Zimbabwe's Wage Bubbles

After independence, the smart in Zimbabwe won the lottery. As 200 000 Rhodesians left , job openings came up and lavish homes were left vacant.

Even semi-literate clerks found themselves taking up managerial positions. Today, over 300 000 graduands fight for a couple of formal semi-clerical jobs.

In 1980, beautiful houses were easy pickings. Families moved en-mass from impoverished areas to the suburbs, courtesy of cash-rich banks and building societies. Living standards rocketed: no more colonial oppression, jobs aplenty, cheap homes, leisure and factories galore!

1980 saw a boom of the salary, pension and allowance bonanza. A legacy of colonialism, with talent having gone in droves the remaining executives realized a self-enrichment gold-mine. In state enterprise- with little transparency and accountability, outright fraud has become the order of business.

Today, jobs are scarce and productivity has been destroyed by poor policy. Factories are gone, however the 1980s 'high salary syndrome' persists. Even with the post-independence economic 'bubble'  having burst, some players still  don't realize the century of performance and austerity is upon us.

Zimbabwe's Saviour?

Robert Mugabe

Christ Jesus is The 'true Messiah'. Jesus  showed the way, healed the sick and raised the dead. When nations are in crisis, they call out for saviours. When the Hebrews cried out, they got national liberators. Just like for the Hebrews, effective leadership is honest, moral and God fearing.

Robert Mugabe, the saviour of Zanu PF, is no proven messiah for Zimbabwe. Water shortages, money shortages and power cuts plague a country poorly managed. Instead of dealing with issues head on, the government blames 'foreign forces'. Zanu PF lacks the integrity to deal with problems within.

Every good christian knows honesty is the key to self knowledge. Without morality, they is no redemption. Only after  you acknowledge your failings, can you can start the journey towards self correction. Working on your failings, by practising better habits, reconfigures your character. The journey is never easy and every being can only save themselves; no messiah can fight another person's moral  battle, messiahs can only show you the door to salvation.

Robert Mugabe leads Zanu PF through its scandal riddled history.  Zanu PF's opportunity has cost Zimbabwe dear. As Zanu PF wins politically, Zimbabwe dies economically. Zimbabwe needs leaders who reconcile political success with economic success. Zanu PF is not moral enough to achieve this goal. Zimbabweans are not courageous enough to challenge Zanu PF.  34 years of failed policy are proof of Zanu PF ineptitude.

Zimbabwe has no saviours within the standing political parties. Christ showed salvation is rooted in God not petty politics. The journey to true redemption is a personal struggle. Christ Jesus is a saviour and Jesus saved himself by avoiding corruption and immorality. Every citizen has to struggle to overcome corruption and immorality.

On the national front we need a moral leadership to encourage honesty and economic prosperity. Like Moses, Noah and Abraham a moral leadership delivers fair laws and national prosperity.  Zimbabwe's failure indicates immorality and corruption needs to be challenged on the national and personal level before the country can achieve prosperity.

Zimbabwe economics 101

We are the local government-pay up!

Economics studies the allocation of 'scarce resources'. Modern economics, unlike classical economics, totally ignores the causes of scarcity. In modern economics, resources are allocated by the forces of supply and demand.

Zimbabwe has an economic crisis. In economics, and Zimbabwe, the central economic problem is  resource scarcity. Resource scarcity in Zimbabwe is worsened by corruption.Corruption has become the sole  resource allocation mechanism.

Zimbabwe has the worst wage system in the world. Employees go months on end without pay, whilst executives and directors reportedly live on millionaire salaries and benefits. Employees live in absolute poverty, working without pay, when they are paid they pay contributions to state organisations that fail to fulfill their obligations. These same state organisations pay large amounts to executives who are non-performing.

Sanctions are being blamed for Zimbabwe's economic problems. With the plundering of national resources, it is becoming clear the real problem is local in nature. Zimbabwe will remain in absolute poverty as long as individuals keep stealing wealth, through non-performing state organisations. Given the poor performance of parastatals and exorbitant payments to some individuals, it seems the sole purpose of these parastatals is to take from hard working underpaid Zimbabweans.

Currently, over 80 quasi-government state sponsored organisations exist with layers upon layer of bureaucracy. The majority of these institutions do not deliver services at all. Nearly all, 80 plus, parastatals are loss making. These institutions are extractive and have been since their initial inception in the 1980s. The whole thing looks like a mafia conspiracy set up to bleed Zimbabweans dry. Zimbabwe's political mafia puts the Sopranos and The Godfather himself to shame.

Zimbabwe has become a feudal economy. An institutionalised patronage system has been created to serve the interests of a few 'Lords'. The main cause of Zimbabwe's worsening scarcity is wealth extraction by these 'lords who run the show', totally mismanaging enterprise (supply and demand) to the point of national bankruptcy.

