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Monday, November 06, 2006

 

They know what to do?

Currently in Southern Africa, the IMF is working with what is arguably the region's most troubled nation: Zimbabwe. The nation is currently enduring a 1000% rate of inflation, and the IMF is considering expelling them, because of their extremely poor credit ranking. If expelled they would be only the second country in the IMF history, and the only country still in existence. Within the text of the article where I found this information, there was an interview with an IMF official, who stated that they needed to get their central bank under control and a variety of other measures, after describing which, he stated, "they know what to do." This made me wonder how well Olson's thesis would stack up against this country. Clearly, one would predict some sort of autocracy. We would also expect that this autocracy took some action (on the behalf of the government or stationary bandit) which lead to a radical shift of people's perception of the incentive's they face.
After taking one look at the CIA factbook, it is clear that Olson's theory is playing out very directly and clearly in Zimbabwe. After some reforms in the mid 1980's a prime minister named Robert Mugabe was elected. They do have term limits, however, Mugabe has been the country's ruler ever since. As recently as 2002, he rigged elections, not only to ensure his own victory, but also (through violence and intimidation) gained a 2/3 majority for his party, which then allowed him to re-create the senate and change the constitution at will. So, clearly our first condition, that of autocracy, has been satisfied.
The question then comes into play about the reduction of incentives, because of the autocracy. Under Mugabe, we see a typical autocratic incentive characterized by Olson. Mugabe brought his nation into a war with the Congo less than ten years ago, which plunged Zimbabwe into debt. The war was fought because Mugabe feared a hostile government so close to his own; so naturally, he put aside the welfare of his nation for his own interests. It is largely because of this war that Zimbabwe is not only suffering a huge deficit, but also is considered a poor credit risk, as Mugabe used the initial IMF loans to fund involvement in the conflict. Additionally, a series of 'land reforms' were taken on, which always indicate redistribution. Redistribution is an ugly word in the language of efficiency, and it lead to a mass emigration of former farmers. Because the recipients of the land were (probably) those tied to Mugabe and (certainly) less able to maximize the land's productivity, then clearly the results are unsurprising. Currently, Zimbabwe is facing a huge commodities crisis, as they have constant supply shortages.
Within Zimbabwe, it's obvious that they are under the control of a stationary bandit. The only good news, if one is prone to look for silver linings in a devastating lightning storm, is that clearly Mugabe sees himself as a long-term stationary bandit. We can see this because of this out right rigging of the political process, and complete refusal to resign despite lack of popular support. In 2005, Zimbabwe began repaying their debt to the IMF, however, they still may be expelled. Clearly this situation follows Olson's observations. Though Mugabe and his government of thugs may 'know what to do' in regards to the plight of the nation, a better question to ask might be, 'do they have a reason to care?'

Comments:
I'm wondering if Mugabee could be closer to a roving bandit? Perhaps stationary bandits see incentives for benefitting from the productivity of the economy more than Mugabee seems to?
 
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