Investment Biker Page 28

  Over the past thirty years, Nigeria and Ghana renounced colonialism, foreign capitalists, and foreign expertise, saying they would use African expertise and African capital. They sought foreign aid, flirted with Marxism, had an affair with socialism, and married statism.

  Like the United States in the nineteenth century, Thailand and Indonesia embraced foreign capital and foreign expertise. They took little foreign aid. Today Nigeria and Ghana are among the world’s poorest countries, while Thailand and Indonesia are booming, prime examples of the economic miracle on the Pacific Rim. Their peoples have become wealthier.

  These aren’t arguments in musty economic journals; they are experiments over decades involving the lives of tens of millions of people, tests that pit vital economic ideas against each other. I can’t imagine a better test, one that much of the world, outside the United States, is seeing and taking to heart.

  One day Zaire will break up, probably into four parts around its largest cities—Kinshasa, Kananga, Lubumbashi, and Kisangani—but possibly into many smaller divisions. The roads are such mud wallows no one travels between these cities by surface transportation other than by rail and slow-moving barge.

  True, the geography and climate make maintaining an infrastructure difficult. Even in the dry season it is always raining, and no sooner do you put in a highway or a railroad than a section washes away. However, when the Belgian colonialists ran the country, they built an infrastructure and kept it together. The irony is that if there were a good economic base and a decent political system, Zaire would be enormously rich.

  If an investment company married American agricultural technology with Chinese farmers, it could make a fortune here. Even now, the crops grew without supervision. You didn’t even have to speak to them, much less water them. The soil is incredibly rich and lush, and because it is so near the equator there are three growing seasons a year.

  At one time the country exported food to Europe; now it imports food. Even though there is no more fertile place on the planet, Zaire can’t feed itself. Instead, in the Zairian markets we found only manioc, along with locusts and grasshoppers, certainly not domesticated forms of livestock. Once in a while we came across a half-dozen misshapen, withered tomatoes, which always made us wonder where the hell they had come from.

  Zaire will fall apart completely. The only forces that have held it together this long are Mobutu and American money and arms, along with whatever Russian support the dictator could sneak in. Both super-powers claimed they kept Mobutu in power to create stability in Central Africa.

  Now that the Cold War is over, there is no reason to support him. His people hate him, and he is going down.

  Other countries in this part of the world, Mozambique and Angola, have already experienced their vicious civil wars. Their currencies have already collapsed. These, not Zaire, are the places on which a smart investor should keep his eye. Zaire hasn’t had its final civil war yet. That horror will come as local chiefs and barons snatch at the country’s wealth after something dislodges Mobutu.

  As an investor, I wait until the wars are fought, the borders are redrawn, and the newly elected democratic governments are eager to make something of the country’s resources. Here, I thought, there ought to be a period of stability once the borders were redrawn and Mobutu was gone. That would be the time to pile in.

  Once war starts here, the end will be near, because nobody is left who wants to finance a conflict in Zaire. There is nothing in it for anybody, because there is nothing left to Zaire.

  What must happen in the real world is that Zaire must emulate Thailand and Indonesia and welcome unfettered outside expertise, management, and capital—as the United States did in the nineteenth century—or disintegrate before it can return to true economic health. I know there are a lot of decent people with good intentions in the West who think we should ship in aid to help countries at this point of dissolution. However, the Red Cross, the United Nations, and other charities should let them go, let them disintegrate instead of propping them up. Unfortunately, shipping in aid will only prolong the agony and the time the Zairians must spend fumbling at the bottom of their economic cycle. Instead of one or two years at the bottom, they would then have to spend three or four.

  Only being on their own will give the Zairians a chance to regroup and make a solid new start. However this appears, it’s not cruel, but the fastest and most reliable way to revitalize a shattered society and economy. How so? Because at the bottom people will say, Well, this is my tribe, my group, my whatever. They will work together and become self-sufficient.

  Law and order will then return. Whether it’s the Soviet Union breaking up, a Mafia chieftain running lawless and breaking kneecaps, or Zairian warlords pillaging, people demand the rule of order. During the breakup, yes, there will be a period of anarchy and chaos, but that will become too exhausting, too chaotic, for everyone involved. Finally, they’ll say, “We want stability.” People can’t take living in chaos and warfare for long. Better to let things collapse quickly than drag out the misery, as dragging it out will still lead to chaos and warfare, only far worse, like a wound that’s neglected and left to fester.

  Only after collapse can true peace come. After all, tens of billions of dollars in foreign aid have been poured into Africa by both the West and the Communists, much of it guided by the International Monetary Fund, the World Bank, the Scandinavians, and the United Nations. No one, however, can name one developing country in Africa that has become developed due to foreign aid.

  Once there’s peace, somebody will say, “Gosh, we’re really good at growing tomatoes. Why don’t we sell them to the guy down the street?” So they’ll start a little business, one with a firm underfooting, not one imposed by a Peace Corps volunteer or an IMF banker.

  There’s been so much meddling in the twentieth century that, except for places like Taiwan and South Korea, which received military aid, it is hard to find a once undeveloped country that makes a good model of economic self-sufficiency. However, in the nineteenth century in America and Europe, there were booms and busts that weren’t manipulated by foreign aid, and those economies still grew rapidly.

