Applied Philosophy

When third world countries that had adopted the so-called ‘socialist’ system started to collapse in the seventies and early eighties they pointed to the future of the whole socialist block, they were the canary in the mine. The imported system with its western symbols and nomenclature was grafted by force on these countries’ societies, this left them extremely weak and so they failed before the countries that exported the system to them did.

The grafting of western liberal democracy on weak third world countries-with imported symbols, nomenclature, foreign educated leaders and deadly force where resistance is encountered-has already produced several victims: eastern Europe, the Asian Tigers, Russia, Argentina and last but not least Zimbabwe.

Zimbabwe is a case where multiple factors come into play. What should be of interest to the whole world is the current hyperinflation of the Zimbabwean dollar. The public in the west has completely accepted the neo-colonial narrative that blacks (and other non-Europeans) are unable to govern themselves, that not only they must adopt western ideologies but also westerners should supervise them. The most corrupt political administrations, currently under investigation, unashamedly talk about ‘teaching’ Africa ‘good governance’!

Such clearly racist explanations are of course wrong. Zimbabwe’s hyperinflation is due to weakness in the western system of fiat currency, its particular problems follows from the post-colonial settlement. For political reasons, which I discuss below, Zimbabwe has been cut off the dollar-manna and left to fall on its own fiat strength. This particular case is the canary in the mine for the demise of the whole dollar-denominated reserve currencies, once the dollar collapses everyone will fall on their own fiat strength.

To emphasise the point of the non-indigenous nature of the current Zimbabwean system we can note the following: the official language of Zimbabwe is English, the predominant religion is European Christian denominations, those in power are called Robert, Jonathan, Gideon, etc. These people were made into the image of the colonial power that ruled them and now they show the future of that same power.

The western media is completely useless about such important subjects. The template journalistic report starts with images of someone paying for lunch with bucket-load of cash, then the empty supermarket shelves-I wonder what good are full shelves for the poor and the homeless in the rich countries, but that is another subject-then some one with a dusty face talks about his personal hardships and that heartbreaking image is the end of it. No information, no analysis, nothing of value. Those who let themselves manipulated by such shameless propaganda will live to regret it and that is a historical truth.

Abandoning the suspect media outlets I searched for a source of information, on the website of the Reserve Bank of Zimbabwe I found The Half Year Monetary Policy Statement, dated 30 July 2008, by Dr. G. Gono the governor of the Reserve Bank. The website is worth visiting if only to see the official year-on-year inflation, which is a six digits number! The rest of the post consists of quotes from the statement followed by comments from me.

[The statement is available in PDF format as a whole and in chapters. I could not perform copy/paste and had to transcribe the quotes, errors are possible, please check the original document for accurate quotes]

 

3.3 On 2 July, 2008, this Governor received a letter from Germany, indicating that because of political reasons, our currency paper suppliers for over 50 years were unilaterally terminating supplying us immediately.

3.4 This saw a fully paid up consignment of paper due for delivery to the Reserve Bank being denied exit from Germany.

3.5 As if this was not enough, Germany then immediately froze Zimbabwe’s accounts in the process, impounding scarce foreign currency resources that were destined for food imports to feed the vulnerable in our society, including women, children, the elderly and the disabled.

I am not an expert on International Law but I have read a lot of history and I know that wars have been started for less aggressive acts than this. What is it with Germany and small weak states, is it some pathological urge in the German psyche?

I also wonder if denying Zimbabwe good currency paper is some kind of a prelude for a ‘black operation’ to flood the Zimbabwean economy with counterfeit currency? Such operations are not unknown in history after all.

 

4.2 Indeed, we have seen from the latest round of EU and US sanctions that the new targets are not just individuals including journalists whose crime is to report news and hold opinions not favourable to those imposing the sanctions but also parastatals and other national institutions that play important roles in the national economy.

4.3 It is difficult to avoid the inescapable conclusion that the inclusion of some journalists in the latest sanctions is an audacious and yet most unfortunate attack not just on press freedom itself but also on the principle of tolerance that at the heart of what many, including US government, say is absent in our national politics today.

Sanctions are the modern equivalent of gunboat diplomacy: bombard them until they acquiesce to your demands. Domestic poplar support in the west for such inhuman, unjust and illegal sanctions is the prelude for inhuman, unjust and illegal domestic restrictions; sooner or later societies will pay for their crimes (see The Seven Deadly Sins of Society)

 

4.14 Fellow Zimbabweans, the times we are living in and the gravity of the challenges we are facing demand that extraordinary interventions be deployed to fend-off the wolves from our national door-steps.

