ZW VIEW – Zimbabweans, Germans, and the great rational fear

Zimbabwe currency
A man wearing a hat decorated with worthless note bearers' cheques during a protest against bond notes, 2016 (AFP / ZINYANGE AUNTONY / Getty)

Around 2011, Germany’s Allensbach Institute asked Germans; “what do you fear the most?” The findings told a story that every Zimbabwean policy maker must hear.

Their number one fear was growing old and helpless. And what was their second biggest fear, more than the fear of illness or the scourge of terror? The fear of inflation.

That this was a study conducted close to a century after hyperinflation in the Weimar Republic shows the lasting trauma of hyperinflation. The hurt and trauma still remained. It never went away, generations later.

For Zimbabweans, few things fill them with horror more than inflation, 2008 and the Zimdollar – well, perhaps next to their deep fear of witchcraft and being cursed by a prophet.

Which is why it is unfair to ask Zimbabweans not to panic at the sight of the term “Zimbabwe dollar”, now a close reality after Monday’s announcement that the country is ditching the multicurrency system.

Germany: Turning fear into success

For policy makers, Germany offers lessons. These are lessons not just about what caused hyperinflation, but, more importantly, how that fear of repeating old mistakes provided the fuel that successive German governments have used over the years to build their economy into the strongest one in Europe.

When Europe was battling for a solution to the Eurozone crisis, Germany’s government was reluctant to agree to measures proposed by other countries. The solution, they were told, would be to allow the European Central Bank (ECB) to engage in “quantitative easing” – just fancy talk for printing money – to lend to countries that had piled up more debt than they could handle.  

The Germans dug in for long, especially as all this happened ahead of elections. They knew their people’s greatest fear, a 90-year-old fear; inflation.

A dollar was worth four Marks in 1913. By 1921, it cost around 200, before it was 7,000 a year later, five million by September 1923, and 4.2 trillion by December. Notes became worthless, and the inflation decimated jobs.

The trauma seeped through the generations. Over the decades, successive generations of Germans heard of tales of loss of livelihoods, jobs and assets. Even as the economy recovered through the years, the fear lived. Nobody wanted to go back there, and the German government, to the point of obsession, understood that fear, and made sure they didn’t.

“The trauma of inflation and hyperinflation…has had a lasting effect. I witnessed this in daily life during my stay in Germany in the 1970s. When I first arrived, it quickly became obvious that Germans did not trust bank cheques. Everything had to be paid in cash,” history professor Richard J Evans, author of The Third Reich at War, wrote in an article back in 2011.

So, no, allow Zimbabweans their panic. If Germans still fear inflation a century later – something which their current generation actually never experienced – it is natural for Zimbabweans to fear something many of them actually lived through.  

It is the job for President Emmerson Mnangagwa and Finance Minister Mthuli Ncube to deal with that fear. For Zimbabweans, the fear is worsened by policy pronouncements that are often as clear as mud, and implemented with Gono-esque rashness.

Analysis paralysis

Of course, for the oversized ranks of the commentariat, the fear of “going back to 2008” has paralysed many into policy stasis, where the only alternative solutions they sell are either cowardly or improbable.

Dollarisation is a popular solution. The reality is that, as a long term plan, it has run its course. Industrial output statistics until the import ban of 2016 are telling. Ecuador, which dollarised in 2000, received an IMF bailout in March as exports suffered. The IMF resident rep, Anna Ivanova, said in March: “Since Ecuador uses the US dollar as its currency, it is not able to use exchange rates as a tool to make its exports more competitive in the global market”.

To fix this, Ivanova said, Ecuador needs to “remove rigidities in the labour markets”, IMF language for job cuts. Ecuador’s former president, Rafael Correa, said dollarisation as a long term plan had been a bad idea.

There is another popular option, joining the Rand market. In January, after meeting Zimbabwean officials, South Africa Finance Minister Tito Mboweni said Zimbabwe needed its own currency. Beneath the diplomatic sheen, he was saying what the big neighbour has been saying to Zimbabwe for over a decade; South Africa won’t ever let Zimbabwe join its club, now or under any future government. Sort yourselves out.

No one person or group has all the answers. It’s a lie

It’s bad enough as it is, and deliberate distortion of policy – such as “FCAs have been banned” – and fake news, don’t make commentators any cleverer than those fumbling in government.

No one person or entity has all the solutions. It’s a lie. Somewhere in the middle of our polarised country, lies a solution.

The biggest task is with government, to win over the people, to gain their confidence. We cannot do that by chiding them for panicking and hedging against real fears. Consumers remember the trips to Beira to buy that hideous parboiled rice. Businesses remember when Robert Mugabe, in a stroke of economic genius, ordered them to cut their prices in half or face jail. Over 5000 of businesspeople were arrested. The memories remain.

A government cannot be the most prolific source of economic panic and uncertainty. It must be the source of reassurance and calm.

Zimbabweans have been through the worst. Our fears are fresh. If Germany, with all its clout, cowers at the mention of inflation, 90 years later, allow us our panic.

Look to today’s Germans, and use our trauma and fear to defend the economy against its gory past. 

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