by hilzoy
From the Economist:
"WITH prices doubling every few days, Zimbabweans now spend huge amounts of time and energy preventing their meagre cash resources from completely evaporating. Trying to catch up with galloping hyperinflation, now officially running at 2.2m per cent a year and at least four times faster in reality, the central bank has been printing ever bigger denominations. But it is outrun by galloping prices: at last count, the most valuable banknote available was for 50 billion Zimbabwean dollars, now worth barely 70 American cents on the black market, and the stock of Zimbabwean dollars is dwindling."
I'm trying to wrap my mind around an inflation rate of 2.2million%, let alone "four times faster." Apparently, it is possible for things to be worse: "It has not yet reached Hungary’s level after the second world war, when inflation peaked at 42 quadrillion per cent a month."
How would that even work? Wouldn't those few people who remained in the cash economy have to spend all their time -- literally -- adjusting their prices? How would you figure out what they "ought" to be? What would that even mean?
Some people use hard currency instead, but a lot of people don't have access to US dollars or SA rand. Many presumably just leave the cash economy altogether.
I find this level of devastation hard to imagine. And I don't know what anyone, especially anyone outside Zimbabwe, can do about it. The fact that I can't think of a thing to do doesn't worry me nearly as much as the fact that Tim Burke can't either: unlike me, he actually knows what he's talking about.
hilzoy,
These sorts of rates are meaningless nonsense, because they result from annualizing short-term price changes. For example, a 6% daily increase in prices produces an annual rate about 30 times that of a 5% daily increase. Yet the difference is hardly likely to register on the average Zimbabwean.
What happens, of course, is that people use other currencies, or resort to barter, which is hugely inefficient. Yet another effect, also devastating, is that producers simply do not sell their goods. Farmers keep their products for their own consumption, or barter, because the market is useless. So they produce only what they need, or can store (not a good bet in Zimbabwe) or barter for something they want.
This in turn means that food supplies to urban dwellers are inadequate.
I doubt I need to trace this further.
Posted by: Bernard Yomtov | July 17, 2008 at 10:27 PM
After reading Burke's post, I feel some classic liberal guilt.
"...they define their achievement of sovereignty in negative terms against the West"
Our (the West) colonial actions have so traumatized Africa that even if we *were* to have a magical fix, they'd be disinclined to agree. They aren't Western puppets, after all. So even if we could help...
/sigh
Posted by: MeDrewNotYou | July 17, 2008 at 10:40 PM
For example, a 6% daily increase in prices produces an annual rate about 30 times that of a 5% daily increase. Yet the difference is hardly likely to register on the average Zimbabwean.
Not if you're paid monthly..
And the oddest thing about Zimbabwe is that the economy hasn't fully gone underground yet. In Mobutu's Zaire for instance, it took less high rates to have the majority of everyone simply refusing to be paid in zaires. Of course, civil servants or the military can't really excape it but then again, at some point, Zairean shops all refused to accept a particular bill that had been used to pay the army.
The difference is of course that the Zaire state had really collapsed long before.
Posted by: Random African | July 17, 2008 at 10:49 PM
"...they define their achievement of sovereignty in negative terms against the West"
"they" in that sentence are "leaders".
And while it's true that there's enormous suspicion about Western intentions, plenty of countries manage to co-operated (or whatever) with the West without much trouble.
Posted by: Random African | July 17, 2008 at 11:01 PM
Thanks RA, I should've mentioned that.
Do you have any specific examples of where the West has been good for Africa? (sub-Saharan, in particular. I'm somewhat familiar with Egypt, Algeria, etc.) Thanks if you can.
Posted by: MeDrewNotYou | July 17, 2008 at 11:41 PM
My Austrian step-father used to carry around a Billion Mark Note in his wallet, just as a reminder and an object lesson to us kids never to trust those little pieces of paper the government calls money.
It was worth about a quarter.
Here's some more, just like it.
