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Robert Mugabe’s Career How to Bankrupt a Country and Keep It Poor for 40 Years
On November 21, Robert Mugabe, Zimbabwe’s authoritarian ruler, was forced to resign in the wake of a military takeover. Emmerson Mnangagwa, who had been Mugabe’s right-hand man was sworn in as president, and Zimbabwe’s long-oppressed citizens took to the streets to celebrate. But little, if anything, is likely to change.
In 1975, I was teaching English Literature and Philosophy at the University of Chad as a Peace Corps volunteer. That same year, a thousand plus miles south in Rhodesia, Robert Mugabe was released from prison.
He had spent 11 years behind bars for his leadership role in the Zimbabwe African National Union, which was working towards peaceful independence from British colonial rule.
When he got out of prison, Mugabe was no longer a pacifist. He became one of the main leaders of the Union’s guerrilla forces. When Rhodesia won its independence in 1979 and became the Republic of Zimbabwe, he ran for prime minister. Under the banner of “peace and unity,” he promised to support the country’s white citizens and protect their property while promoting the welfare of the native African population. That position got him elected by an overwhelming majority.
I was writing for a publication called African Business & Trade at the time. I remember thinking that Mugabe’s vision for Zimbabwe was a great one. Along with most of the international press, I supported him.
Every politician, college professor, social warrior, and NYT columnist today is concerned about wealth and income disparity. The general view is that there is a lot of it. Globally, but also within the good old USA. The underlying assumption is that this is a bad thing.
I agree. When I was a young man, living in Africa and working for the Peace Corps, I felt that I was part of a larger mission to close the gap – not by bringing the wealthy down, but by bringing the poor up. And during my lifetime I’ve taken part in and/or witnessed many efforts towards that goal. Johnson’s War on Poverty, for example, and the hundreds of social welfare and economic reform campaigns that have taken place since then.
To my chagrin, I’ve seen no substantially positive results. The biggest reductions in poverty happened around the turn of the last century thanks to industrialization. More progress was made mid-century after WWII. But progress has slowed to a standstill. In the last 30 or 40 years, in fact, the gap has widened.
The African country I lived in for two years, Chad, is no better now than it was in 1975. The same is true for most sub-Saharan countries. Southern African countries such as Zimbabwe (formerly Rhodesia) and South Africa are much poorer than they were back then. (See my essay about Robert Mugabe.) In the USA, working- and middle-class Americans earn less – when you figure in inflation – than they did in 1980. That bothers me.
I’ve been thinking and writing about this subject since about 2000. And what I’ve noticed is that the remedies that were proposed nearly 50 years ago are pretty much the same as they were then: give more, help more, teach more, etc.
The aid we give to single moms was meant to help them take care of their children, who would then go on to have better lives. But what’s happened is much the reverse. The children are dropping out of school sooner and getting into legal trouble at a much higher rate than they did when the only financial assistance their mothers could hope for came from churches and private charities.
So if what we have been doing is not working, it seems obvious that we should try something else. But the only “something else” that is being offered is to do nothing. That may be the better solution… but for me and many others, it is not a satisfactory one.
Which brings me to an essay I read recently by James Clear: “The 1 Percent Rule: Why a Few People Get Most of the Rewards in Life.”
The Inequality Gene: Our Deep-Seated Impulse to Be Better or Worse
In his essay, Clear talks about the discovery of the famous 80/20 rule in the 19thcentury by Vilfredo Pareto, a part-time gardener and full-time economist.
Having noticed that most of the peas in his garden were produced by a small number of plants, he wondered if there was some sort of mathematical ratio that could be applied to the peas as well as to other things. As an economist, he had been studying the unequal distribution of wealth in various countries – so now, beginning with his own country, he turned his attention to analyzing the data he had collected. And the first thing he found was that about 80 percent of the land in Italy was owned by just 20 percent of the people.
He found similar ratios in other countries. In Great Britain, for example, 30 percent of the population earned about 70 percent of the total income.
The numbers were never quite the same, but the pattern was consistent. The majority of the financial wealth and income always accrued to a small percentage of people.
“In the decades that followed,” Clear writes, “Pareto’s work practically became gospel for economists. Once he opened the world’s eyes to this idea, people started seeing it everywhere. And the 80/20 Rule is more prevalent now than ever before.
“For example, through the 2015-2016 season in the National Basketball Association, 20 percent of franchises have won 75.3 percent of the championships….
“The numbers are even more extreme in soccer. While 77 different nations have competed in the World Cup, just three countries – Brazil, Germany, and Italy – have won 13 of the first 20 World Cup tournaments.
