Inflation and apathy on top of a “profit over people” mindset

IT should be a matter of huge embarrassment for a country that calls itself an agricultural economy to have soaring food inflation, resulting in rampant poverty-compounded misery, especially among the downtrodden segments of society.

Annual inflation at 229% in January 2023 and weak economic growth over the past two decades have increased poverty levels and inequalities.

Poverty has become a key part of Zimbabwe’s image. If you ask a foreigner what comes to mind when they hear the word “Zimbabwe”, chances are it is either a scene of overcrowded slums in some parts of Harare or a dishevelled beggar walking from car to car in Samora Machel Avenue — the “Wall Street” of Zimbabwe — or vendors fleeing from raging police in First Street. This is all a result of growing poverty levels and inequalities brought about by years of high inflation and widespread apathy among the elite given their “profit over people” mindset. 

The roots of this problem are deep and widespread, holding back economic growth and preventing the less fortunate from escaping the shackles of poverty. The leadership across the political divide, as has always been the case, are busy spewing venom against each other, adding more toxicity to the horribly murky environment. It rightly seems that apathy on the part of our politicians is at its peak, and the lust for power seems to be the only thing that matters to them.

It is really quite unfortunate that both government and opposition parties have miserably failed in providing basic amenities of life to the poor segments of society. They, the politicians, continue to claim that all their actions are meant to alleviate the sufferings of the masses, but all their actions continue to add to the woes of the masses.

The elite class is hardly bothered by market manipulations and high food inflation that has become a matter of life and death for the underprivileged daily-wager who earns a meagre amount. It is time the politicians stopped verbal spats and the blame game, and begin focusing on doing something practical.

Inequality in Zimbabwe had already seen a significant rise since 2000, but the cracks in the economic system to protect against the “profit over people” mindset of market fundamentalism due to underlying weak institutions and regulations, got all the more widened as the pandemic shock hit the global supply chains.

Hence, prices were raised more than what reflected the lack of supply, and unwarranted windfall profits on one hand, and lack of adequate taxation system on the other, meant the inequality increased all the more during the Covid-19 pandemic and are showing no signs of retreating.

The recently released report titled ‘Survival of the Richest: How we Must Tax the Super-rich Now to Fight Inequality” by Oxfam, made a thorough analysis of the level of inequality during recent times, and the taxation structures, among other reasons, that allowed such shocking outcomes. For instance, the report revealed the difficult inequality situation.

“Elon Musk, one of the world’s richest men, paid a ‘true tax rate’ of just over three percent from 2014 to 2018. Aber Christine, a market trader in Northern Uganda who sells rice, flour and soya, makes $80 a month in profit. She pays a tax rate of 40 percent.”

Such analysis is needed in Zimbabwe and that can only be done from a proper assessment on how much true tax is being paid by the elite including but not limited to men of the cloth, business tycoons, politicians and their proxies against how much the poor are paying. Speaking to one vendor who sells her wares in front of a supermarket on Harare’s First Street revealed that on a normal day, she makes profits of US$50 but has to part with around US$20 in bribes to police and municipal officers. That is a massive 40% tax. 

No wonder absolute poverty is on the increase. In addition to a general cost of living crisis on one hand, and on the other a higher cost of doing business on the back of decades of high inflation, and for protracted low economic growth, a recession-causing pandemic, sharp increase in inequality, where most of new wealth generated went into fewer hands and increase in unemployment, the poor are becoming poorer and their voices are crying for basics. It is scandalous in a country that purports to be a democracy.

The poor prioritise food and other basic needs above all else. They develop survival instincts anchored on low expectations, making them easy to impress and prone to manipulation. They lose their critical voice. In other words, in a society where the majority is poor, their choices are grounded in short-termism, that is, what matters most is fulfilling immediate needs. This is the case for Zimbabwe where the majority are poor but faced with a democratic process – elections. In such a society, democracy adulterates the poor by making promises of the future they cannot deliver by preying on the shortemism worldview of the poor. Indeed, the elite are preying on the poor.

The Oxfarm report, highlighting the rising level of inequality, pointed out: “Over the last 10 years, the richest one percent of humanity has captured more than half of all new global wealth. Since 2020, according to Oxfam analysis of Credit Suisse Data, this wealth grab by the super-rich has accelerated, and the richest one percent have captured almost two-thirds of all new wealth. This is six times more than the bottom 90 percent of humanity. Since 2020, for every dollar of new global wealth gained by someone in the bottom 90 percent, one of the world’s billionaires has gained $1.7m.”

One might argue that this is a global view and is not synonymous with trends in Zimbabwe. The elites in this country, through manipulation of systems as a result of weak institutions and regulations, are milking the poor. The spectacular rise of wealth and income at the very top has coincided with a collapse in taxes on the richest. Is wealth adequately taxed in Zimbabwe or it is consumption that is more taxed?

The elite pack most of their wealth in trust funds that do not pay taxes which they pass on to their direct descendants.

Inheritance tax and capital gains taxes in Zimbabwe, currently at rates less than 5%, need a relook as they have a direct impact on equality. Zimbabwe’s tax system has also failed to recognise the myriad ways corporations and wealthy individuals can evade taxes and how financial globalisation has enabled firms to shift profits and assets to low-tax jurisdictions.

Instead of addressing these legal loopholes, the government relies far too heavily just on “naming and shaming” individuals and corporations involved in that, while getting revenues from indirect taxation, such as value-added tax (VAT), which falls disproportionately on the poor. This systemic inequity has led to a massive decline in public wealth and to enormous concentrations of private wealth.

Rising levels of inequality and poverty require both putting in place a taxation system that properly taxes windfall profits, and is overally progressive in nature, along with addressing the loopholes in collecting taxes. Moreover, high levels of inflation, and a very difficult inequality and poverty situation, call for non-austerity, and counter-cyclical policy measures.

However, apathy among the authorities due to the “profit over people” mindset implies that what continues to lie ahead for Zimbabweans is an unpleasant reality: “the continued record high inflation in a dysfunctional slow economy.”

Lower income groups are suffering the most while middle class families have had to make significant lifestyle changes to make ends meet. As consumption habits change, businesses too have felt the pinch of reduced demand along with the higher cost of doing business.

It is high time that serious thought is given to how the country got to where it is, who is responsible and what needs to be done to address it. Unfortunately, political ambitions of individuals, institutions and families continue to take precedence over what is better for country as a whole and its citizenry.