How to cut inflation by 230 million percent

Nine months ago when the power-sharing government in Zimbabwe came into office, I must admit that I was pretty darn skeptical that they could meet their hyper-inflation-cutting goals. After a complete economic collapse, inflation last year about this time had reached 230 million percent; GDP "growth" was negative in all senses of the word. It was in this nasty environment that the new finance minister, Tendai Biti, came along and began what few would argue is the hardest job in the world. 

Now less than a year later, he was in Washington to tally the progress (and damn, Milton Friedman would be proud...)

- Inflation is completely gone, thanks to the abolition of the Zimbabwean currency in favor of a basket of other notes (including the dollar and the South African Rand). The highest rate seen in 2009 was a slim 1 percent.

- The money supply has been cut by 1,000 percent  -- effectively decapitating a nasty forex trade that the money-printers were previously using to enrich themselves

- Capacity utilization in the economy is up from 4 percent to nearly 50 percent, with some industries, including food and beverages, as high as 95 percent.

- GDP growth this year was probably around 4 percent; Biti expects 6 percent in 2010. 

Of course, it's not all rosy. But just think about that for a second: the world's most free-fall economy -- the only one in history to see negative economic growth for a decade in which it was not at war -- today is almost normal. In fact, it has the largest stock exchange on the continent, capitalized at $4 billion. 

Biti has an interesting theory about this.  The collapse of the economy, he said today at a Freedom House event, was in fact the reason why President Robert Mugabe's government finally had to accept the power-sharing agreement in the first place. "Everything else they could deal with -- the opposition, they could beat us up," he said, "but you cannot implement violence against the economy."

Now that progress is being made, it's time for the equation to work the other way: "the cornerstone of any economic development is democracy." In Africa, he argued powerfully, "without democracy you cannot sustain the lives of the people." No matter how impossible the economy seemed, it's the politics that will still prove the harder task.

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Sarkozy's Putinesque TV talk show

Last night, French President Nicolas Sarkozy went on television for a very special appearance with 11 "typical" French voters and listened to their concerns. The Times' Charles Bremner describes the scene: 

The President sympathised, using their Christian names and showing his understanding of what the Elysée calls la France qui souffre. Leading the country out of recession was tough, Sarkozy admitted. He  blamed the Socialists of the 1990s for sapping the economy with their 35-hour working week and he promised an imminent drop in unemployment. With one exception, the guests were clearly dazzled to be on TV in the presence of Monsieur le Président de la République -- as well as of Jean-Pierre Pernaut, a folksy TV presenter who is the hero of the rural elderly.

Well-briefed, Sarkozy managed to tell Sophie, a struggling milk farmer from the Tarn, the exact price per litre that she receives for her milk. Rex, a draughtsman from Villiers-le-Bel, a riot-prone immigrant area, worried about Sarkozy's debate on French national identity, which has focused solely on France's Muslims. "A nation is like a family, Rex," said Sarkozy. "If you don't talk any more, if you don't listen to one-another... when you wake up 10 years later, it's too late." After that, Rex even said nice things about Sarkozy's policing effort in the banlieue.

Even the trade-unionist auto factory worker was nice to Sarkozy, apparently! Bremner calls it a performance that "only Silvio Berlusconi could rival," but the description actually reminded me more of Vladimir Putin's televised call-in shows. Here's Julia Ioffe's description of one for FP:

In his answers to these requests, Putin sounded a bit like a genie. Someone writes in, "I am a diabetic but haven't been able to get free medicine for more than a year." Putin: "What region is this?" Irkutsk oblast, Angarsk. Putin: "We're going to see what's going on in Irkutsk oblast, and in Angarsk in particular. This I promise you." A caller brings Putin's attention to the poverty of an old woman living by the railroad tracks where the Nevsky Express train was blown up last week. Putin: "To her very modest pension -- I think just 4,500 rubles [$150] a month -- will be added an equal amount.... They will restore her home ... and look into the possibility of moving her closer to her relatives." A young man named Nikita studying aeronautical engineering volunteers to go build planes in the remote Russian Far East at the Sukhoi Superjet complex. Putin: "I support Nikita's choice, and if you're not against it, I will definitely talk to the CEO so that he can help you get over there."

The world leader as talk show host format is apparently one that a number of leaders are finding appealing. 

 

 

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