Journal Highlights: Roads I Have Traveled ... Transition Journal Excerpt # 3

(continued): Harare, Zimbabwe, 1985-1986: Every dictator who desires to rise to power in a Lesser Developed Country promises the people two things to gain their political support: a better health-care delivery system and electricity to the rural areas. None of those who make such promises, that I have ever met, were capable of delivering on either promise. So, it did not come to me as a surprise that the Zimbabwean delegation was very interested in investigating the possibilities of acquiring both electrical and health-care items for their country. While I was in Zimbabwe I would try to help them with meeting those needs, since health-care and electricity were so important to the economic development of the country. 

Upon arriving in Zimbabwe I began working almost immediately with them on an exciting project dealing with their neighbor, Zambia. I was taken out and shown how the grain storage facilities in Zimbabwe were full and running over with maize.

For three years they had experienced bumper crops, and they had run out of room to store the grain. 

The reason we had purchased the burlap sacks while in US was for the storage of the overflow. I was shown stacks and stacks of sacks of maize covered with black plastic. The stacks were the size of very large buildings. But the rain was getting in from the top and the rodents were getting in from the bottom.

And all the while the tribes across the Zambezi River in Zambia were starving to death. The irony was that Zambia was rich in copper production. However, the price of copper had plummeted and no one was buying Zambia’s copper. 

As I surveyed the situation, it looked to me like there existed a great opportunity to simply put some uncomplicated trades together and make some enormous profits in a new and overripe field of opportunity. For hundreds of years Africa had suffered tribal conflicts and lacked any developed system of economics or a basic understanding of economic factors. Someone like me could come upon a situation like this and make a whole lot of money. 

It should have been a very simple deal for Zimbabwe and Zambia to have structured a fundamental counter exchange, like trading excess maize for devalued copper, and made it come out beneficial for all concerned. But tribal differences, and the lack of any established method for transacting the international exchange, left both countries in a negative position. It took someone who was neutral and on the outside to step in and broker the deal. Acting in that role as “deal broker” could result in huge profits in a continent like Africa. 

As I was thinking along this line, suddenly God reminded me of my commitment that I had made to Him well over fifteen years earlier: I would stop earning and storing up wealth for myself and give the rest of my life helping other people. But why then was I in Africa working with the very top people in power. I was learning a great deal about how the international world worked, but what was my specific role to be in all of what I was witnessing? 

I decided to stay out of participating in any of the profits of any of the new ventures, and I simply stood on the sidelines and coached the teams. I showed my friends in Zimbabwe how they could get rid of their inventory of maize before they lost any more of the production. I showed them how to rent warehouse space in London to store the copper until the world price once again stabilized. When the price went back up they could sell the copper and make a lot of profit and at the same time they would have salvaged their precarious maize situation and saved the lives of a lot of starving folks in the meantime. Many of the hungry people of Zambia ended up with supplies of maize that helped fill their empty tummies. 

While grappling with the African situation and my economic role for the future, I also had a chance to re-evaluate my commitment to doing good and not taking advantage of the business deals for myself that were so obviously available internationally. I vividly recalled some episodes in the life of my sometimes hero, Armand Hammer. He had been faced with similar temptations. Following the Bolshevik Revolution, Hammer visited the ravaged areas of the Russian Ural Mountains. He had witnessed the sickness and starvation and had told Lenin that he would with his own personal money purchase a million dollars’ worth of grain and bring it to Russia to save the starving people. He had been moved with great compassion. 

But by the time his shipments of grain had arrived in Russia, he had seen a phenomenal opportunity to pillage very valuable Russian antiquities from the dethroned Czar’s wealth. Instead of simply giving the grain to the Russians as he had offered, he changed the deal and insisted that they fill the ships that had brought the grain with the valuable Russian antiquities for his own keeping. There was no gifting at all! 

I didn’t want to renege on my commitment to God. I allowed the Zimbabwe situation to strengthen and reinforce my earlier promises. I remembered the old adage: The final temptation is the greatest treason: to do the right thing for just the wrong reason. 

