The Cost of Really Bad Government

When does a press pass cost $27 billion?

When you’re a local reporter in Zimbabwe working for a foreign news outlet. Foreign Policy‘s Passport Blog reports that the government in Zimbabwe will begin assessing local journalists a fee of between $1,000 and $3,000 U.S. for the right to send news out of the country.

Considering the country’s 231 million percent inflation rate, $3,000 U.S. amounts to billions of Zimbabwe dollars.


kuduboy

The Zimbabwean government blames all the economy's problems on western imperial powers, yet its mismanagement is the only reason for the downward spiral. What hope is there of these politicians being prosecuted for, I suppose, gross negligence and corruption? Unfortunately, very little. They continue to consolidate their wealth as the country's ordinary citizens continue to suffer, and it seems that there's not much anybody can do about it.

Eric M. Jones

$3,000 US is $27.3 billion Zimbabwe dollars.

oops...$28.6 billion
opps...$29.3 billion
oops...$29.8 billion
oops...$30.5 billion

Sorry got to go....

Whitwt

Not to be a doom and bloom type of fellow, but why can't we take a hint when it comes to the dangers of inflation? We are well on our way to the same outcome due to our reckless monetary policy.

Geoff

You know, I always hear these ludicrous inflation rates trotted out, and wonder if they even hold any meaning. Even if you take a more sensible number, say 10,000%, isn't that still the same thing as calling a currency worthless?

There has to be some logical threshold where a currency becomes utterly worthless.

Kyle S

In the WSJ yesterday, there was a picture of a new $50bn note from the Zimbabwe Central Bank, which the accompanying article claimed was worth about one USD. Hence, a $3,000 USD fee would have been worth 150 trillion Zimbabwe dollars yesterday.

Now, add a day's worth of inflation at 231 million percent, and you get the answer for today. It's a high one.

DizzyK

Gross negligence and corruption aren't the only things for which the Zimbabwean government could be prosecuted. Mugabe is accused of a small scale genocide that supposedly happened in southern Zimbabwe in 1983, involving the murder of hundreds of Ndebele people.

On more concrete facts, ZANU-PF has routinely beaten and killed members of the opposition party and a few years ago they enacted Operation Murambatsvina which was a veiled way of punishing hundreds of Harare residents who voted for MDC.

There's not much people can do but I wish that Zimbabwe's neighboring countries put more pressure on the government to cause some change. South Africa, especially could do a lot of damage should they stop supporting Zimbabwe. Much of Zimbabwe's electricity comes from South Africa right now as do many imports. Their inaction is very confusing since due to the Zimbabwe crisis they have thousands of refugees in their cities (resulting in xenophobic violence mid last year) and now their are increasing cases of cholera which is also be spreading from Zimbabwe.

On Geoff's comment, you're right that the currency is essentially worthless now. Now everyone has switched over to using other countries' currencies (USD, ZAR etc.) although I'm not sure how this long this can work. A few months ago though, as high as inflation was, it dictated when you changed prices. The difference between 10,000% and 10 million is the difference between changing your prices today or 5 days from now.

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Stephen

It's easy to vilify Mugabe and ZANU-PF for what they've done since independence, but it's also important to realize that serious land reform/redistribution was necessary. White-owned large scale commmercial farms dominated the best agricultural land in Zimbabwe after independence while the vast majority of African Zimbabweans were farming on tiny plots of marginal land. The Lancaster House Agreements largely tied Mugabe's hands (though it's worth noting that he did sign those agreements, so he was complicit in that) until 1990. Mugabe only really acted on land reform in the 2000's as he shifted towards a radical populism in an effort to maintain control. Radical land redistribution was clearly a mistake -- and a politically motivated mistake by Mugabe -- but we have to realize that the roots of this current crisis in Zimbabwe lie in the failure of land reform and the blame for that cannot be fully placed on Mugabe.

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Nile

Life under hyperinflation isn't quite the way it's portrayed by headline inflation numbers and tales of workers in the Wiemar era carrying their wages in a wheelbarrow.

The population falls into three distinct fractions: the economic elite, who have access to dollars; a mercantile class, who do deals with whatever currency is available - including barter - and who disdain the 'official' scrip but will use it under duress; and an underclass of civil servants who are paid in worthless scrip and rely on the informal economy for all their needs.

The latter class gradually abandon their official duties in favour of any activity that obtains the necessities of life and access to real money; in the case of essential workers like the police, this presents a real danger to the functioning of the state.

Russia presents interesting examples of workers - teachers being a prime example - who continue attending their formal place of work in towns where no wages are being paid, because the workplace offers a networking hub in the barter economy.

The question for an economist is this: what is money? Stating that a scrip which no-one uses has inflated by some factor of a million is nonsense: the medium of exchange is something else. It may be that the population are reliant on the happy accidents of barter; it is often the case that this, or some other credit-note system, are denominated at some level in dollars, filtering down the undocumented economy.

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Jonathan

Hang on, so the Zimbabwean government is setting its prices in USD now? Surely at least the government should use the local currency!

So event THEY don't have any confidence in their own currency!

ukdan

No. 7 I couldn't disagree with you more. Mugabe inherited a golden country by African standards.

Its hard to believe now but it was a food exporter before the land reforms that you say were needed.

Mugabe ruined the country and is soley responsible for the mess its in.

Kinglink

Here's a question, at what point does a note become truely worthless. By this I mean when would a dollar bill of currency become worth so little that it could be used as scrap paper, toilet paper, or other means?

Is there ever a point even? I don't know if I could truly use American currency as toilet paper, but with the value of Zimbabwe plummeting, there has to be a point where it's a viable alternative.

Trevor

The Zimbabwean Reserve Bank officially announced it's Z$ 150 trillion note today. It will buy roughly three loaves of bread.

The situation is dire and money worthless. Zimbabwe has effectively moved backed to a barter economy.

Stephen

Zimbabwe was a food exporter and they also had one of the most developed manufacturing sectors in Africa at the time of independence. HOWEVER, the benefits of this success were almost entirely concentrated in the hands of a few (almost all white) land owners. Do you really think that after years of fighting for independence, that there would not be significant popular inertia for land reform?

Simply looking at Zimbabwe's economy in its aggregate numbers is very misleading for the above reason. Also, analyses of land use in Zimbabwe in the 1980's have shown that a large amount of land was underutilized by these large scale farms. In some of the most productive areas less than half of the land was actually utilized (and that's assuming that a quarter of the land was left intentionally fallow). Check out Sam Moyo's work on Zimbabwe for a much more detailed account of this.

Mugabe has engaged in behavior that was obviously against Zimbabwe's interests in the past (i.e. his involvement in the war in the DRC). Land reform is different. The need was real, but the execution by Mugabe was horrible.

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Bobby G

@ Kinglink (#11),

I doubt anyone looks at this anymore, but money becomes a viable solution for toiletpaper when the value of the money becomes less than the value of the toilet paper. If a roll of dollar bills cannot buy you a roll of toilet paper, then on a piece-by-piece basis it's more economically efficient to use the currency to fulfill your wiping needs, rather than "overpaying" for a more luxurious solution of real toilet paper.

will

no they have used the miss guided us government to help but the us cant help they have problem of there own at home we just dont talk about it here its time to wake up we need every one to help if you see this expose your local government they cant hurt us when were to stand in the constitution they all take bribes or lobyest money it time for america to tighten up its sad to not see my friends dads not workin when are we goin to wake up and take are country back from this emposter it just a matter of time we need to hurr up love the us