Thursday, January 28, 2010

The political power of economic collapse

After a complete economic collapse, inflation [in Zimbabwe] last year about this time had reached 230 million percent; GDP "growth" was negative in all senses of the word. It was in this nasty environment that the new finance minister, Tendai Biti, came along and began what few would argue is the hardest job in the world.

Now less than a year later, he was in Washington to tally the progress (and damn, Milton Friedman would be proud...)

- Inflation is completely gone, thanks to the abolition of the Zimbabwean currency in favor of a basket of other notes (including the dollar and the South African Rand). The highest rate seen in 2009 was a slim 1 percent. ...

- GDP growth this year was probably around 4 percent; Biti expects 6 percent in 2010. ...

Biti has an interesting theory about this. The collapse of the economy, he said today at a Freedom House event, was in fact the reason why President Robert Mugabe's government finally had to accept the power-sharing agreement in the first place. "Everything else they could deal with -- the opposition, they could beat us up," he said, "but you cannot implement violence against the economy."
--Elizabeth Dickinson, Passport, on forces beyond any despot's power of fiat. HT: Chris Blattman

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