While liberals living in the world’s strongest states surrender their personal liberties in response to possible unspecified threats they expect such a weak state as Zimbabwe to open itself up and surrender its sovereign rights for unspecified human rights issues. The gullibility of western liberalism increases as their historical decline continues (see The Staggering Hypocrisy of the Western Mind).

Those countries most loud in criticizing Zimbabwe have already invaded and occupied several nations, turning them into a wasteland for their own agenda. Zimbabwe’s fear of the “wolves” is rational and backed by recent history; any so-called humanitarian intervention will transform the country into another Somalia.

 

4.26 In these efforts, we also need to expand and consolidate our circle of friends as a country.

4.27 As we have repeatedly stated, no country or economy, let alone a people, can exist as an island in today’s integrated global economy.

The weak shall never come to the aid of the weak. Throughout history the combined strength of the weak outweighed that of the strong and yet they never manage to overcome their disunity. Zimbabwe’s relation with South Africa has certainly given it a lifeline (just like South Africa once gave a lifeline to the white government); the post-apartheid settlement in South Africa is very similar to the deal that was struck in Zimbabwe at the end of the seventies. The fear that South Africa would similarly unravel is keeping some in the west awake at night; recent economic troubles are not helping.

 

6.1 Over the past few months, developments on the inflation front, accentuated by subdued productivity levels, as well as the constricting effects of the illegal sanctions imposed on the country, the demand for currency has significantly grown.

6.2 Also reflecting the high inflation environment prevailing in the economy, monetary valuations and transaction values have grown to nominal magnitudes that are now constraining the smooth operability of financial IT systems.

The reasons for high inflation in Zimbabwe is not particular to the country but rather a consequence of the fiat currency system, those who laugh at Zimbabwe today will be sharing their misery very soon.

Some have made fun of Zimbabwe’s removal of ten zero’s from the currency valuation, thinking that it was an attempt to fight inflation. It is clear that the action was taken for technical reasons and not as a move to combat inflation; the truncated headlines in the international media without any context are not a suitable source for information.

 

10.2 The Mining Sector contributed 53% of export shipments, followed by Tobacco which contributed 18% as shown in the Figure below:

The claim that expropriating the white landowners has caused the collapse of the economy is put into context here: not only is the hard work of Zimbabweans in the mines provides half of the export but Tobacco exports are still going on without the need for a white landlord who takes a cut of the profits.

If we only listen to the media we would think that the economy was wholly dependent on the Tobacco export and that the land redistribution has totally stopped it. The truth is that the important sector in the Zimbabwean economy is not agricultural but mining. I would be very interested to know who actually controls these mining concerns, I have no doubt that the ultimate control lies in the money markets of the western capitals. While simple white farmers are shown upfront in the media coverage the real economic powers that control Zimbabwe are never talked about.

Hundred years ago the land was given to white settlers, this was done to form a protective layer for the mining companies that control the mineral resources. After the failed uprisings of 1896-97 the British South Africa Company distributed land to European settlers, the deal is clear as it is old: the empire gives poor outsiders land on its periphery and in return they perform garrison duty.

The grandchildren of those settlers (in Zimbabwe and elsewhere) keep repeating that they are “Africans”, but in reality they have never cut the umbilical cord that links them to their mother countries, until they do so they will not really be Africans. If they really want to be Africans then they must pay the price, they can’t have their cake and eat it too (i.e. enjoy a privileged position thanks to the colonial history and at the same time claim indigenous rights).

 

14.2 The surge in the domestic debt position largely reflects the needs Government, like in any elections, confronted to meet the smooth running of the 2008 Harmonized and Run-off Elections.

It was a song & dance election, I will give you that, but it was a show they couldn’t afford and they had to put it on because of a highly coordinated campaign against them. Instead of helping Zimbabweans it actually made it worse for them and this outcome was, I believe, the desired one. Pressure is put on weak states: they submit or the people rise up against them, the target of international sanctions is always the people never the governments.

Was Mugabe’s twenty-year reign, from 1980 to 2000, completely democratic? Why did democracy and human rights in Zimbabwe only become an issue when, after the failure of the land redistribution program, land seizure started? Some of the important questions that the media never bothers to ask let alone answer.

