Tuesday, September 4, 2007

More From Zimbabwe

Some of you may remember that Zimbabwe is experiencing hyperinflation. Now, in order to combat this, the government of Zimbabwe is outlawing pay raises. From the NYTimes:

Zimbabwe’s government slapped a six-month freeze on wages, rents and service fees on Friday, the latest step in what some analysts call an increasingly desperate campaign to sustain an economy gutted by hyperinflation.

Even as President Robert G. Mugabe declared the freeze, however, Zimbabwean newspapers suggested that the government’s two-month-old drive against inflation had backfired by drying up tax revenues needed to run the government.

This is only the latest in a long line of great ideas from the government.

The freeze follows a decree issued in late June that forced merchants and wholesalers to reduce all prices by at least 50 percent. Shoppers stripped store shelves of clothes, meat and other basic goods after that decree, and producers have largely failed to ship new stock because goods now sell for less than it costs to make them.

Most commodities are now available only on the black market, where prices have continued to skyrocket. Moreover, as the last remaining stocks of goods trickle out of factory warehouses and onto the market, Zimbabwe could soon see the start of an inflationary spiral that would make today’s prices seem cheap, John Robertson, a Harare economist, said in an interview.

Unfortunately for Zimbabwe, politicians never learn that they cannot control an economy by passing silly laws. A national economy is one of the most complex systems of human interaction mankind has ever developed. For a few politicians and bureaucrats to think they are going to manage the sum total of free transactions for a nation by defining what can and cannot be charged for any good or service, while at the same time violating every fundamental principle of the nature of money by printing it to pay its expenses, is not only stupid and dangerous, but typical.


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