User:Andrew Hyde/Mugabenomics

Mugabenomics is a term describing the economic policies of Robert Mugabe, the current president of Zimbabwe. The phrase "Mugabenomics" is often in a derogatory fashion by critics of his policies. They have also been referred to as "Voodoo Economics" (not to be confused with supply-side economics)

"Mugabenomics" is not a strictly defined economic theory but describes the general attitude held by Robert Mugabe and his goverment. Mugabe's policies are viewed as being against conventional economic thinking. Mugabe studied Marxism at the University of London, however most economists say his policies are driven more by authoritarianism than communism.

Critics blame Mugabenomics for Zimbabwe's high inflation, economic regression and goods shortages. The Zimbabwean Goverment has rejected these claims, blaming the crisis on "Western sanctions" and intermittent droughts. According to the Washington Post, a foreign diplomatic cable summarized Mugabe's 2002 budget with one word: surreal.

Supporters of Mugabe have praised his policies, saying that they have helped correct colonial injustices. The supporters also explain the current crisis as being the result of sanctions and drought. Some supporters even deny that there is an economic crisis in Zimbabwe.

Land Reform
The agriculture sector used to be Zimbabwe's leading economic sector. The sector was run by white farmers, who had bought the land before Independance. Despite numerous droughts, the sector flourished and caused Zimbabwe to be known as "the bread-basket of africa".

In 2000, the goverment, after pressure from war veterans, began a process of land reform. Laws were enacted to enable the goverment to "seize" the land of white farmers and redistribute it to landless black farmers.

This policy was met with large amounts of critisism, although most of it was directed at it's implementation rather than the policy itself. The reform program was brought to the front when the pro-Mugabe War Veterans Association marched on white-owned farmland. A total of 110,000 km² of land was seized.

The policy was disastrous for the farming industry and shortages of food soon followed. Many farmers took the matter to court claiming that the seizure of land was unconstitutional. The goverment would later pass a constitutional ammendment that nationalised all land, effectively blocking the farmers' cases.

The goverment described the land reform as a way of correcting the past colonial injustices.

Price Controls
The land reform brought with it shortages of bread. The price of bread quickly sky-rocketed beyond the reach of many poor families. The goverment then instituted Price Controls on various goods to keep prices at an affordable level. These mainly included Bread, Petrol, Sugar, Maize and Cooking Oil but stretched as far as Palmolive soap to T-bone steaks.

The policy misfired as the goverment's prices were not reflective of the rapidly rising cost of production. This meant that all the controlled goods were to be sold at a loss. There was an outcry from manufacturers to increase the prices but the prices remained constant. Consequently the majority of goods disappeared from the shelves.

Some manufactures got around the controls by classifying their goods as luxury goods. Luxury goods were generally not controlled and these goods could be sold at much higher but more reasonable prices. This led to what would normally be considered as absurd pricing, e.g. The price of bread with raisins suggested that the raisins alone were worth 4 times the actual bread.

A strong parallel market sprang up that bought controlled goods and sold them at high prices. The market thrived as many individuals were so desperate for these essential goods and were prepared to pay any price. This

The goverment has defended it price controls stating that families would not survive without them.

Control of Foreign Exchange Rates
When the Zimbabwe dollar started to lose value against the US dollar and the UK pound. Mugabe instituted strict controls over Foreign exchange. Traders were forced to trade at the official rate, which was constantly critisiced as being too low. The goverment also took 50% of any cash transfered and used the official rate to calculate the final amount in Zim dollars. This meant that an exporter could lose over 85% of a payment's real value when he received it.

The goverment also banned the use of Forex in local transactions. It also banned "hoarding" of foreign currency.

A strong parallel market (see below) sprang up selling Forex at higher prices, this was condemned by the goverment and made illegal. Despite this the black market has thrived and is one of Zimbabwe's only profit making industries.

The Zimbabwean goverment has defended these moves as being vital to the country's economic survival.