People, nowadays, are content to live in the moment: knowing nothing about what came before and not caring what might happen next. Those who exist without knowledge of the past will never understand the present and will always be surprised by the future. To understand the current situation of Zimbabwe we have to study events that took place forty years ago.

The unilateral declaration of independence in 1965 was meant to pre-empt a deal between the western powers and the local black leaders at the expense of the local whites. After standing duty for the empire, the empire was going to drop them like a used rag. The sanctions against Zimbabwe and South Africa were meant to pressure these whites to give up and make a deal, they were never about human rights or equality.

Although they were only recognized by South Africa, also under sanctions, they were very well supplied and when they were at the brink of collapse the powers intervened to have an acceptable settlement instead of a true liberation (i.e. political, economic, cultural, etc.). The result was The Lancaster House Agreement-land reform was a point of contention then and Mugabe is now paying for his compromise-the deal was presided over by the Thatcher government, the same government that designated Nelson Mandela as a terrorist.

As long as Mugabe’s regime could control the population and hold the status quo it was acceptable-the British even gave him an honorary knighthood-when the pressure from the landless blacks increased, it was time to replace him with a more ‘friendly’ government, his refusal to be discarded like an old rag ignited this confrontation. Suddenly he is transformed into a ‘thug’-the new buzzword in media campaigns-his rule demonised as worse than Hitler, etc.

Statistics that show the decline in economy fail to mention that the majority of the people were not enjoying the fruits of their land. The people of Zimbabwe might have had political independence but they were still under economic servitude. Now they have to be shown that slavery is much better than an attempt at freedom. Those who blame the destruction of the economy solely on “mismanagement and corruption of the Mugabe regime” must first explain how the same regime could adequately function from 1980 to 2000 and then completely wreck the country in few years!

 

14.9 Commercial banks accounted for about $750.7 quadrillion or 99% of the Monetary Banking Sector’s holding of domestic debt. This attributed mainly to banks’ active participation in Open Market Operations.

I see that they have chosen the nonsensical ‘quadrillion’ instead of my excellent ‘ptillion‘. I wonder why the banks are holding 94.05% [Monetary Banking Sector holds only 95%] of the domestic debt?

 

15.1 The Banking Sector has remained generally safe and sound despite adverse macroeconomic environment.

And this is why! As Walter Bagehot explains (see Bagehot on Money) banks can function regardless of the currency. Between hyperinflation and insolvency they will always choose the former and the consequences be damned, this is true for all fiat currency systems.

 

16.4 As Monetary Authorities, we urge those institutions whose shareholders have no realistic chances of meeting the requisite capital threshold to actively consider mergers and amalgamations with other institutions.

Sound advice, very appropriate for US financial institutions that are dangerously undercapitalised, but they never do anything unless the Fed assumes almost all the liabilities as it did in the Bear Stearns deal.

 

19.1 The Zimbabwean economy continues to experience acute macroeconomic challenges.

19.2 The adverse effects of sanctions, high production costs, power outages, fuel shortages, shortages of foreign currency and drought have largely constrained production, culminating in widespread shortages of goods and services, high unemployment levels and declining living standards.

19.10 The manufacturing sector also continues to face a number of challenges which include rising production costs, foreign currency constraints, electricity supply interruptions, fuel shortages and brain drain.

These challenges are not unique to Zimbabwe, the whole of Africa is suffering from power shortages and western nations have unashamedly recruited state-educated professionals.

While recruitment from third world countries helped them function for a while, society in these countries has since collapsed and they are unable to produce professionals anymore. Now the west has to pay double for using short-term solutions, the shortage of trained and experienced professionals is hitting every sector in the western countries: education, health, engineering, etc.

The “high unemployment levels and declining living standards” is the mark of our time, no country escapes this fate the only difference is the magnitude. Those who sit in judgement on Zimbabwe should turn their attention to their own failings and leave others to run their own business.

 

20.1 Tourist arrivals recorded an 11% increase, from 305,757 in the first quarter of 2007 compared to 340,810 recorded during the first quarter of 2008, despite negative publicity that the country is currently going through.

Over the period there was 496% increase in tourists from America. I am very curious to understand why is that; my best guess is South American hunters favouring Zimbabwe over Kenya, but I may be wrong.

