YOUR front page story “Kondozi moves to Mozambique”, (Zimbabwe Independent, April 30) merely underscores the message that some of us have been stating for several years – that the only means by which the Zimbabwe economic crisis can be re
solved is political.
African countries support Zimbabwe’s land reform programme, we are told. Of course they do – especially those welcoming our commercial farmers with open arms.
It is political decisions that have ruined the economy. And it is only political changes that will create the possibility of restoring the economy. It is the story of Kondozi, rather than that of so-called “new monetary policies” that accurately reflects Zimbabwe’s present economic realities.
Despite the incessant praise singing for central bank chief Gideon Gono’s new monetary policy as exemplified by choir master Eric Bloch’s regular columns of praise and worship – the reality remains that no new monetary policy can overcome the politically-motivated destruction of the productive capacity of the Zimbabwean economy. Neither can any new monetary policy overcome economic fundamentals and market realities.
Perhaps Zimbabwe’s many lear-ned economic consultants and columnists could address a few basic economic realities and truths. They might start with the most obvious – that if the economy’s ability to create wealth is constantly being undermined if not quite destroyed – then no amount of monetary, fiscal, or any other policy prescriptions will succeed in turning the economy around.
Is it any surprise that as soon as Gono announced a foreign exchange rate of US$1:$5 200 (not, of course, a devaluation) the auction rate dropped from its previous artificially low levels to US$1:$5 271 (It was $3 518 only three months ago).
Does any economic commentator seriously expect us to believe that the auction rate has been freely set by the market since it began or even that plus or minus $5 200 accurately reflects the true value of the Zimbabwe dollar to the US dollar?
It does not need a genius to understand that if Zimbabwe is to maximise its foreign currency earnings it should let the rate be freely determined by the market and should restore sanity to the governance of the country.
One of the very few policy measures of former British premier Margaret Thatcher that had lasting benefits to the UK economy was her decision to remove all foreign exchange control restrictions and to let the exchange value of the pound be freely determined by the market.
Despite many predictions by prophets of doom there was no massive capital flight nor a dramatic decline in the exchange value of the pound.
The problem with trying to run an economy by controls and regulations is that too much of a country’s finite resources get used up in either enforcing or trying to circumvent such controls and regulations rather than being productively employed in the creation of wealth.
Creating, not controlling wealth, is the fundamental economic problem that needs to be addressed especially in countries that have so many of their citizens living in abject poverty.
A confident prediction: there will not be “an economic turnaround” unless and until there is first a political turnaround.