  For thousands of years, African kingdoms functioned without the burden of nation-states as we know them. Many had complex social structures supported by solid economies, court systems, and wealth. If African tribesmen put together a civilization once, they can put one together again.

  Out of these tribes would come true local government. These new states would make voluntary alignments with others that would take root, rather than have order imposed upon them by Mobutu or the United Nations. When you consider the dozens of ethnic groups forced together under one system of government here, it’s easy to see that Zaire should never have been a country in the first place. It’s been one for only a little more than a hundred years, a patchwork quilt stitched together by the Belgians.

  The rest of us, particularly those who like to meddle in others’ lives, should stay away and let Zaire disintegrate into its natural shape. Every time we prop it up we’ll get it wrong. We should let nature take its course, allow these people to sort out their own problems.

  In the West we have the hubris, born of statist notions, to think we can change history, force the world into a political, social, and economic configuration that we find pleasing or familiar.

  We cannot. There aren’t enough soldiers or money in the world to stop the coming collapse in Zaire.

  We were delighted that Zambia was close to Lubumbashi. By now we had been in Zaire almost five weeks. Both of us were heartily sick of it. We pushed on south and arrived at the border.

  As usual, we dreaded the crossing with its crowds of people, cars, and trucks, its chaos, paperwork, and the bribes we would have to pay.

  However, entering Zambia turned out to be simple. The border guards spoke Oxford English. We went into the customs shed and said, “We’re tourists going through,” and it was a snap.

  All of a sudden,
we were in civilization again.

  Civilization by African standards, that is. If the average American were dropped into Zambia he would recoil at the primitive conditions. But here the roads were paved. The people were sane. The currency was declining but not collapsing. They had gas. There was food. You could buy vegetables. There was soda pop.

  Even though everybody was nice as pie at the border, we jumped on our bikes and took off, obeying the first rule of crossing borders: When you make it across, get away before someone changes his mind.

  …

  We immediately ran into a military checkpoint, but we were waved through, as if they saw we weren’t emerald or gold smugglers. Few, if any, white travelers come through here, and no long-distance travelers of any race, much less outlanders in chaps and riding what to them were exotic machines. What a relief after having gone through so many police and military checkpoints in Zaire!

  Around the world, military checkpoints are often an attempt to deter smugglers. Governments want to prevent the export of the local product that brings them the most hard currency.

  As emeralds were important to the Zambian economy, the government had instructed its citizens that it and only it was allowed to buy emeralds. The government set the price, naturally a good bit lower than the world price. If you wanted to sell emeralds in Zambia, you had to sell them cheaply to the government or run afoul of the law. It took emerald producers no more than a second to figure out they could make more money by smuggling their product outside the country.

  Such government-established monopolies were a worldwide racket. To give a few examples, there was cocoa in Ghana, coffee in Colombia and other Latin American countries, gold in Russia, bananas in Nicaragua, tin in Bolivia, tobacco in Zimbabwe, oil and gas in Libya and Algeria.

  Some of Zambia’s roads near the economic centers were very good. Its markets had lots of produce, and gasoline and electricity were available. I couldn’t figure what would happen here after its socialist leader and benevolent strongman Dr. Kenneth Kaunda departed. He was the glue holding the country’s twenty-five ethnic groups together.

  In the pantheon of Third World leaders, he was regarded as a hallowed saint. Saint or not, he was in the process of being thrown out because his statist policies weren’t working.

  Zambia’s 7.8 million people had been jammed together without geographic, ethnic, or linguistic rationale, a collection of land and peoples that the British had cobbled together as Northern Rhodesia. I doubted Zambia would exist for long in one piece.

  We heard the roar and spotted the steam cloud from Victoria Falls from six to seven miles away; the natives called it “the cloud that thunders.” The Falls were awesome, all the more so because we could walk right up to and into them.

  Around the footbridge across the pool, the mist was so thick it actually made a rain shower. Baboons were everywhere.

  The falls were one and a half times as wide as Niagara and almost twice as high. The water roared down in a canyon which has formed a pocket, not at all like Niagara and far more majestic. Over the centuries it had cut a deep river channel that wound back and forth in a zigzag through the jungle.

  As we’d crossed from Zambia into Zimbabwe we noticed an immense difference in their approach to the falls. Both countries had full access to this tourist attraction to use to draw business. However, on the Zambia side, there had been only one decent hotel; socialism and government control precluded choice and competition. On the Zimbabwe side, tourist facilities were highly developed, with hotels, stores, villages, airplane rides, tour groups, every amenity a traveler might want. The five-star Victoria Falls Hotel, with its manicured lawns and 1907 fixtures, was as elegant as Raffles in Singapore or the Savoy.

  This side of the border was capitalistic. Entrepreneurs could develop whatever business they thought would turn a profit, and so they met the needs of the market.

  Back on the Zambian side, there was only that one drab hotel because Dr. Kaunda, elected in 1964 and still in power, controlled everything. After the transformation of the British protectorate Northern Rhodesia into Zambia, its citizens had been granted elections, one man, one vote—but only once. The country had been stuck with the socialist dictatorship ever since.