“Examples of [what we now know as] the Pareto Principle exist in everything from real estate to income inequality to tech startups.
“Why does this happen?”
Clear answers his question with another theory: the Winner-Take-All Effect.
The idea here is pretty simple. When you win the gold, you are given rewards that put you in an advantaged position over those against whom you have been and will be competing.
“From this advantageous position,” he says, “with the gold medal in hand or with cash in the bank or from the chair of the Oval Office, the winner begins the process of accumulating advantages that make it easier for them to win the next time around. What began as a small margin is starting to trend toward the 80/20 Rule….
“If one business has a technology that is more innovative than another, then more people will buy their products. As the business makes more money, they can invest in additional technology, pay higher salaries, and hire better people. By the time the competition catches up, there are other reasons for customers to stick with the first business. Soon, one company dominates the industry….
“The margin between good and great is narrower than it seems. What begins as a slight edge over the competition compounds with each additional contest. Winning one competition improves your odds of winning the next. Each additional cycle further cements the status of those at the top.
“Over time, those that are slightly better end up with the majority of the rewards. Those that are slightly worse end up with next to nothing. This idea is sometimes referred to as The Matthew Effect, which references a passage in The Bible that says, ‘For all those who have, more will be given, and they will have an abundance; but from those who have nothing, even what they have will be taken away.’”
This takes us to what Clear calls “the 1 Percent Rule.”
“The 1 Percent Rule states that over time the majority of the rewards in a given field will accumulate to the people, teams, and organizations that maintain a 1 percent advantage over the alternatives. You don’t need to be twice as good to get twice the results. You just need to be slightly better.
“The 1 Percent Rule is not merely a reference to the fact that small differences accumulate into significant advantages, but also to the idea that those who are one percent better rule their respective fields and industries. Thus, the process of accumulative advantage is the hidden engine that drives the 80/20 Rule.”
So where does this leave us? How does this help?
What it means is that in any free area of competition – whether it be competing in sports or owning a restaurant or running a business or making money – those that come out of the gate working harder and smarter than the rest and edge ahead of the competition can stay ahead of the competition and eventually move to the lofty one-percent level… if they continue to work hard and smart.
But it also means that in any given area of competition, newcomers that come up with new ideas and/or new strategies for “winning” can enter the market and begin their own ascent.
What’s interesting is that in a free market – where everyone is competing for wealth and income – staying ahead, though perhaps easier, is not as common as the 1 Percent Rule would have you suppose. Fortunes made in one generation are reduced in most cases in the second generation, and are mostly gone by the third.
Meanwhile, the up-and-comers keep coming. About 80 percent (there it is again!) of the approximately 1500 new millionaires the USA produces every day are people that started from scratch.
And the reason for that is another principle. Let’s call it “the intrinsic impulse for inequality.”
This is my principle. (You heard it here first.) And it is easy to understand. It states that human nature deplores equality. And that no matter how often and how ruthlessly you attempt to level inequality in any given market, the moment you seem to be making headway, every single individual in that market will begin to work on creating inequality again.
The easiest way to achieve inequality is to find a way to do less or to have less. And that is the choice that many people make. The harder way is to do more in order to have more. And that is also a popular choice.
A government can, by force, mandate more equal incomes. It can also redistribute wealth. This can be done partially or fully. But the result is always the same. The forced equalizing is accepted, even welcomed by those on the take. But within 24 hours, that equality will start to erode as individuals do what they are genetically designed to do – distinguish themselves from the rest.
Last week, Robert Mugabe, the long-time leader of Zimbabwe (formerly Rhodesia) died. He was 95.
Looking Back on Robert Mugabe’s Career:
How to Bankrupt a Country and Keep It Poor for 40 Years
In 1975, I was teaching English Literature and Philosophy at the University of Chad as a Peace Corps volunteer. That same year, 1000+ miles south in Rhodesia, Robert Mugabe was released from prison.
He had spent 11 years behind bars for his leadership role in the Zimbabwe African National Union, which was working towards peaceful independence from British colonial rule.
When he got out of prison, Mugabe was no longer a pacifist. He soon became one of the main leaders of the Union’s guerrilla forces. When Rhodesia won its independence in 1979 and became the Republic of Zimbabwe, he ran for prime minister. Under the banner of “peace and unity,” he promised to support the country’s white citizens and protect their property while promoting the welfare of the native African population. That position got him elected by an overwhelming majority.
