How Misrule Has Cost Zimbabwe $96 billion…and Counting

After a brief respite during the coalition government, Zimbabwe's economy, now firmly back in the hands of Robert Mugabe's ZANU-PF, is once again teetering. Media reports have highlighted misuse of public funds, such as scandals over exorbitant salaries of top officials and money squandered on lavish presidential birthday parties. These episodes are symptomatic of the corruption and rapaciousness that have eaten away at a once promising economy.

But the cost of birthday cakes and SUVs pale in comparison to the economic damage by ZANU-PF’s misrule. The economy really started tanking in 2000, the year that Mugabe lost a referendum to change the constitution, started throwing away private property rights, and began in earnest to attack the opposition. Just as the rest of Africa started booming, Zimbabwe’s economy was contracting.

It's impossible to know how Zimbabwe would have performed if the government had instead pursued more sensible policies. One reasonable comparison might be to consider what would have happened if Zimbabwe had instead performed like one of its similar neighbors.  Zambia is probably the closest match. The two countries share a long border and both economies are based largely on agriculture, mining, and light industry. The two countries also have a similar institutional history (during much of British colonial rule they were Northern and Southern Rhodesia). Yes, there are important differences between the two countries, but using Zambia as a benchmark also seems reasonable because it’s no outlier:  its recent growth rate is close to the regional average and it’s a middling performer on governance (e.g., its World Bank CPIA score is just above the regional median).

So, where would Zimbabwe's economy be if, since 2000, it had grown at Zambia's growth rate (5.3%) instead of its actual rate (-2.6%)? 

Instead of plunging by roughly half, Zimbabwe’s real GDP would have doubled.  GDP per person would have been more than $1100, instead of less than $500. 

And the implied cumulative loss of economic value over these twelve years:  $96 billion.