Worse Than Bad In Africa

Governments cause high inflation: Their thieving and redistribution get out of whack. So they print too much money.

High inflation is bad. It brings all sorts of discomforts. You can't use money to store wealth. Credit is all but impossible to give or get. Fears of financial insecurity cause popular upheavals.

But the governments that cause inflation can, and usually do, make it worse. They try to impose price controls and currency controls. When they do, goods flee the country and the markets go empty. It happens fast, and I'm going to tell you exactly how.

In 1983, Bénin in West Africa had high inflation, price controls, and currency controls. I lived next door in Togo. It had the same currency but not price controls, and it had an unregulated black market for money changing. In the "street of banks," the money changers walked around with fat rolls of banknotes and were proud to call Togo "Africa's Little Switzerland."

The markets of Togo's big, coastal city, Lomé, were overflowing with goods -- meat; fish; vegetables; a little girl selling only shoestrings, another selling only chocolate bars; eggs; live animals; pharmaceuticals sold on a platter in the open air next to hand axes and coconuts; second-hand clothes from Europe and the United States that the locals called "dead yovo clothes," because they couldn't imagine live white people giving such precious things away; batteries; bolts of cloth; furniture; spices; palm butter; Chinese mosquito repellent; electric fans; and charcoal. You could buy anything really.

I visited Cotonou in the neighboring Marxist El Dorado of Bénin (formerly The Kingdom of Dahomey). Bénin should be the same as Togo. It has the same tribes, languages, colonial history, geography (including approximate size and topography), and weather. But in Cotonou, the market was pitifully empty. There was just nothing to buy. I, being used to Togo, assumed that there was a holiday, or a coup d'état, or a plague that emptied the market. I began to ask questions of the bereft market people and ended up conducting a little investigation on both sides of the border between Togo and Bénin.

I learned about the Marxist government in Bénin and the inflation and weak currency and price controls. But why would that empty the markets?

The market people knew why. The key to prosperity and wealth (until everything ran out and the government abandoned Marxism in the late 80s) was to buy goods in Bénin at the official prices and smuggle them out of the country. If you bought goods, you smuggled them to Togo to sell at market rates. Then you went back to Bénin where you might buy more goods at the official prices to smuggle out of the country and, if you were well connected, you might change the West African currency (CFA) for US dollars or French francs at the official rate. And back to Togo you went with goods for the market and hard currency for the street of banks.

Some people got rich this way. Eventually they had to risk their skins to do it, after the government of Bénin closed the borders. But not before there were almost no more hard currency or goods in Bénin.

Variants of this story have played out all over the world at various times, famously in Germany and Brazil, and now in Zimbabwe where inflation is "illegal," the government is printing Z$200,000 notes, and the people are suffering severe shortages of food, fuel, and medicine.

Let's hope (against hope) that Mugabe is the last hyper-idiot of hyperinflation.