Mugabe Should Heed the Warnings of Hayek

July 27, 2005 • Commentary
This article originally appeared in the Financial Times
Copyright 2005 The Financial Times Limited

The year 1944 saw the publication of the widely read and influential book, The Road to Serfdom. The author, Friedrich Hayek, an Austrian‐​born economist, warned that the crimes of the German National Socialists and Soviet Communists were the inevitable result of growing state control over the economy. Hayek was fortunate enough to live to see the defeat of both totalitarian regimes. Unfortunately, there are still places where Hayek’s most dire warnings remain relevant. Robert Mugabe’s Zimbabwe is one such place.

As Hayek explained, central planning leads to massive inefficiencies and long queues outside empty shops. A state of perpetual economic crisis then leads to calls for more planning. But economic planning is inimical to freedom. As there can be no agreement on a single plan in a free society, the centralisation of economic decision‐​making has to be accompanied by centralisation of political power in the hands of a small elite. When, in the end, the failure of central planning becomes undeniable, totalitarian regimes tend to silence the dissenters — sometimes through mass murder.

Fast‐​forward to Zimbabwe in the 21st century. Between 1999 and 2003, its economy contracted by more than 30 per cent. Last year, unemployment stood at 80 per cent for the economically active population, and income per head was lower than in 1980 — the year Mr Mugabe came to power. Life expectancy fell from 56 years in 1985 to 33 years in 2003. Inflation, after rising to 500 per cent in 2004, continues at triple digits. Foreign direct investment and tourism have plummeted. In January, more than half of Zimbabwe’s population needed emergency food aid. Of a total 13m population, 3m to 4m Zimbabweans have emigrated abroad.

What led to this? In 2000, Mr Mugabe gave the green light to his supporters to invade commercial farms, many of them held by white Zimbabweans. Private property rights of commercial farmers were revoked and the state resettled the confiscated lands with subsistence producers — many with no previous farming experience. Agricultural production plummeted.

The farm invasions had economic ripple effects. The banking sector, which used farm land as collateral, was hit by bad debt and curtailed the issuing of new loans. The manufacturing sector, which relied heavily on processing agricultural goods, went into a tailspin. Declining domestic production deprived Zimbabwe of the ability to earn foreign currency and buy food overseas. Famine ensued.

Mr Mugabe’s response was to rig elections and tighten the government’s noose around the economy through price controls. Many prices — including those of bread and gas — were set too low. That led to shortages and the emergence of black markets. As more of Zimbabwe’s economy moved underground, tax revenue dried up and the government coffers emptied.

The emergence of the black markets was partly why Mr Mugabe decided to launch operation Murambatsvina in May. The security forces arrested more than 20,000 vendors and destroyed their vending sites. They levelled entire townships where the government was unable to exercise control over the shadow economy, leaving some 700,000 people homeless. Zimbabwe’s Catholic bishops warned: “We have on our hands a complete recipe for genocide; we’re witnessing a tragedy of unprecedented enormity.” They may yet be proven right. According to Didymus Mutasa, one of Mr Mugabe’s ministers of state, Zimbabwe would be better off with only 6m people, with our own people who support the liberation struggle.” The rest are evidently expendable.

Just as Hayek warned, the government’s initial attack on private property led to intervention in the economy and, concomitantly, the destruction of political freedom in Zimbabwe. If Mr Mugabe continues along the path marked by other socialist dictators, the world may yet see Zimbabwe descend into an orgy of violence.

In a report last week, the United Nations condemned the latest abuses in Zimbabwe, calling the government’s decision to demolish settlements a violation of international law and urging prosecution of those responsible. Kofi Annan, UN secretary‐​general, called the policy a “catastrophic injustice”. In contrast, the African Union has washed its hands of Zimbabwe, stating it would not be “proper” to interfere in the internal affairs of AU member states. That is a terrible indictment of those who rule over the continent. It is time they followed Mr Annan’s example and spoke out against Mr Mugabe.

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