Over the past couple months we have pointed out how the social and economic policies of Robert Mugabe were leading to the collapse of the Zimbabwean economy. (here, here, here, here, and here) The latest in a long line of foolish decisions was the implementation of price controls which led to an exploding black market. Now it appears that even the black market is failing. Not a good sign.

“Mugabe’s efforts at price control have not only backfired, but they’ve exacerbated what is a fairly catastrophic situation anyway,” said the source, who spoke to reporters on condition of anonymity.

“It displaced retail activity into the black market, where there is no control, so inflation … is probably anywhere between 13 000% and 20 000%,” the source said.

The Zimbabwean government said in its latest report that inflation was about 6 600%. That is down from previous monthly estimates, but still the highest in the world.

…

Zimbabwe credits a government-imposed price freeze in June for helping to control inflation.

But the British diplomatic source said Mugabe’s price-cutting attack “completely fractured the supply and production chains behind the retail sector, which were pretty fragile in any case. Companies have lost billions of Zimbabwean dollars and … even the black market is beginning to dry up.

“We know we’ll be feeding four million people by January or February, possibly more,” he said, warning Zimbabwe is on the verge of “a really very serious food and every other kind of shortage”.

I’m guessing those “bookish economics aren’t looking so stupid now, right Mr. President?

One of the reasons for this problem is people have just stopped doing business in Zimbabwe, historically this has been the result of these types of regulatory schemes. The producers of goods take them someplace they can get a fair price for them and the regulated market suffers. Something to think about the next time neo-populist Bill O’Reilly advocates price caps on gasoline and confiscatory taxes on the oil companies.

Zimbabwe, Mugabe, Economics

This entry was posted on Wednesday, September 26th, 2007 at 7:53 am by Chad and is filed under Politically Correct ... and stupid. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.