Thursday, August 02, 2007

Mugabe's decree on prices put economy in a tailspin

IHT (NYTimesLite) summarizes how stopping prices from rising leads to nothing to sell...

....It appears, however, that not even an unchallenged autocrat can repeal the laws of supply and demand.

One month after Mugabe decreed just that, commanding merchants nationwide to counter 10,000-percent-a-year hyperinflation by slashing prices by half and more, Zimbabwe's economy is at a halt.

Essentials like bread, sugar and cornmeal, staples of every Zimbabwean's diet, have vanished, seized by mobs of bargain-hunters who denuded stores like locusts in wheat fields. Meat is nonexistent. Gasoline is nearly unobtainable. Hospital patients are dying for lack of basic medical supplies. Power blackouts and water cutoffs are endemic.

Manufacturing has slowed to a crawl, because few businesses can produce goods for less than their government-imposed sale prices. Raw materials are drying up because suppliers are being forced to sell to factories at a loss. Businesses are laying off workers or reducing their hours....

Zimbabwe's vast underclass, the majority of its 10 or 11 million people, is perhaps less affected by this latest economic shock, simply because it has long been unable to afford most food anyway. The rural poor survive on whatever they can grow. Urban and rural poor alike stay afloat with food and money sent by the two million or more Zimbabweans who have fled abroad. Remittances are so vital that in some rural areas, the South African rand has replaced Zimbabwe's worthless dollar as the currency of choice.

Rather, it is the middle class, which had muddled through the last seven years of decline, that is likely to feel the brunt....

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