Wednesday, August 1, 2007

The inexorable laws of supply and demand

Robert G. Mugabe has ruled over this battered nation [Zimbabwe], his every wish endorsed by Parliament and enforced by the police and soldiers, for more than 27 years. It appears, however, that not even an unchallenged autocrat can repeal the laws of supply and demand.

One month after Mr. Mugabe decreed just that, commanding merchants nationwide to counter 10,000-percent-a-year hyperinflation by slashing prices in half and more, Zimbabwe’s economy is at a halt.

Bread, sugar and cornmeal, staples of every Zimbabwean’s diet, have vanished, seized by mobs who denuded stores like locusts in wheat fields. Meat is virtually nonexistent, even for members of the middle class who have money to buy it on the black market. Gasoline is nearly unobtainable. Hospital patients are dying for lack of basic medical supplies. Power blackouts and water cutoffs are endemic.

Manufacturing has slowed to a crawl because few businesses can produce goods for less than their government-imposed sale prices. Raw materials are drying up because suppliers are being forced to sell to factories at a loss. Businesses are laying off workers or reducing their hours.

The chaos, however, seems to have done little to undermine Mr. Mugabe’s authority. To the contrary, the government is moving steadily toward a takeover of major sectors of the economy that have not already been nationalized. ...

The World Food Program issued an urgent appeal Wednesday for $118 million in donations to feed Zimbabweans, stating that drought and political upheaval would empty the organization’s stockpiles by year’s end without more money. The organization now feeds about 300,000 Zimbabweans and has regularly given food to as many as four million citizens at the height of the hunger season, in January.
--Michael Wines, NYT, on the poisonous brew of trying to control hyperinflation through price controls. What is the compassionate thing to do here? Does providing aid simply prop up an evil regime? Or is there no prospect of regime change anyway, simply a choice between an evil regime with lots of suffering or an evil regime with slightly less suffering effected through foreign aid?

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