Posted by: Mark Adams | July 18, 2008 at 12:04 AM
"Where the West has been good for Africa" is such a weird concept. I mean what are we talking about ? Financial aid ? Helping govern ? Maintaining peace ?
I don't think being removed by the French made Bokassa popular with Central Africans and it would have made the French popular had they not put him in power to start with.
I doubt Tanzanians are angry at the British for stopping a coup against Nyerere in 1964 or the French in Gabon the same year.
Or people in Sierra Leone about Operation Palliser.
I don't think the anglophile, pro-British BDP would have won every election in Botswana if any interaction with the west was horrible.
And Mauritius wasn't really happy about the end of their preferential status in trade with EU, neither was Lesotho at the end of AGOA.
And there's not much anger in Rwanda about closer "cooperation" with the US since 1994. US Aid or World Bank "advice" and help have improved a thing or two.
---
I think that one thing all those examples have in common is that nothing was imposed. Any alliance, help, intervention was requested and voluntary which is the case with more evil actions too (like French's help during the Rwandan genocide). I guess one has to learn how to choose sides in an efficient way.
Posted by: Random African | July 18, 2008 at 12:19 AM
"Do you have any specific examples of where the West has been good for Africa?"
I'd suggest Botswana, perhaps, for one.
Posted by: Gary Hussein Farber | July 18, 2008 at 12:19 AM
Thanks to both of you.
RA-I was asking blind, I really had nothing in mind other than, "Did the West do something? Did it improve the situation?"
Now, to the library! Well, maybe not at 12:30. To the Internet!
Posted by: MeDrewNotYou | July 18, 2008 at 12:31 AM
Oh, also, and I think Tim Burke would agree with me, sovereignty is both a hustle and an excuse for those leaders.
You never hear it when it comes to gettting IMF loans. You hear when the loans are refused, cancelled or when the conditionalities get unpopular (in fact that's what happened with Zimbabwe).
So, while we, random africans may be suspicious about the West, that suspicion is exploited by our rulers for their own self-interest more often than not.
Posted by: Random African | July 18, 2008 at 12:33 AM
"Did the West do something? Did it improve the situation?"
Personally I'm quite grateful for the introduction of cassava, maize, tomato and sweet potato.. but there are other instances of "goodness". Though in many cases, I doubt it was intentional.
Posted by: Random African | July 18, 2008 at 12:40 AM
My initial thought was that this was a mistake, confusion stemming from the fact that "m" is (or, at least, was) a common abbreviation for "thousand" in accounting, with "mm" meaning "million." Then I did research, and found that it really is short for "million" in this case. Yikes!
Posted by: tgirsch | July 18, 2008 at 12:46 AM
"introduction of cassava, maize, tomato and sweet potato"
D'oh! I feel bone-headed for missing easy ones like that. ^.^;
"Oh, also, and I think Tim Burke would agree with me, sovereignty is both a hustle and an excuse for those leaders."
Would it be fair to say that sovereignty is more an image that leadership is concerned with? One that the 'man in the street' doesn't pay as much attention to?
Posted by: MeDrewNotYou | July 18, 2008 at 01:12 AM
2,200,000% per year is about 5.4% per day.
Posted by: KCinDC | July 18, 2008 at 01:15 AM
hey, check out my number, hilzoy:
The US also ranks first among the 30 rich countries of the Organisation of Economic Cooperation and Development in terms of the number of people in prison, both in absolute terms and as a percentage of the total population.
It has 5% of the world's people but 24% of its prisoners.
Posted by: redwood | July 18, 2008 at 01:45 AM
I agree with redwood. I blame the United States of America. And I don’t think we can drill our way out of this problem.
Posted by: Brick Oven Bill | July 18, 2008 at 02:03 AM
Snark aside; Burke’s write-up was very good. Thank you for providing it Hilzoy.
Posted by: Brick Oven Bill | July 18, 2008 at 02:23 AM
Part of the reason people aren't switching to hard currencies is that for many years it has been illegal to own foreign currency.
