sector raises prices, it is driven by greed, according to the president, but by implication if the state does so, it is driven by legitimate need!).

It is time that the presidential advisors start giving the president facts, instead of that which they believe he wishes to hear, and that they advise him appropriately. In the alternative, it is time for the president to recognise, insofar as their advices are concerned, that it’s not so, and the realities are totally different to that which he is told.