Much has been made of–not least by Donald Trump himself–Trump’s claim that here are 96 million American unemployed. We all keep repeating that there are 96 million not in a formal paid job which is a rather different thing but that doesn’t seem to be changing minds. However, at the other end of the economic totem pole, yes even further down than the disasters of Greece or Venezuela, there is Zimbabwe. Where, astonishingly, even the government itself thinks that the unemployment rate among the population is 95%.
This is not good economic management:
From 2011 to 2014, the percentage of Zimbabweans scrambling to make a living in the informal economy shot up to an astonishing 95 percent of the work force from 84 percent, according to the government. And of that small number of salaried workers, about half are employed by the government, including patronage beneficiaries with few real duties.
The informal economy means outside regulation, outside taxation, and most of the time outside any particular place or time either. It is, if we’re fair about it, the economy we had before we actually had a formal or organised economy at all. And the problem with such informality is that any sense of large scale organisation or cooperation is impossible. Which is something of a problem as it is the division and specialisation of labour which creates economic wealth and if no large scale organisation is possible across people then not much dividing and specialising is going to take place. Thus not much wealth will be created.
No one really has any accurate figures about what the GDP of Zimbabwe is these days but reasonable estimates put it down at $600 to $700 a year per capita. That’s pretty much the level at which all of peasant humanity from Ur of the Chaldees to the start of the Industrial Revolution in 1750. In fact, it’s poorer than England was at that start of the Industrial Revolution. Effectively, in the modern sense, Zimbabwe doesn’t actually have an economy any more.
So that’s something we can add to our economic checklist. Greece shows us not to have one monetary system over something larger than an optimal currency area. Venezuela tells us what happens when you destroy the price system and thus the market. A small hint here, everyone becomes much poorer. And Zimbabwe shows what happens when you confiscate all the productive assets from those who were being productive with them. In effect Zimbabwe has had a 100% inheritance tax with the tax revenue distributed to the President’s cronies. Which is indeed a bit of a warning to those who complain so much about inherited wealth, isn’t it?