Zimbabwe's Robert Mugabe As Machiavelli: Running On Dollarization...And Gold Jul 19th 2013, 08:00
Robert Mugabe, president of Zimbabwe and leader of the political party Zimbabwe African National Union - Patriotic Front (ZANU-PF), addresses an election campaign rally at Nzvimbo growth point in Mashonaland Central province on July 11 2013, where he was upbeat on winning the forthcoming general elections. (Image credit: AFP/Getty Images via @daylife)
"Those who by the exercise of abilities become princes, obtain their dominions with difficulty but retain them easily, and the difficulties which they have in acquiring their dominions arise in part from the new rules and regulations that they have to introduce in order to establish their position securely."
- Machiavelli
In years of conversation Johns Hopkins Professor of Applied Economics Steve Hanke has persuaded me of the value of these words of former West German Finance Minister Karl Schiller (who also served as President of the Economic Development Corporation for Equatorial and Southern Africa), "Stability might not be everything, but without stability, everything is nothing."
Media coverage to the contrary, this might as well be the campaign theme of Zimbabwe's 89-year old President Robert Mugabe who is seeking re-election on July 31st on a platform that celebrates his country's unlikely experiment with dollarization while simultaneously outlining a path to a gold-backed currency.
The announcement on July 5th that Zimbabwe is looking to re-establish the Zimbabwe dollar – its national currency which displayed a 6.5 sextillion% (that would be a unit followed by 21 ciphers) rate of inflation the last time we saw it, is causing shockwaves, inspiring humorous mockery in local media, and drew a spirited attack from Finance Minister Tendai Biti, via Facebook,"It is bad enough to suggest the return of the Zim dollar at this present moment in time but foolish to the point of insanity to suggest in this century a bullion backed currency." So much drama ensued that the Governor of the Zimbabwe Central Bank Governor, Dr. Gideon Gono issued a statement clarifying that the re-introduction was only a 'medium to long term' initiative. And as for gold? Dr. Gono elaborated, "Importantly too, is the fact that the sustained stability of the re-introduced local currency will also be contingent upon the accumulation of adequate assets from the country's resources, notably gold, to enable the currency to be fully gold-backed. This means that Government would need to purchase from Gold Miners, adequate stocks of Gold in order to build its bullion reserves."
Dr. Gono's use of language is careful if not delicate, hinting to global markets that any increase in Zimbabwe forex reserves will come as the result of a 'free-market' purchase of bullion rather than the nationalization of foreign mining companies.
In 2011, at the suggestion of Nathan Lewis, author of what I believe to be the best book written on the gold standard, Gold: The Once and Future Money – Dr. Gono asked me for a copy of the 2009 plan I authored in advising the African Union in its effort to establish a common currency. I was happy to share it with him as the plan explains how Zimbabwe could transition from a national currency to a regional parallel currency regime tied to gold as one of three transitional regional monetary blocs in Africa. Over 6 years, I outline a plan by which the continent would arrive at a single currency backed by gold.
While I don't believe that Zimbabwe qualifies as an optimal currency area, Africa certainly does – a point I confirmed in lengthy discussion with Nobel Prize Economist Robert Mundell over dinner in 1999 and at an IMF forum in 2000. And despite dismissive mockery, if President Mugabe and Governor Gono are serious about it, they could influence the Southern region of Africa – currently suffering the most from currency instability – to entertain the possibility. With the South African rand and Zambian kwacha both experiencing over 4 year lows, inflation in Zimbabwe's neighborhood will accelerate and talk of alternative monetary regimes will find more receptive ears.
In positioning gold as a 'medium to long term' option while celebrating the benefits of dollarization President Mugabe's ZANU PF party denies the competing MDC party a policy plank to run on – as claims that the latter was responsible for the decision to dollarize meet formidable challenges. Even a CATO Institute report on Zimbabwe perceived as styling of Finance Minister Biti – who also serves as the MDC's Secretary General – as the source of the 2009 decision to dollarize is confronted in Zimbabwe. The fact that the Mugabe regime embraced dollarization before the ZANU PF-MDC power-sharing government was formed, is one that is difficult to undermine and a decision that the party known for anti-imperialism is surprisingly embracing. Case in point: a July 16th article in the ZANU-friendly The Herald cites the party's manifesto, "While Zanu-PF is clear that the collapse of the Zimdollar was a shameful development not worthy of celebration, its strategic replacement with the United States dollar as the leading legal tender to serve Zimbabwe in a basket of multi-currencies is in effect poetic justice given that the same US dollar had been used to kill the Zimdollar by merchants of regime change in their vain hope of killing Zimbabwe."
While the logic in the ZANU-PF claim is a bit disingenuous it certainly represents a shrewd campaign gambit – marrying revolutionary rhetoric with an appreciation of what imported monetary policy has produced, a now annual level ofjust 3% inflation. This places ZANU at the center of the Zimbabwean electorate as dollarization polls favorably among the electorate at the level of 68% according to a poll by the Mass Public Opinion Institute (MPOI). But seemingly overlooked in the research is this: "Adult Zimbabweans (55 percent) would want re-introduction of local currency sometime in the future, 23 percent immediately and 17 percent preferred its total abandonment."
By claiming both dollarization and a reintroduced local currency backed by gold, President Mugabe is more centrist than the MDC – appealing to a significant plurality of an electorate in a manner that absorbs the best of what philosophers like Cicero, Augustine and John of Salisbury noted of the commonweal of the people. Power-sharing de jure was forced upon both ZANU-PF and the MDC by an electorate fatigued by years of partisan bickering and violence. It was a signal that the people want the best of both sides, not one or the other – a point lost on those who reduce the MDC Presidential Candidate and current Prime Minister Morgan Tsvangirai to 'foreign puppet' and President Mugabe to 'demagogue.' Both men represent two legitimate streams of longing for change in the people that can't be dismissed. That the people want a pragmatic 'middle' position more than ideological purity from either side is a dynamic that ZANU politicians do seem more adroit in navigating.
Mugabe Presidential Spokesperson George Charamba displayed it early on in 2009, in an audio interview shared with me by The Herald's US correspondent Obi Egbuna, "These [Zanu PF and MDC] are distinct disparate political forces, quite un-reconciled except through the voter. The voter will say 'well, we give ZANU PF a marginal lead.' 'We give MDC a very significant support level,' which therefore robs ZANU PF of the capacity to create a government within it its own right. So there is some kind of balance of forces between the Patriotic Front forces, and the MDC which means this is really an inclusive government born out of necessity. But it is not the fusion of politics. It is not the fusion of vision. It is not the fusion of, even of tradition – to the extent that ZANU PF is coming from a liberation tradition while the MDC is coming from a tradition of neo-colonial politics. So this is a marriage of convenience."
Though naturally favoring his side, Mr. Charamba divines the core truth, that while ZANU and the MDC are not united in reality, they are reconciled in the minds and hearts of the aspirations of the Zimbabwean voter, as a balance of power.
The reality that neither ZANU nor the MDC will admit to their supporters in public is that victory lies in pragmatism and strategy as much as ideological purity and truth-telling. While the enemies of ZANU-PF and President Mugabe depict him as merciless and unworthy of support and his supporters as uncompromising, both sides would be shocked to learn the extent to which entities like the World Diamond Council are working to clean up President Mugabe's image and cooperate with ZANU. By the same token, those who frame Morgan Tsvangirai as Western pawn might be shocked to learn of the level of is engagement with China.
These days there is more grey than black and white in Zimbabwe politics – the only country in the world where a man may win an election by supporting a fiat currency and the purest form of hard money, at the same time.
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