Any low level employee, who has served in a parastatal, will know they are powerless to deliver any credible change. Political interference and corruption have become the forces of demand and supply in Zimbabwe's economy. With no change in sight, a scarcity of cash and capital will continue to haunt Zimbabwe.

Economic Holy Trinity

Economic success is an outcome of team-play. It is common knowledge: a house divided against itself cannot stand. The triad of economic success is comprised of government, banks and firms. Like The HolyTrinity, these three have to follow one principle.

Economic growth is a dynamic process. Growth depends on: the willingness of firms to invest, banks credit creation capacities and government efficiency ensuring macro-economic stability. The Central Bank is the government supervised bank that ensures private banks treat customers fairly and work honestly. Backed by government, all the time, the Central Bank holds reserves and bills as assets.

When government fails completely, macro-economic instability becomes rampant. This lowers investor confidence and firms stop investing. When firms stop investing, long term cash flow is compromised and banks become less willing to lend worsening a crisis.

To counter such an occurrence, government needs to engage economic actors as partners and develop policy that benefits the trinity. The goal is win-win-win. Firms want profit, government needs tax revenue from these profits and banks see asset growth as firms stay profitable.When all is going well the Central Bank also gets higher reserves from banks and bills are honoured.

No part of the trinity is more important than the other. If one part of the triune collapses, the other two can provide support. If all parts collapse, they need to sit down and work out how to get into business. All this requires compromise and remembering the principle of economic unity:an economy works well, when all actors contribute to growth and development.

Zimbabwe Money

Reserve Bank  Of Zimbabwe

Money has a significant role in economic growth. 
Zimbabwe's recession is worsened by an absence of local money and credit. Instead of developing practical solutions to resolve the money crisis, politicians and analysts are locked in an existential power struggle.

Credit is economic money. Failing to understand this, The Reserve Bank of Zimbabwe(RBZ) printed fuelling hyperinflation. Without factories to stimulate employment and money flow, money flowed direct into pockets driving up prices.

Money prospers, when it is given as credit to firms for productive activities. RBZ hyper-inflationary printing crowded out productive investment and encouraged speculation.

Currently RBZ cannot create base money. Also, banks cannot lend given high loan delinquency levels and dismal economic performances. Lacking credit,  Zimbabwe's economy lacks the stimulus it needs to recover.

RBZ needs an operational framework to rebuild a balance sheet. This is  not permission to print base money, the bank's ineptitude would bring back super inflation. A well funded balance sheet is  needed to support banks that feed  the Zimbabwe's economy.

RBZ owes banks foreign currency and this weakens the liquidity of owed banks- meaning less funds for credit. These two predicaments indicate RBZ cannot achieve outcomes in this environment of repeating political failures. Politicians and analysts identify they is a problem, they do need to work together and resolve the crisis.

　

Zim Banks 101

We are all at risk. Academic economics literally ignores the real-world role of banks, money and credit. We have all heard the abstract mumbo-jumbo about a money multiplier, demand for money and other assumption based fictions, only useful for passing economic exams. 
Events like the  Great Crash of 2008 and Zimbabwe's 20 year recession demonstrate you cannot trust academic economics when it comes to money and banking.

Private banks hold the key to growth in business activity. As private banks stopped lending in 2008, the world economy stalled; in the 1990s, when Zim banks slowed lending, industrial sectors startered declining.

Banks hold two major assets: reserves at the Central Bank and loans. When the Central Bank cannot honour its 'lender of the last resort' position, high loan delinquency means private banks become operationally insolvent.

It is no surprise Zim Banks are always in trouble. Outright fraud, deliberate fund misuse  and poor lending practices have left smaller banks bankrupt. With the lender of the last resort failing to honour deposites made by larger banks,small and large banks lack the funding to support economic transformation.

Local Prosperity

According to John Maynard Keynes: economics is a moral science. Adam Smith,' the father of modern capitalism', clearly identifies: the economy cannot function without justice, fairness and morality. Corruption in Zimbabwe is fuelled by a triad of injustice, unfairness and immorality. With high immorality the economy is not realising prosperity.

Contracts from the basis of economic activity. Fraud, graft and corruption are causing the majority of Zimbabwe's business contracts to fail. Businesses continue to fail and the economy sees more economic decline, as corruption grows unchecked. It is clear to see, for the economy to function contracts have to be fulfilled. With the majority of Zimbabwe's contracts not being settled, Zimbabwe for the past twenty years is sitting in permanent depression.

Until courts are allowed to deal fairly and justly with fraud, graft and corruption Zimbabwe will continue in decline. A just law and fair implementation by a conscientious court system will stop the spread of corruption and reduce dishonesty in 'business'. Immorality is not cured by itself; the law can stop its spread and check its destructive impact.