Price Controls: Zimbabwe Sobering Up

Published on 11th December 2007

Zimbabwe Reserve Bank Governor's 'reversal' of the extremist enforcement position that the NIPC chairman had taken on import pricing is commendable. Apart from basic goods trickling back, businesses are no longer subjected to NIPC vigilantes crusading on behalf of misplaced policy frameworks!

I would like to bring to your attention an interesting chapter I read from a book entitled: "Forty Centuries of Wage & Price Controls - How NOT to fight inflation", by Robert Schuettinger & Eamonn Butler. In more ways than one, it lends credence to that Zimbabwe's current economic policies have taken business forty centuries back! I quote some of the sentences below:

"The Edict of Diocletian ... Shortly after his [the Roman Emperor Diocletian] assumption on the throne in A.D. 284, prices of commodities of all sorts and the wages of labors reached unprecedented heights... One of the few surviving contemporary sources, the seventh chapter of the De Moribus Persecutorum, lays almost all the blame squarely on the feet of Diocletian... himself, in his Edict attributed inflation entirely to the "avarice" of merchants and speculators... It would seem clear that the major cause of inflation was the drastic increase in money owing to the devaluation or debasement of the coinage...

During the fifty-year interval ending with the [previous] rule of Claudius Victorius in A.D. 268, the silver content of the Roman coin fell to one five-thousandth of its original value. With the monetary system in total disarray, the trade which had been a hallmark of the Empire was reduced to barter and economic activity was stymied... To this intellectual and moral morass came Emperor Diocletian and he set about the task of reorganisation with great vigour. Unfortunately, his zeal exceeded his understanding of the economic forces at work in the Empire. Since money was completely worthless, he devised a system of taxes based on payments in kind. This system had the effect, via the ascript glebae, of totally destroying the freedom of lower classes - they became serfs and were bound to the soil to ensure taxes would be forthcoming..." 

The chapter continues to explain a typical Zimbabwean scenario, but what really captures my mind is the Monetary Policy Statement-like Edict. Classical historian, Roland Kent, observed: "the famous A.D. 301 Edict was all pervasive in its coverage and penalties prescribed severe." He continues: "the preamble is of some length, and is couched in language which is difficult, obscure, and verbose as anything composed in Latin... He [Diocletian] begins by listing his many titles and then goes on to announce that: The national honour and dignity and majesty of Rome demand that the fortune of our State ... be also faithfully administered. To be sure, if any spirit of self-restraint were holding in check those practices by which the raging and boundless avarice is inflamed… peradventure there would seem to be room left for shutting our eyes and holding our peace, since the united endurance of men's minds would ameliorate this detestable enormity and pitiable condition ...".

My last observation is the recorded result of this myopic Diocletian Edict. The authors quote L.C. F. Lactantius' book, "A Relation of the Death of the Primitive Persecutors"  ... then he [Diocletian] set himself to regulate the prices of all vendible things. There was much blood shed upon very slight and trifling accounts; and the people brought provisions no more to the markets, since they could not get a reasonable price for them and this increased the dearth so much, that at last after many had died by [enforcement of] it, the law [Edict] itself was set aside."

Sadly, we do not seem to learn anything from history. Chamber of Mines members are currently faced with a Bill that will only achieve two things: the plunder of property rights and emphatic diversion of critical mining investment from Zimbabwe to neighbouring countries. Our work in defense of the free market economy in 2008 is truly cast in stone.

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