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February 2, 2009

Socialist Death Throes in Zimbabwe

by Brad Warbiany

Socialism/Communism has largely caused the collapse of any nation that’s truly tried it. Russia is the biggest example; China has seen the writing on the wall and has allowed economic modernization and liberalism to creep into their country to keep the system moving. Even most of Europe, who we libertarians would consider democratic socialists, understand that if you want to keep taking the golden eggs in taxes, you can’t quite kill the goose.

What’s always interesting, though, is those countries who try to kill the goose — Zimbabwe is showing us what occurs:

Zimbabwe’s central bank has revalued its dollar again, cutting another 12 zeros off its currency in a bid to tame hyperinflation and avert economic collapse.

Reserve Bank of Zimbabwe Governor Gideon Gono said: “This Monetary Policy Statement unveils yet another necessary programme of revaluing our local currency, through the removal of 12 zeroes, with immediate effect.”

Mr Gono gave no updated inflation figures but said broad money supply growth rose from 81,000 per cent in January to 658 billion per cent in December.

The last time inflation was officially recorded in mid-2008 it had soared to 231 million per cent.

The new government has raised hopes of rebuilding Zimbabwe’s shattered economy, where food and fuel is in short supply and unemployment estimated at 94 per cent.

Africa’s deadliest cholera outbreak in 15 years has also hit the country, killing over 3,100 people and infecting another 60,000.

This is the end result of a government that borrows/prints to pay social benefits that are too large for the costs to be recouped through taxation without destroying economic growth. If you allow government promises to exceed expected revenues by a margin that large*, you start to see inflation — and that inflation can reach runaway levels if not curtailed.

The sad thing, when Zimbabwe is concerned, is that I keep expecting the situation to improve. When Mugabe lost the election, I thought there was a good chance it could turn around. I keep being proved wrong, and it’s the people of Zimbabwe who suffer for it.

Hat Tip: The Austrian Economists

* PS – Just what are the projections of America’s unfunded liabilities right now? Or should we avoid that discussion in a sense of “hope and change”?

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2 Comments

  1. Zimbabwe is a beautiful country that was once a bright spot in Africa. No more. I hope, but am not particularly hopeful, that the change in government will get the country back on track. We’ll see.

    Comment by Greg — February 2, 2009 @ 1:21 pm
  2. [...] tip: The Liberty Papers.  Their article’s a good read in itself; head on over and check it [...]

    Pingback by What’s 1012 between friends? « Blunt Object — February 2, 2009 @ 2:07 pm

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