LEARNING FROM FAILURE
May 1, 2006
Few countries have failed as spectacularly, or as tragically, as Zimbabwe has over the past half decade, says Craig Richardson, associate professor of economics at Salem College.
Zimbabwe has transformed from one of Africa's rare success stories into one of its worst economic and humanitarian disasters. The destruction of Zimbabwe offers important, cautionary lessons for other developing countries -- as grim natural experiments in the hidden architecture of capitalism, says Richardson:
- By the late 1990s, a broad consensus had taken shape that land reforms were needed in Zimbabwe; the purpose of these reforms would be to improve agricultural productivity and, simultaneously, increase wealth for the black minority.
- The damage done to property rights by the land reforms caused a series of ripple effects throughout Zimbabwe's other economic sectors; because most of the new owners knew little about farming, agricultural production dropped sharply.
- The rebuilding of an economy after property rights have been revoked is likely to be contentious and slow, akin to rebuilding trust in a relationship after a serious betrayal.
As the market's foundation, property rights serve many purposes: they bind together work and rewards, expand time horizons from days to years, allow wealth to be transformed into other assets, and encourage foreign investment, says Richardson.
Moreover, explains Richardson, the speed at which an economy can develop ultimately depends on the ability of the government to inspire trust among citizens, banks and investors that it will fairly enforce the rule of law.
Source: Craig Richardson, "Learning from Failure: Property Rights, Land Reforms, and the Hidden Architecture of Capitalism," American Enterprise Institute, April 6, 2006.
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