I was writing for a publication called African Business & Tradeat the time. I remember thinking that Mugabe’s vision for Zimbabwe was laudable. Along with most of the international press, I supported him.
That bright promise dimmed several years after the elections. Mugabe became concerned that a faction of his political party (in Matabeleland) did not support him. Working with a crew of handpicked generals, he initiated a campaign against them. It began with public denouncements and moved on to bureaucratic harassment. Then arrests. Then executions. More than 10,000 civilians were killed in the process.
I remember losing some faith in him then, but in Zimbabwe his popularity did not ebb. In 1998, he became president, a position of greater power.
The economy was still strong – mostly because Mugabe had wisely left the country’s wealthy white farmers and businesspeople unmolested. He had, until then, a policy of rewarding his most loyal supporters with land grants for many of the tens of thousands of acres of fertile farmland that were unused.
But a year or two after he became president, Mugabe felt the need to do something more. The country’s population had swelled from 7 million in 1980 to 11 million, and this was stressing the economy. In 2000, he began to publicly denounce the white majority that had, during colonial times, been the country’s ruling class.
Most of them were farmers with large landholdings. He criticized them for having gained their property illegally, even though they had inherited it from their fathers and grandfathers.
Then he instituted a quiet campaign of harassment, accusing them of all sorts of minor violations and assessing penalties. The coup de grace was encouraging the National South Service to act as “green bombers,” a virtual license to invade white-owned farms and loot international food aid. After a year of two of that, the government itself began seizing farms and factories directly.
Not surprisingly, this lead to an exodus of most of the white businesspeople and landowners. It also caused an immediate and severe reduction in foreign investment, and a collapse of the local currency. By 2009, Mugabe’s government was printing 100 trillion Zimbabwean dollar bills!
Fun fact:There were 4,000 white farmers in Zimbabwe in 1980. By the time Mugabe left, there were only 300.
Without the education, experience, or even interest to run their seized assets, most of the new “owners” (many of them former guerillas) quickly failed. As they failed, they sold off their equipment at bargain basement prices.
It didn’t take long for the economy to start falling apart. Unemployment soared. Food shortages became commonplace. Foreign aid was diverted from those needing it to corrupt government officials.
And while all this was going on, Mugabe was spending millions on payments to former guerillas and a war in the Congo. Hyperinflation and defaulting on international loans followed.
As Bill Bonner explained in a recent essay:
“By the end of the ’90s, the inflation rate was already around 30%. Mr. Gideon Gono, head of the central bank, was in an inflation trap. The easiest way out was to print money – to stimulate the economy, of course!
“Mr. Gono added more and more zeros. The inflation rate passed 11 million percent in 2007, when Zimbabwe became the first nation ever to issue a $100 billion note. In nominal, local currency terms, Zimbabwe had the world’s best-performing stock market in 2006.
“Finally, the economy collapsed completely, and Mr. Mugabe was forced into exile. Later, Mr. Gono was asked why in the world he inflated the currency so disastrously. ‘I only did what you are doing,’ he replied, referring to major central banks.”
Fun fact: At its peak, inflation reached an astonishing 500 billion percent, with prices doubling every 24 hours!
And yet, through corruption, intimidation, and sheer force of will, Mugabe remained in power until November 21 of last year, when he was forced to resign in the wake of a military takeover.
Emmerson Mnangagwa, who had been Mugabe’s right-hand man, was sworn in as president, and Zimbabwe’s long-oppressed citizens took to the streets to celebrate.
But so far, little if anything has changed.
It was clear to me, and to pretty much anyone that paid any attention to African affairs, that Mugabe had destroyed his country. Before independence, it had been, along with South Africa, the richest country on the continent. Forty years later, when he was forced out of office, it was among the poorest.
Back when I was writing for African Business & Trade, it was obvious that change was needed in Rhodesia. And when it came, as I said, many of those that were following the story welcomed it.
But Mugabe’s “solution” (extinguishing his opponents, establishing a virtual dictatorship, and then seizing assets and redistributing wealth) did nothing to equalize the wealth gap.
Rather, it made things a hundred times worse. First, because the country lost the lion’s share of the population that was managing the production of wealth. But also, and perhaps more importantly, because new talent and new money – which are necessary for continued growth – disappeared instantly and permanently.
This is not unusual. It is pretty much the story of every Socialist/Communist takeover of third-world countries throughout the 20thcentury.
It is perhaps the most important economic story of my lifetime. And yet, if you look at what most US college students are learning about global economics and what an ascending faction of the Democratic party in the US is advocating, you’d think none of these things ever happened.