How the loss of property rights caused Zimbabwe's collapse
December 6, 2005
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The National Center for Policy Analysis
Dallas, Texas / Washington, D.C.
The economic collapse of Zimbabwe was caused by land reforms that ignored property rights and the rule of law, says Craig J. Richardson, associate professor of economics at Salem College.
Although unconstitutional, Zimbabwe President Robert Mugabe's government authorized the seizure of nearly all of the 4,500 commercial farms between 2000 and 2003.
By 2003, the economy was imploding with increasing speed, at 18 percent per year.
Inflation was running at 500 percent, and Zimbabwean dollars lost more than 99 percent of their real exchange value.
Richardson estimates the independent effect of land reforms, after controlling for rainfall, foreign aid, capital and labor productivity, led to a 12.5 percent annual decline in gross domestic product (GDP) growth for each year between 2000 and 2003.
Richardson says the lesson learned here is that well-protected private property rights are crucial for economic growth and serve as the market economy's linchpin.
Source: Craig J. Richardson, "How the Loss of Property Rights Caused Zimbabwe's Collapse," Cato Institute, Economic Development Bulletin, No. 4, November 14, 2005.
http://www.cato.org/pubs/edb/edb4.pdf (4 pages)
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