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Electing for Real Growth in Zimbabwe

July 31, 2013 in Economics

By Marian L. Tupy

Marian L. Tupy

On Wednesday, Zimbabweans head to the polls. Standing against each other in the contest for the presidency are, for the third time, President Robert Mugabe and Prime Minister Morgan Tsvangirai. Their respective political parties, the ZANU-PF and Movement for Democratic Change, will battle for the control of the country’s Parliament.

None can be sure about the outcome, but smart money must be on the 89-year-old dictator, who seems determined to extend his 33-year hold on power. Mr. Mugabe has managed to hang on to the presidency in more difficult circumstances, murdering his way to electoral “victory” in the midst of hyperinflation and economic meltdown in 2008. Wednesday’s balloting will take place under slightly more stable and somewhat more prosperous circumstances brought about, paradoxically, by the efforts of Mr. Mugabe’s opponent.

The combination of foreign aid, government borrowing and spending, and high commodity prices is unsustainable.”

Mr. Mugabe and Mr. Tsvangirai have been sharing power since 2008. Back then, Zimbabwe was in the midst of a man-made disaster. In the late 1990s, Mr. Mugabe started attacking a small but economically vital group of white farmers. Invasion and confiscation of white-owned commercial land followed in 2000. Banks, which used land titles as collateral when extending loans to farmers, found themselves in the red and the financial system collapsed. Most of the new occupants of the farmland were subsistence, not commercial, farmers and agricultural production dwindled. Companies that processed, packaged and exported agricultural produce went out of business.

From 1998 to 2008, Zimbabwe’s economy contracted at a rate of 6 percent per year. In contrast, the economy of neighboring Mozambique grew at a rate of 4.9 percent annually. Zimbabwe’s per-capita annual income fell from $1,640 to $661 — the lowest level since the late 1940s. In Mozambique, average income rose from $1,428 to $2,400. The United Nations‘ Human Development Index, which is an approximate measure of a standard of living that is calculated on a scale from 0 to 1, saw Zimbabwe decline from 0.376 in 2000 to 0.345 in 2008. Over the same period, Mozambique’s index rose from 0.202 to 0.327.

By 2008, Zimbabwe’s unemployment rate stood at 94 percent. With the tax revenue in free fall, the cash-strapped government started printing money. Professor Steve Hanke of Johns Hopkins University estimates that Zimbabwe’s inflation reached 90 sextillion percent in 2008. Prices doubled every 24 hours. In the end, the public refused to use the Zimbabwe dollar, which was abolished and replaced by the South African rand and American dollar.

Since 2008, Zimbabwe has experienced relative stability and high …read more

Source: OP-EDS

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