Wednesday, January 13, 2010

Free-Market Capitalism at Work in Zimbabwe

Zimbabwe is a poster child for hyperinflation (the other one being Weimar Republic), always cited by inflationists as a warning of what could happen if the fiat money printing doesn't stop. But while the rest of the world keeps focusing on that aspect, the country has clearly moved on, to a debt-free, central-bank-free, free-market capitalism that provide jobs, feeds and clothes its citizens much better than the system they had had.

Zimbabwe gold production up 35% (1/11/2010 AFP)

"HARARE (AFP) – Zimbabwe's gold production surged 35 percent to 4.2 tonnes last year in a "remarkable recovery" for the mining sector despite erratic power supply, the Chamber of Mines said Monday.

"The 2009 figure was up from 3.1 tonnes the previous year, it said.

"It was a remarkable recovery for the gold and mining sector in general," Chamber of Mines chief economist David Matyanga told AFP.

""However the recovery process within the gold and mining sector in general was affected by the erratic power supply and the critical shortage of working capital," he said.

""The operating environment last year greatly improved when compared to the previous year," said a manager at foreign-owned mine who did not want to be identified.

""Last year we got a loan to revive some of our operations and expand operations which was something that could not be heard of in 2008 or 2007," the manager said." (The article continues.)

This encouraging story is made possible by the demise of the central bank in Zimbabwe.

The central bank effectively ceased to exist. No more lender of last resort. No more printing money at the behest of politicians. Zimbabwe allowed multiple currencies (U.S. dollar, Euro, British Pound, South African Rand) to circulate freely. Now, prices of money and goods are set by a free market. Price control and forex control are gone. Money flows freely into and out of the country. Shelves at markets are full again, people can feed and clothe themselves again. Zimbabweans who fled to neighboring countries to escape poverty and famine caused by astronomical inflation are returning.

Best of all, the country is debt-free, probably the one and only in the whole world. Government and private debt in old Zimbabwean dollar was repudiated. President Mugabe is still there, but it is hoped that he won't last very much longer (he is 85).

I read about the amazing transformation of Zimbabwe in this article posted at back in November last year:

Zimbabwe: A Fresh Start (Alf Field, 11/11/2009
Now the once-mighty gold mining industry in Zimbabwe is coming back, despite power shortage and shortage of working capital. All thanks to the death of their central bank, and return of a free-market capitalism.


W.C. Varones said...

Best of all, the country is debt-free, probably the one and only in the whole world. Government and private debt in old Zimbabwean dollar was repudiated.

What about the $5+ billion USD-denominated debt to the IMF and others? I have not seen any news of this debt being repudiated. And what recourse would the evil IMF have?

arevamirpal::laprimavera said...

Good question. I'll research. IMF was party to the hyperinflation that the country suffered, as the politicians of Zimbabwe instructed the central bank to print money to buy US dollars just to pay interest to IMF (i.e. big Wall Street banks).

BTW, do you know that the U.S. administration is proposing debt forgiveness to Haiti? What Zimbabwe would need may be a big earthquake...

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