I did the best I could to help Zimbabwe get their economy established, but there was considerable push back from some of the military generals who had just discovered a lot of new power and had designs on reaping a lot of benefits from their new positions of power. Even while I was in Harare, I overheard President Mugabe’s generals remind the president that he had gotten where he was because of their bravery and their fighting expertise, and he owed them for their loyalty and they expected to receive consideration. 

At that point I knew that my days of usefulness as a successful economist in Zimbabwe were pretty much over. Any idealistic dreams President Mugabe may have had for establishing a democratic free market economy in his new Zimbabwe would be swallowed up by the greed and entitlement corruption of those close to him. That spirit of greed and entitlement would be contagious, and it did not appear to me that the President had the resolve to counter it. 

Next Week: The idea and practice of International Debt Swaps. 

© Dr. James W. Jackson  

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MORE EXCITING NEWS: Looking Forward to the New Book Better Off: How America Got Wealthy & You Can Too!

We talked last time about why some countries are wealthy and some countries wallow in misery and poverty. On page 20 of the new Better Off book I use a couple of real-life examples. 

A Tale of Two Countries

In the early 1980s, I embarked on one of my first international economic assignments in Zimbabwe, Africa. I was there at the invitation of prime minister Robert Mugabe—who later became president—and members of his cabinet. It didn’t take long to realize that Zimbabwe wasn’t the place for me. Civil war had not only claimed thousands of lives, but the government had also imposed a policy of forced redistribution of assets and property. However, I was there long enough to become well acquainted with the political and economic situation. 

Formerly known as Rhodesia, the “bread basket of Africa,” Zimbabwe has a population of more than thirteen million people and boasts some of the richest farmland on the face of the earth. The country also has one of the finest railroad systems in all of Africa, as well as the world’s largest platinum reserves. In the past century, the Marange diamond fields were one of the greatest discoveries, but Zimbabwe is most famous for the great Zambezi River that flows over the majestic Victoria Falls. 

Zimbabwe has everything imaginable to qualify it as one of the wealthiest countries in the world. But today it wallows in poverty. According to the Mundi index of gross domestic product (GDP), as of January 1, 2014, the per-capita earnings of the people of Zimbabwe amounted to just $600 per year. That’s $1.64 per day! Out of 228 countries, Zimbabwe ranks 227!1 Why? 

Next, let’s consider a little spot on the globe called Hong Kong. More than seven million people inhabit this 400-plus-square-mile parcel of land bordering the South China Sea. Most residents emigrated to Hong Kong from Guangdong Province in China to escape conflict. In 1997, Great Britain returned Hong Kong to the People’s Republic of China, and it has remained under Chinese rule ever since. 

Hong Kong possesses very little arable land and almost no natural resources, except for a shoreline sufficient for a port. As of 2013, the Hong Kong dollar was the thirteenth most traded currency in the world.2 The tiny administrative region has become one of the most important financial centers in the world, following New York and London,3 and is considered the epicenter for management, finance, Internet technology (IT), business consultation, and professional services. 

Hong Kong has a well-developed transportation system and is lauded for the exquisite quality of life its residents enjoy. In fact, life expectancy in Hong Kong is one of the highest in the world—eighty years for men and eighty-five for women.4 

Year after year, the Heritage Foundation’s Index of Economic Freedom has listed Hong Kong as the freest market economy in the world.5 The Mundi index of per-capita income ranks Hong Kong sixteenth in the world, with individual earnings at nearly $53,000 per year.6 That’s $145 per day, or approximately 90 percent more than the folks in Zimbabwe earn in a year. 

Hong Kong doesn’t possess even a fraction of the natural and human resources available to Zimbabwe, and yet it’s one of the wealthiest regions on earth. Why? 

The hunt for clues continues!

© Dr. James W. Jackson   

Permissions granted by Winston-Crown Publishing House