  Naturally when tourists visited Victoria Falls they went to the Zimbabwe side.

  Here was an object lesson in the difference between the free market and statism with its incredible restrictions. Capitalism was battling statism right across the river, and it was hardly a contest.

  Zimbabwe had a checkered political history. In 1923 it had become the self-governing British colony of Southern Rhodesia. In 1965 it unilaterally declared its independence, and a white-dominated republican regime was established. In 1978 it became a biracial one, with a black-puppet administration controlled by whites. For a year or so the British returned to run the country. In 1980 it reached its independence again as the Republic of Zimbabwe. As happened in many African countries, in 1987 it became a one-party state.

  It had lots of natural resources and a relatively advanced economy oriented toward foreign trade and supported by a sophisticated infrastructure. In addition to large tobacco exports, asbestos, chromium, copper, and other minerals were shipped to a wide variety of foreign markets. For a while agricultural self-sufficiency permitted the export of corn and other crops to its neighbors.

  Like other African countries, however, mismanagement, drought, and falling commodity prices had since contributed to fiscal difficulties, including budget deficits and persistent inflation. As in China today, the government still spouted Marxist-Leninist rhetoric, but it was being forced to explore relaxing its control of the economy in favor of private business, industry, and agriculture.

  We stayed outside Hwange National Park in the Ivory Lodge, one of the world’s most unusual resorts.

  Each of its dozen suites was a treehouse in the middle of the jungle. Although the bathrooms were at the base of the trees, each treehouse had a full bedroom, one as big as you’d find anywhere, and was surrounded by a porch. There were never more than twenty-four guests at the lodge, all living in the treehouses with the birds. A nearby small water hole drew lions, giraffes, zebras, and other jungle animals, which guests could view from their porches.

  The guests ate gourmet meals in the main lodge at a single large table. The owners, holdovers from the colonial period, had spared no expense. The fixtures were new, the plumbing modern, and the rooms well appointed. They figured to break even at 40 percent occupancy and to make a fortune at 100 percent.

  Most of the guests rose before dawn to watch jungle animals gather at the larger water holes inside the park. After viewing the animals and taking pictures, they returned to eat a big English breakfast together.

  One night Tabitha and I heard elephants making loud grunts and trumpet calls below us. These were young male elephants, about twelve years old, who traveled in packs because they were young bucks, a bit like our teenagers. When they were older than twelve they found a female and paired off, or whatever elephants did. We figured this would be a terrific chance to see them up close.

  We climbed down, got a driver, piled into a jeep, and drove to the water hole to see them.

  We were watching a dozen by the light of the full moon when something spooked them. They immediately charged, stampeding toward us. We were stuck, couldn’t move—we were paralyzed. When they were fifty or sixty yards away it was clear that Tabitha, the driver, and I were going to be trampled underfoot. Somehow, at the last minute they veered away.

  Later the lodge’s owner told us elephants didn’t like to step on anything squishy that would make them slip and fall. They avoid mud, slick leaves, and, I suppose, motorcyclists filled with slippery blood.

  In Zimbabwe many farms were in ruins. These had been taken from the white settlers—expropriated—and turned over to locals to reward them for whatever. Today lots of them stand empty even though fifteen years ago they were prosperous and exported food.

 
; The government of Zimbabwe had decided to have a cheap food policy so everybody could get inexpensive grain. What could be more benign? They set a low price for corn and forced producers to sell to them. Back in the mid-eighties, before this policy, the country had produced 1.8 million tons of corn a year—that’s tons, not bushels. Now it was producing thirty thousand, a drop of 98 percent.

  This was yet another example of a government stupidly setting an artificially low price and thereby getting a low supply, the same stupidity applied by Russia to virtually every product.

  And how did the government explain this failure?

  “It’s the drought.”

  Was this the truth? My answer, as usual, was to check the flow of money to find out.

  In its wisdom the government had never regulated the production and sale of flowers. Back in the mid-eighties the country’s farmers had produced $5 million worth of flowers, which they exported to obtain hard currencies. This year they were producing $200 million worth. The ability of farmers to raise flowers had apparently gone up some forty times during this catastrophic drought.

  How was it possible to raise flowers and not corn?

  Because the government hadn’t set the price of flowers. Farmers could obtain rand, dollars, and deutsche marks for them, so they raised all they could.

  Had the government left the price of corn alone, people with capital would have been attracted, irrigation systems would have been laid down, and even inefficient growers would have made money. There would have been corn.

  The government should never have set the price, and instead allowed it to rise naturally. The Russians got themselves into a pass where, to get the price of fuel to a market level, they had to raise it one hundred and fifty times. If they had let it creep upward over the years, nobody would have noticed. Here in the United States we all say, “Gosh, I remember when gas was twenty cents a gallon.” But there aren’t riots in the streets because it costs a dollar now. However, if it went from twenty cents to a dollar in one week there might be riots. It is only when a government artificially holds a price back and then all of a sudden releases it that the price explodes and a political crisis arrives.