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July 05, 2007

Insane economics!

Even without any economics training, it is pretty obvious that a government can't just waltz into a store and tell the owner to slash the prices by 50% and then expect business to continue as usual.

But that's what the Zimbabwean government did last week.

The photo on the left is a line of people waiting to buy the reduced items... in other stores people shoved and shouted to grab all the items they could! The police had to be called in.

OK, and if that's not crazy enough, the government told producers that they would subsidize the basic commodities... how? Simply by printing more money!!!!

Again, without any deep understanding of economics, one would probably understand that you can't just go and print money any time you want it!

And the government blames hyperinflation on WHOM?!?

So, a few consequences:
* items simply disappear from the shelves... why should a shop owner want to sell something below cost? When I left Zim, there was no bread to be found in stores... just some out on the street in the black market.
* police forces are needed to randomly check on stores to make sure they comply with the price cuts, and then they arrest the store owners. Meanwhile, the stores get ransacked by hungry shoppers who hear about the enforced price cuts.
* and the cycle continues, fueling the black market, adding to inflation and fueling the general chaos in Zim.

And Mugabe thought this would earn him point from the general populous. Nice try.

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