Posted by: PlatinumJester | July 18, 2008 at 05:29 AM
Part of the reason people aren't switching to hard currencies is that for many years it has been illegal to own foreign currency.
that is or has been the case in the many places.. the difference is that in Zimbabwe they're able to enforce it too.
Would it be fair to say that sovereignty is more an image that leadership is concerned with? One that the 'man in the street' doesn't pay as much attention to?
I'm not sure. The man in he street can be convinced that whatever his concerns are, they're linked to "sovereignty". And "image" sounds like posture to me, which is too dismissive. Sovereignty is quite often a legal issue with huge consequences. Both economic (why do people ask why the "people of the Congo" didn't benefit from its mineral wealth ?) and political (just read the OAU charter).
Posted by: Random African | July 18, 2008 at 06:49 AM
"Westphalian" sovereignty has real, tangible properties in the global system, and state elites in many postcolonial African states use their internationally designation as the agents of such sovereignty as a tool for producing wealth. As Random African says, this isn't just posture or image. But many African nationalists, both in the past and the present, often have presented the achievement of sovereignty as an inevitable remedy for colonial injustices. The problem is that nationalists and their international supporters in the West primarily defined those injustices as violations of classical liberalism (formal limitations of the rights of a racially-defined majority, arbitrary uses of violence, economic exploitation and state-fostered dependency, and so on)--and sovereignty in and of itself does nothing to repair those violations. Indeed, if the newly sovereign postcolonial state takes over the colonial state and merely changes the skin color of its controllers, the achievement of sovereignty frequently reproduces most of what was morally and politically objectionable about the behavior of colonial regimes.
I think one thing about the economic survival of Zimbabweans today that's not immediately obvious is that there are deeper structural roots to various coping mechanisms which are now being strained to their absolute limits. Even when the economy was in pretty good shape in the late 1980s, early 1990s, a lot of Zimbabweans travelled licitly and illicitly across borders with South Africa, Botswana, Malawi, Zambia and Mozambique (as did the citizens of those nations) to buy, trade, barter goods and currencies to maximum advantage, and to do day labor. A lot of Zimbabweans are now drawing upon remittances from relatives working in South Africa, doing informal or illicit work themselves for a few days to get some currency that will actually buy things or they're pulling money from relatives further abroad to keep that kind of cross-border trade alive. In a few cases, they're relying on kinship connections (as in eastern Zimbabwe and western Mozambique). Once goods cross the border, they're the real currency that keeps people (barely) afloat, along with whatever small cultivators can produce (and usually hoard) out of their own resources. Life can still limp along that way for a long time, but it's a horrible squandering of a strong, sustainable economy and a highly educated, skilled citizenry.
Posted by: Timothy Burke | July 18, 2008 at 10:17 AM
So sovereignty is a complicated issue that means different things to different people. Go figure. ^.^
I didn't mean to imply that there was mostly posturing. More of a leader saying 'sovereignty has real consequences, but I'm not going to ignore the PR aspect either.' Would Realpolitik be appropriate?
Also, big thanks to Dr. Burke for the explanation.
Posted by: MeDrewNotYou | July 18, 2008 at 01:37 PM
Some how high inflations works notes:
In Germany 1921 or so, prices were in often dollars so the signs would not have to be changed.
You spent money as soon as you got it on whatever you could buy, even if you did not really need what was on offer.
There was a lot of barter. A professor of mine at Berkeley was from Hungary. He got out of the army just as the great inflation was going. He traded his uniform for a big tin (like 10 kilos or so) of paprika. He traded the paprika for board at the University dining hall. At the end of the school year, inflation had run its course.
Posted by: David Margolies | July 18, 2008 at 06:36 PM
The real problem apparently is the printing of money itself. http://www.latimes.com/news/printedition/front/la-fg-money14-2008jul14,0,6099597.story?page=1>The LA Times notes that they're about to run out of paper and that their license to use software to create new designs to keep up with inflation may be rescinded due to new sanctions.
Posted by: crionna | July 18, 2008 at 11:11 PM