Traditionally, independence meant freedom. And freedom meant prosperity and economic growth. In the case of Zimbabwe, it went the other way. Robert Mugabe, who died this week was the mastermind, who liberated and destroyed the country. In 1980, Mr. Mugabe took power in what was white ruled Southern Rhodesia. He pledged pragmatism and reconciliation. But the country quickly descended into a nightmare of widespread unemployment, hyperinflation, hunger and disease. He summarily let people invade white owned farms. The white farmers and businesses fled, sending the economy into a tailspin. Mr. Mugabe and his cronies unleashed gangs of armed thugs to beat up, torture and kill their political foes, while suffocating Zimbabwe’s fledgling democratic institutions.
Mugabe pillaged the country so fast that he had to print trillion dollar notes that was worth only $8 in US currency. Cars waited in line for days outside filling stations, rationing left most people with electricity only every other day and people would walk to grocery stores with wheelbarrows full of currency notes, just to buy bread and milk. And eventually, he was overthrown and died this week in a hospital in Singapore. No one in Zimbabwe is shedding a tear for him.
Future Wealth’s View
If there is a cautionary tale in investing in international and emerging markets, Zimbabwe is the epitome of such a strategy. But, hyperinflation is nothing new. Zimbabwe has a few friends – Argentina, Venezuela, Germany, Turkey, Iran and others have all experienced hyperinflation. There was a time in Russia when customers went to a restaurant – they paid when they ordered the food, paid again when the food was served and paid again when they completed the meal. Inflation was rising by the hour.
For investors, Zimbabwe has valuable lessons. While the US is grounded in economic stability, leadership matters. To think that the US is invincible is a mistake. Capable leaders are a fundamental bedrock of economic growth and prosperity. If economic stability solely drove Wall Street, we would not be witnessing the whipsawing in the market as much as they have been happening lately. But, alas, the stability of the man with the twitter account in the White House is one that even Robert Mugabe would have questioned.