A value perspective of price and currency stability in Zimbabwe

In his mid-term budget speech, Zimbabwe’s Finance and Economic Development Minister, Hon. Prof. Mthuli Ncube identified rising inflation and currency depreciation as the major challenges requiring “the support of all stakeholders and citizens”.  Zimbabwe is failing to ward off persistent inflation. According to Ncube’s mid-term budget report, headline inflation increased from 60.7% in January to 191.6% in June 2022.

In this post, I will argue that whilst price and the exchange rate have some importance, preoccupation with them can constrain economic development. I start off by giving a brief background of inflation in Zimbabwe as well as inflation targeting policies, before arguing that sheepishly pursuing currency and price stability equates to commodity fetishism. I then look at the real beneficiaries of price and currency stabilisation policies. Finally, I attempt to demystify value and price in Zimbabwe’s context.

Zimbabwe and inflation targeting

Almost a decade ago, Zimbabwe issued a 100 trillion dollar note – the first of its kind in the history of money. Because of this record, it is unsurprising that analysis, rhetoric, and policies on Zimbabwe’s economic development have tended to focus on inflation and currency stability. Echoes of hyperinflation have contributed to the fetishization of currency and price stability. For instance, in a 2021 press statement  the Monetary Policy Committee of the central bank  expressed “satisfaction” with the previous monetary policy “decisions” because they had helped to “stabilise the exchange rate and domestic prices”. Evidently, prices and the exchange rate are of utmost importance to Zimbabwe’s central bank. But Oscar Wilde once said, a cynic is “a man who knows the price of everything and the value of nothing”.

Since the 1970s, governments the world over seem to have tacitly agreed to focus on price stability as a policy objective. For example, the bank of England has set an inflation target of 2%. However, this target is coming under increasing scrutiny as the UK faces a devastating cost of living crisis. It must be borne in mind that under the current neoliberal order, price and currency stability are key elements of class struggle. More critically, they have developed a life of their own as policy objectives that must be pursued almost blindly often with the support of international financial institutions like the IMF and the World Bank.

To an ordinary citizen price and exchange rate stability are noble policy goals not the least because neoliberalism has been associated with stagnating wages. Therefore, it makes sense that prices remain constant otherwise the corollary is a fall in living standards. For politicians, focusing on price and currency stability offers a simple but powerful campaign message primarily because it avoids the more uncomfortable question of class – the marketplace sees no colour or creed. Many Zimbabweans are probably familiar with the meme ‘Tsvangirai akauya ne dollar for two’ loosely translated as Tsvangirai brought the pricing model of $1 for two commodities. This was in praise of the late opposition leader Morgan Tsvangirai for supposedly bringing price stability during his era in the ‘inclusive’ Government of National Unity (GNU). The late Tsvangirai served in the GNU between 2009 and 2012.

Price and currency stability as commodity fetishism

Although a stable currency and prices might give the appearance of stability, this is a deception! Things are not always the way they appear. Of course, a certain level of price and currency stability is essential for economic development, however, social scientists don’t necessarily agree on what the rate of inflation should be as well as the drivers of inflation. Thus, although necessary, price and currency stability are insufficient for economic development. In fact, the dogmatic pursuance of price and currency stability is what Marxists would refer to as commodity fetishism.

A simplified definition of commodity fetishism was provided by Ben Fine and Alfredo Saad-Filho in their book Marx’s Capital. According to them, commodity fetishism is the idea that although under capitalism workers and owners of the means of production confront each other in definite social relationships, the exchange of goods and services appears as a relationship between things independent of the way they are produced. This results in an appearance of profit, interest, and rent as the products of machines, money, and or land whereas they are the outcome of the way in which society is organised. Thus, although money and prices may appear as if they are the products of nature, they cannot be divorced from societal relations of production. Consequently, inflation and currencies must be viewed through this lens.

Since gaining independence in 1980, Zimbabwe has not only grappled with currency and price instability but also high levels of unemployment. Because of this, most Zimbabweans tend to have a short-term relationship with money. Seventy per cent of Zimbabwe’s population resides in rural areas where there is limited social reproduction through the market. What is more, Zimbabwe’s labour regime is of a fragmented nature and largely conforms to Issa Shivji’s concept of ‘working people’. This basically means that to reproduce their lives, Zimbabweans engage in farming, wage-work, artisanal mining, and petty commodity trading. There is therefore no working class that is comparable to that in the advanced capitalist countries. Because of these reasons, prices are of relatively little importance.

Who benefits from the fixation on price and currency stability?

