Sunday, November 11, 2012

Zimbabwe’s Economic Recovery Prompted by Spontaneous Dollarization

Here are some very interesting developments in post-hyperinflation Zimbabwe.

Hyperinflation has prompted the average Zimbabweans to junk the domestic currency [the defunct 'Zimbabwe Dollar'] while simultaneously gravitating spontaneously to dollarize their economy. This has resulted to a rebound in economic growth.

Writes Professor Steve Hanke at the Cato Institute
So how did Zimbabwe go from economic ruin to an annual GDP growth rate of 9.32 percent in 2011, with estimates of relatively strong growth rates through 2013?  As I predicted in early 2008, the answer is simple: spontaneous dollarization brought an end to the horrors of hyperinflation.

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The important point to emphasize is that the average Zimbabweans responded to failed and repressive regulations and edicts through their own spontaneous initiative (and exactly the OPPOSITE from government imposition) which eventually became the nation’s informal ‘standard’.

Yet the informal dollarized money standard has been reflected on the economy as the informal economy dominates Zimbabwe which accounts for nearly 84% of employment (and could be more).

Yet Zimbabwe’s government continues to force its way on a society which has already rebelled on them economically

Again Mr. Hanke (bold mine)
While these achievements are cause for celebration, there are still problems in paradise: Robert Mugabe continues to hold the reins of power; Zimbabwe’s “Ease of Doing Business” ranking is a dismal 172nd out of 185; and “change” is, in short, hard to come by. In addition, the government’s external debt is now close to $12.5 billion and lending rates between Zimbabwe’s embattled banks are as high as 25 percent. To top it off, the Zimbabwean government is attempting to force banks to buy its treasury bills at significantly discounted rates, after its debt auction flopped in early October. Talk about ruling with an iron fist.
Also the Zimbabwean government, notes Mr. Hanke, continues to manipulate statistics “Lying statistics remain the order of the day” to embellish what has been a monumental government failure.

It’s amazing that the average Zimbabweans, who seemingly remain submissive and tolerant with the incumbent abusive and oppressive government, apparently live in a paradox or in a parallel universe.

Perhaps the Zimbabwean political economy could be a seminal manifestation of √Čtienne de La Bo√©tie’s nonviolent political resistance and civil disobedience through the starvation of the beast.

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