When Money Destroys Nations: How Hyperinflation Ruined Zimbabwe
First-hand accounts of trading, saving and pricing through the collapse; the modern companion to Fergusson.
Summary
Philip Haslam and Russell Lamberti wrote this account of the Zimbabwean hyperinflation, which peaked in 2008 and is among the most severe on record, based substantially on interviews with Zimbabweans who lived through it.
The economic account covers the sequence: the land seizures from 2000 that destroyed agricultural output and the export earnings it produced, the resulting fiscal deficit as revenue collapsed while spending did not, the central bank's financing of that deficit and of quasi-fiscal operations, the price controls that produced shortages, the successive currency redenominations, and the eventual abandonment of the currency in favour of the American dollar in 2009.
The first-hand material is the book's distinctive content. The interviews describe what people actually did: the speed at which wages became worthless, the substitution into foreign currency and into barter, the informal markets and the arbitrage between official and parallel exchange rates, the collapse of the banking system as deposits became worthless, the emigration, and the specific adaptations including holding goods rather than money. The authors write from an Austrian economics perspective and use the case to argue general propositions about monetary expansion, which readers should weigh, since Zimbabwe's circumstances included a productive collapse that most inflation episodes do not. The interview material is valuable regardless of the framing.
Key takeaways 7
- Zimbabwe's hyperinflation followed the destruction of agricultural output and the export revenue that had funded the state.
- Central bank financing of the deficit and of quasi-fiscal operations was the mechanism, and the fiscal collapse was the cause.
- Price controls produced shortages and drove transactions into parallel markets rather than restraining prices.
- Wages became worthless within days of payment, which forced immediate conversion into goods or foreign currency.
- The banking system collapsed as deposits lost value, which destroyed savings and the payment system together.
- Abandoning the currency in favour of the American dollar ended the inflation immediately, which shows the problem was monetary at the end.
- The authors write from an Austrian perspective and generalise from a case that included a productive collapse most inflations do not.
Who should read it
Readers wanting first-hand accounts of what people actually do during a hyperinflation, with the authors' theoretical framing weighed separately.
Where it sits in the reference 2
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