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Some intermittent thoughts on the mortgage crisis and Zimbabwe

July 30, 2008

First you can’t pay your mortgage, and then–presto penstroke–you can! The government just made it affordable. How is it that the same house wasn’t affordable yesterday and it will be tomorrow? Better rate? Yes, the kinder gentler FHA will provide a lower rate of interest. The lower rate comes at a cost of devalued money. Presto penstroke. Like Zimbabwe, only here we’re not lopping 10 zeroes a day, yet.

It is probably unlikely that Americans will have to rent C-17s to carry their cash to the grocery store. We aren’t so conspicuous about inflation as all that. We don’t want to be like the silly Germans in the 1940s, who had to haul trunkloads of marks everywhere. Even Zimbabwe doesn’t want to look like that. They just print denominations in the billions and call them one-dollar bills. That makes it convenient for everyone. Yesterday a pizza cost hundreds of millions of dollars; today it costs hundreds of billions–but who cares? A dollar’s a dollar. And really who cares, because no one has bus fare to the pizza joint, much less pizza money. No has money because no one has a job.

Zimbabweans are becoming adroit at dealing with billions and trillions in common transactions.  Last week, a $100 billion note wouldn’t buy a loaf of bread. But Mugabe isn’t ready to call the situation an emergency yet. He warns “profiteers” not to force him to place his country under emergency rule.

Zimbabwe doesn’t have what is typically called an economy; it has a government printing press and about 12.4 million people, of which 80% lack employment. Still, the country manages to import things, while exports, mostly within Africa, are negligible. Imports will likely dry up, because Zimbabwe mostly imports machinery and transport equipment, and those require fuel the country can’t afford. The IMF suspended its relief because Zimbabwe would not/could not implement stabilizing reforms.

Poverty sort of forecloses hope of emigration, unless you’re ambitious enough to walk into South Africa, which isn’t much of an improvement right now. And you probably aren’t ambitious, because your life expectancy is right around 40 anyway, and there’s a 25% chance you have AIDS.

The “land reforms” Mugabe initiated in 2000 led to the exodus of virtually all of the competent white population. Expropriation of white-owned land was followed by price controls that led to panic buying and depletion of all basic commodities. Mugabe starved his own people and made life impossible for anyone who could produce anything. The land once called Beloved Country became a dustbowl, and the phenomenon wasn’t due to physical climate change.

Zimbabwe is not an apocalyptic scenario of our future. Zimbabwe is intrinsically African, and Africa is not intrinsically capitalist. Zimbabwe expelled its European capitalists and agrarians. America could reduce production incentives with bad policy, but at that point, there would be few places for competent Americans to go. The American ethos would remain in America, heal from its bruises, and revive. It’s hard to imagine what Zimbabwe could revive to, since it has spent its entire modern history either under colonial rule or under the worst regime of home rule on the planet.

But there was a brief time, before Mugabe’s land grab, when European and African Zimbabweans prospered together. After that interlude, as Samantha Power writes, Mugabe transformed the Beloved Country from a bread basket into a basket case.

I will not say that I think “it can happen here.” I don’t; at least, not in exactly the same way. But the mechanisms of error that destroyed Zimbabwe are too uniform to assume they could not be retrofitted to our own beloved country: in smaller, kinder, gentler ways.

  1. July 30, 2008 10:53 am

    Good obsevations.

    True, it happens differently here: more kindly and gently. Our dollar only dropped around 30-40 percent over the past five years. No big deal. . . .

  2. July 30, 2008 11:00 am

    No, and our land reforms are accomplished with mortgage bail-outs–very gentle. We don’t expropriate other people’s land or money; we simply redistribute value with inflation. We siphon the value of other people’s money, not their holdings themselves. How harmless is that. . . .

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