Before 2000 the tourists were about a million, some would view this as a decline that hurts the economy, I would consider an economy of thirteen millions catering to a million tourists to be a failed economy. The idea that countries should depend on foreign tourism is one of the most abhorrent ideas in my opinion, but I will leave this subject to another post.

 

21.1 Inflation, the economy’s enemy number one, has now evolved to alarming levels that threaten the socio-economic stability of the country.

A worthy warning, is anyone listening? This is the end of inflation whether slow and steady or fast and hyper. The only difference is how fast you get at the dismal end.

The US Federal Reserve targets an inflation of 2% per annum. This seems low but in reality it means that prices double every 35 years or, alternatively, one dollar put away in the first year of employment would loose half its value before retirement. What is important to remember is that inflation is like a snowball the longer it falls the bigger it gets and the faster it goes. Inflation will start low but as the years go by and people realize that the value of the currency is persistently falling and never recovering any lost value they start to shy away from cash, which only makes inflation worse.

 

21.1 Resolving the inflation monster requires an unfailing combination of the following critical pillars.
              (b) An immediate unified call by all Zimbabweans across the board for the lifting of the illegal sanctions against Zimbabwe.

I add my voice to the lifting of the illegal sanctions not only against Zimbabwe but also against all sovereign nations [the numbering error is in the original statement].

 

21.3 What every Zimbabwean has to realize is that if we all continue as we are doing to increase prices, exchange rates, interest rates, wages, salaries, rentals and other service charges, including bank charges, at the current daily and in some cases hourly rates, we will soon have no economy to talk about.

Typical central bankers’ response to inflation: asking everyone to sacrifice while printing money like there is no tomorrow. When they stop printing money and the government starts paying back its debt the problem will go away by itself, whether they can do such a thing is another question altogether.

Trichet (head of the ECB) is singing from the same hymn sheet: calling on labour unions to abstain from asking for real pay increase while at the same time pumping billions into the banking system. Workers are expected to subsidies the bailout of the financial markets, as in Zimbabwe so everywhere.

 

29.1 The Reserve Bank of Zimbabwe through FISCORP (PVT) LTD is purchasing cattle as one of the methods of re-building the national herd.

If the Fed is buying mortgages why shouldn’t the Z-Reserve (my pet-name for this central bank) buy herds? I suspect that the herds have more intrinsic value than the securities the Fed has been accepting lately.

Not stopping at FISCORP the Z-Reserve is printing money to wholesalers & retailers via BACOSSI and to the agricultural sector via ASPEF (central bankers seem to have a fetish for alphabet soup acronyms!).

 

31.4 The watershed Land Re-distribution Programme brought significant positives such as the generation of a new diverse indigenous breed of both commercial and communal farmers.

Is this a moral cover to counter the moral cover of “human rights” that has been adopted by the western powers? It is certainly a worthy cause; we should insist that the Zimbabwean government lives up to it instead of focusing on formal democracy in a country without a functioning economy. Again it helps us to view this issue within the historical context.

Zimbabwe tried to buyout the white landowners but they refused. Their refusal is logical, expected and the right thing to do for themselves. As long as they own the land they are secure, they can extract income from the land and pass the wealth to their children intact. This is the beauty of owning land, the problem is that the whites were less than one percent and they controlled the best land (if not the most land). The development of the country was held back by them, so land seizure becomes then logical, expected and the right thing to do for the government.

The whites were 1% of the population now they are down to 0.37%. The numbers now are negligible, even if some of those who are outside Zimbabwe should return they would be viewed as those who left while the rest went through the hyperinflation mill. The whole society has changed, no longer would it be acceptable for a future social movement to make a deal with the whites, whatever else happens white presence in Zimbabwe is gone.

The same issue exists in Namibia and South Africa, their efforts to buyout the white landowners have failed. The western powers do not care one bit about these people, currently a hundred thousand South African whites are living without running water or electricity; this is their reward for defending the apartheid regime and it is also their punishment. The real fear is that once the land is expropriated the next logical move is to move on the mining companies. They had to make an example out of Zimbabwe.

 

38.6 Zimbabweans, like another country’s citizenry, seek to earn an honest living out of their heritage of natural resources.

The natural resources of Africa has not benefited Africans in many generations, instead it have been a source of great wealth to outsiders. Any local regime that consents to the status quo will gain ‘international’ acceptance, while any that tries to bring change will be demonised and vilified.