So, who benefits from policies that seek to overemphasize price and currency stability? In Zimbabwe, the strength and domination of Multinational Corporations (MNC’s) in production may lead us to some important clues. The dominance of MNCs in Zimbabwe cannot be overstated given their involvement in the most productive sectors of the economy. Despite the global attention that it has received including being sanctioned by the EU and the US, Zimbabwe is dependent on a limited range of primary commodities. According to an UNCTAD report, tobacco, minerals, and metals are central to Zimbabwe’s export basket constituting over 70% of the country’s export earnings. Control of the export-orientated sectors is firmly in the hands of MNCs. For example, the mining sector is controlled by three MNCs (Zimplats, Anglo-American, and Mimosa). Similarly, all the country’s tobacco is processed by three MNCs (Tobacco Processors Zimbabwe, Mashonaland Tobacco, and Zimbabwe Leaf Tobacco).

Christian Palloix the famous Marxist economist demonstrated that the internationalisation of capital as expressed through the emergence of MNCs was a hindrance to independent economic policy. Palloix argued that the internationalisation of capital compelled nation states to constantly adjust to international conditions through monetary policy. In Zimbabwe, the internationalisation of capital is observable by the shift in state power from production orientated ministries to finance ministries. Unsurprisingly, industrialisation plans are now of less appeal compared to budget speeches. At independence, Zimbabwe had a Ministry of Finance, Economic Planning and Development but today we have a Ministry of Finance and Economic Development. Economic planning has clearly been displaced by the anarchy of the market because of the growing importance of finance. Understanding these dynamics contextualises Zimbabwe’s price and currency regime.

Demystifying value and price in Zimbabwe’s context

During my 2021 fieldwork trip to Harare many people expressed their dislike of the Zimbabwe dollar mainly because of its association with the 2008 hyperinflation. People in the managerial class and some trade union leaders argued that government policies were responsible for price and currency instability. Looked at superficially these arguments seem plausible. But are prices and currency strength really the subject of the confidence of citizens or government policies? The answer must be in the negative for an affirmation would be to mystify them.

And here I must make two points. Firstly, there are fundamental differences between value and price. Secondly, the prevailing price and currency system in Zimbabwe is a product of the structure of its economy, the domination of MNCs in production and the internationalisation of capital. Whilst it cannot be denied that how an economy is managed affects both inflation and currency stability, it is neoliberal nonsense to simply attribute currency stability and inflation to good governance. I touched briefly on the second point in the previous section. Let me proceed to dealing with the first in greater detail.

Value and prices

The notion of value was historically at the centre of political economy. However, debates about value have been squeezed out of the discipline with the success of the marginalist revolution in economics in the last century (Fine and Milanokis, 2009). As the award-winning economist Mariana Mazzucato once put it, until the mid-nineteenth century, it was widely held that: “to understand the prices of goods and services it was first necessary to have an objective theory of value”. This meant taking a multi-dimensional approach to understanding price formation by looking at things like conditions of production, technological advancement, and the quality of labour employed in the production of goods and services. Today, once again to paraphrase Mazzucato, value is in the eye of the beholder. Perhaps she should have said value is in the eye of the beer holder given mainstream economics’ underwhelming achievements.

Value can be understood in many ways, but the most compelling theorical framework of value was given by Marx. From a Marxist perspective, value theory based on capitalist social relations is only relevant in the context of commodity production and irrelevant in product creation. The distinction between products and commodities is of utmost importance. As Marx emphasized, production for own use and consumption creates a product and not a commodity. In developing countries many sectors of the economy do not necessarily produce commodities. Moreover, developing countries especially former colonial subjects are characterised by advanced commodity production in the export-oriented sectors and product creation in the domestic sectors. Because of this, inflation and the rate of exchange are often mediated by global conditions. Thus, as I argued earlier, Zimbabwe’s high levels of inflation and volatile currency must be understood in the context of its underlying economic structure that is dominated by few commodities produced by MNCs.

At a global level, Zimbabwe exchanges a quantum of its national products (gold, metals, and tobacco), in which a certain amount of its national labour is crystallised for the produce of other countries in which a quantum of their labour is crystallised. Marx showed that contrary to day-to-day observation: “on an average, commodities are sold at their real values, and that profits are derived from selling them at their values, that is, in proportion to the quantity of labour realized in them”. Therefore, the value of the Zimbabwe dollar mainly depends on this relationship and not on government policies or effective economic management as bourgeoisie economists would have us believe.  

To sum up, price and currency stability tell us nothing about the complex relations between those who own the means of production and the labouring masses in society. However, by exhorting all of society to concentrate on the superficial external appearance that is price, the ruling classes successfully manage to divert attention from the mass exploitation that is the order of the day in mineral and tobacco production the commanding heights of the economy of Zimbabwe. Therefore, one of the first steps towards understanding and perhaps transforming Zimbabwe’s economic development involves rejecting the centrality of prices and currency as the core units of analysis. Progressive Zimbabweans must avoid the cynicism of knowing the price of everything and the value of nothing!

Francis Garikayi is a PhD researcher in economics at the Open University. His research interests are in the areas of political economy, money and finance in sub-Saharan Africa, industrialisation, input-output analysis, and structural change. He tweets at @veegarikayi.

Photo of a Fifty billion note by ZeroOne, used under a Creative Commons License.

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