Summary: Can Obama make America like Zimbabwe? Or is this widespread warning a sign that we’ve become gullible fools? The easy acceptance of this preposterous warning suggests the latter. It’s sad that such a post is necessary. Worse, explaining these facts is unlikely to change the mind of many people believing this nonsense. This is a follow-up to Would a default by the US government help America?, and another in a series looking at the important role of propaganda in modern American politics.
Conservatives have warned that President Obama is wrecking America, perhaps deliberately. The early comparisons were mild.
“What you’re doing is buying into the notion that if we just print some more money that we don’t have and send it to different states, we’ll create jobs,” he said. “If that’s the case, why isn’t Zimbabwe a rich place?” — Mark Sanford (R, Governor of S. Carolina), CNN, 11 March 2009
In the past year they’ve become explicit.
“Bruce, I’m not trying to turn the United States into Zimbabwe. That would be the guy in the White House, whom you seem surprisingly anxious to defend.” — Glenn Reynolds (Law Professor at U of Tennessee), Instapundit, 19 February 2010 — Red emphasis added.
That intelligent and educated people make this comparison — either sincerely or as agitprop — shows the sad condition of political debate in the US. By comparison with this ”Tippecanoe and Tyler too” (Wikipedia) looks like The Federalist Papers. This fear of becoming like Zimbabwe has taken root among conservatives, frequently appearing in comments on this website and others. For one sample see this Google search.
Let’s count the ways this comparison fails.
- Obama’s economic policies closely follow those of President Bush.
- The expansion of the money supply took place under President Bush; it’s been flat under Obama.
- Conventional economic theory says that expanding the money supply during a depressionary shock is the correct action.
- There are no significant similarities between Zimbabwe and the USA.
- There are no significant policy similarities between Zimbabwe and the USA.
Below you’ll see a brief analysis of each point. Anyone making this comparison needs to read this: Where to go to learn about economics, and help you understand what’s happening to America and the world.
Update: As noted in the comments, this comparison serves to incite fear much as the equally absurd Bush=Hitler did among liberals.
(1) Obama’s economic policies closely follow those of President Bush.
The recession started in December 2007. In response the Bush Administration and Congress passed…
- Economic Stimulus Act (February 2008) — Gave money to households and businesses (not just rebates and rate cuts), expanded the mortgage lending activities of the Federal Housing Administration, Fannie Mae and Freddie Mac (virtual nationalization of the mortgage lending industry, with the government now the nation’s top subprime lender)
- Emergency Economic Stabilization Act (October 2008) – A massive bailout of the banking system, which is now condemned by the Tea Party Movement.
President Obama’s economic policies continued those of Bush. The bank bailouts continued, without any meaningful reform of bank regulation. As did the stimulus programs. In February 2009, with the recession in its 15th month (by which point most recessions had ended) and the global economy rapidly contracting, Obama signed the American Recovery and Reinvestment Act — bigger and broader than the February 2008 package.
The timing shows the political basis of these warnings about Zimbabwe-ifaction. During 2008 many conservatives mocked those economists who warned that we were in a severe downturn. Such as Glenn Reynolds, with his repetition of “Dude, where’s my recession?” (for examples see these links on Google; for analysis see this and this). Bad news for his loyal readers who failed to prepare. With Obama in the White House, the President gets tagged with every bit of bad economic data. Using Instapundit as an example:
- “ER, SO IS THIS THE HOPE? OR THE CHANGE? Deficit To Hit All-Time High.“ (1 February 2010, link)
- “CHANGE: December home sales down nearly 17%: Home sales plunge nearly 17% in December after tax credit deadline extended.“ (25 January 2010, link)
(2) The expansion of the money supply took place under President Bush; it’s been flat under Obama.
In February 2009 — after Obama’s inauguration — M2, the broadest measure of the US money supply, was $8.29 trillion. In January 2010 it was $8.45 (not seasonally adjusted; source: Federal Reserve). The same is true for M1, the adjusted monetary base, and the Federal Reserve’s balance sheet. The massive expansion took place in the second half of 2008, during the Bush Administration.
(3) Conventional economic theory says that expanding the money supply during a depressionary shock is the correct action.
By late 2008 the shock to the global economy was as large as that of the early Great Depression. For more about this see…
- ”A Tale of Two Depressions“, Barry Eichengreen and Kevin H. O’Rourke, VOX, 1 September 2009
- “The Labor Market during the Great Depression and the Current Recession“, Linda Levine, Congressional Research Service, 19 June 2009 — The similarities are even stronger now, 8 months later.
During severe economic downturns people increase their savings. The want cash and its equivalents assets (e.g., bank deposits, money market funds, treasuries). Almost all economists believe that the Federal Reserve’s failure to accommodate this desire for cash contributed greatly to the Great Depression. An analogy is an emergency room doctor failing to give oxygen to a patient. This time the Federal Reserve did better, a major reason this shock did not create a depression.
(4) There are no significant similarities between Zimbabwe and the USA.
Zimbabwe is a third world state that was never really a nation. The #2 worst failed state on the 2009 Fund for Peace-Foreign Policy Magazine list (Somalia is #1). It has almost nothing in common with the condition of the USA.
- Small, aprox 12 million people. vs. our 310 million.
- Poor, GDP aprox $100/person vs. our $48 thousand/person
- New, government recognized in 1980 vs. our 1788 (one of the oldest government and oldest democracies in the world)
Zimbabwe’s hyperinflation is extraordinary, the second largest hyperinflation on record as shown by this table from “On the Measurement of Zimbabwe’s Hyperinflation“, Steve H. Hanke and Alex K. F. Kwok, Cato Journal, Spring/Summer 2009):
(5) There are no significant policy similarities between Zimbabwe and the USA.
This is too obvious to deserve discussion. Wikipedia has a clear description of the Zimbabwe hyperinflation. As always with Wikipedia, the links are the most useful part.
Originally published at Fabius Maximus and reproduced here with the author’s permission.