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How can history be useful? A historian tries to give an example

Zimbabwe inflationa

For most Zimbabweans, the past 20 years have been devastating. The country has been hit by  catastrophes on an almost Biblical scale. A neoliberal, IMF-sponsored program in the early 1990s which destroyed the middle class, a stock market crisis, an involvement in a War (in the DR Congo), a ‘Fast Track Land Reform Program’ which lead to the breakdown of the agricultural sector, maybe the most corrupt and incompetent dictatorship in the world, large-scale atrocities – in case you wonder how long this list goes on, let me tell you, I only got until 2003 yet.

However, there were some organizations which survived throughout the years and which made heroic efforts to improve the lives of many Zimbabweans. You might think of human rights organisations at first, but my personal heroes are the unions, united in the Zimbabwe Congress of Trade Unions (ZCTU). When I studied its history, I was impressed by the strength of their members and their abilities to cope with oppression and direct physical threats. Yet, they were not able to find an answer to the biggest economic threat of the years 2006-2008, hyperinflation.

In a hyperinflation, money loses its value incredibly fast. Workers negotiate wages which are not worth anything by the time of payment. Tax laws are usually so rigid that the poor soon have to pay high income taxes. Shops stop accepting domestic currency and demand US-Dollars, Dollars which are out of reach for many under and middle class workers. To sum up, hyperinflations weaken the economy and destroy the life of countless people, especially vulnerable workers.

In my last article, I argued that historians have the potential to draw lessons from past events in order to help facing current problems. Why is that so? Although most Zimbabweans perceived hyperinflation as something new, something exceptional and unique, it clearly was not. Despite hyperinflations occurring for centuries, most societies and working classes were stunned by the phenomena and were unable to develop effective measures to protect themselves. Comparing hyperinflations across cultures, centuries and continents enable some conclusions.

What have workers tried that did not work?

–          Live without money:

Simple barter is not able to replace monetary transactions. Money, with its multiple functions (store of value, medium of exchange, unit of account), is indispensable in the long run.

–          Negotiate wages more frequently:

The German example of 1922/3 shows that even if you negotiate wages in the morning, workers had to send their wives and kids to the factory offices to get the first half of the daily wage at lunchtime, so that they can run to the shops in order to spend it. This clearly is not a solution.

–          Get the government to freeze prices:

In Germany 1922/3 and Zimbabwe 2007/8 alike, the black market was stronger than any official power. In a capitalist economy in crisis, the market always wins against governmental decrees.

What have workers tried that did work in some cases?

–          Demonstrate against the domestic currency: In the German and Zimbabwean case, workers tried to avoid taking this option, because of huge nationalist conflicts in the countries. The Zimbabwean dictator Mugabe accused the workers as being “sell-outs”, because the workers wanted to get paid in real money (Dollars), while Mugabe was in a fight with the US-Government.

–          Negotiate automatic increases of wages, in accordance with the inflation rate: These “sliding wages” helped in Germany, because it had a fair and quite independent statistical office

What has not been tried and might possibly work?

–          Negotiate wages in foreign currency (or gold) and get paid in domestic currency.

With this solution workers are protected against inflation, without ideologically or economically undermining the domestic currency which serves as a national symbol. Additionally, in case the domestic currency does get abolished in the end, workers are prepared and the step towards receiving forex-payment is a small one – transitional problems are reduced to a minimum.

History has shown us how workers made the same mistakes over and over again when facing hyperinflations. There was no learning progress in the 85 years between Germany 1922/3 and Zimbabwe 2007/8, two of the four most severe inflations of all times. Next time, historians must be able to help unions in trouble – and unions have to listen!


Gunnar Take

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