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Dr Mungai Nginya Lenneiye: African bandit economics: Goats, cows, and the law of supply and demand

By Dr Mungai Nginya Lenneiye

My friend Hopewell Chin’ono raises Boer goats in his village in Murewa, he is doing so successfully by all accounts.

Dr Mungai Nginya Lenneiye
Dr Mungai Nginya Lenneiye

Given the scarcity and demand for Boer goats, these goats exchange at 1 Boer goat to 1 cow or 4 local goats, and everyone is quite happy with that exchange rate.

This is due to the scarcity and demand for Boer goats.

The people in Hopewell’s village continue to harness two cows to a plough, produce maize and tobacco, and pay bride price with cows, goats, and even cash.

But once enough people raise more Boer goats and their supply becomes the same as that for local goats, all goats will trade at 4 goats to 1 cow – this is basic law of supply and demand: the higher the supply of goats, the less valuable they are compared cows.

African Bandit Economics turns this basic law upside down.

If one morning the Village Headman with his advisors announce that by decree, all goats will be traded at par with cows; that is 1 goat for 1 cow, life in the Hopewell’s village will change dramatically.

First, there will be a mad rush by those villagers with goats to quickly trade their goats for cows, and just as quickly store these newly-acquired cows in the neighbouring village.

Once the neighbouring village realizes what is happening, they too will come to Hopewell’s village and rapidly buy all the remaining cows in exchange for goats.

In a fairly short time, Hopewell’s village will only have goats and no cows.

This frenzy won’t stop at just cows and goats.

Maize that used to trade at 1 tonne for 1 cow will now be sold in exchange for 1 goat, and just like the cows, all maize in Hopewell’s village will be bought and either sold or stored in the neighbouring village.

Tobacco, sweet potatoes, millet, and everything else will follow the same fate of cows and maize as these commodities become scarce in Hopewell’s village.

If the headman insists that local shops must also follow the same 1 goat to 1 cow equivalence, it will only be a matter of time before the shops are empty and Hopewell and his villagers will have to travel to the neighbouring village with their goats and either buy goods at the exchange of 4 goats to 1 cow or use any cows that they have managed to hide there to make the purchases!

Even the practice of paying bride price with cows will stop when young men in Hopewell’s village turn up with goats pretending they are equivalent to cows just because their headman decreed them to be so.

This single decree on pricing will also bring many extra costs to Hopewell and his villagers: they have to pay for someone to provide extra security for their cows (which have now become scarce) and the extra time and effort to move their goats whenever they need to purchase goods in the neighbouring village – where the excess supply of goats will now lead to 6 goats being equal to 1 cow.

Trying to harness a plough to 2 goats will not work and Hopewell’s village will experience a decline in the production of maize, soya, sorghum, tobacco and everything else.

The local school will run out of books, and both teachers and children whose parents ‘stored’ their cows in the neighbouring village will follow their cows and move.

The local dispensary will no longer have drugs due to this economic distortion and contradiction.

In time, even the headman will start demanding that his services be remunerated in cows and not goats but will not reverse the decree.

The people in Hopewell’s village will therefore wake up one morning to find themselves very poor, and even poorer than the neighbouring village that once only had goats and now has all the cows without even having to pay a fair exchange of 4 goats for 1 cow.

Hunger, ill-health, and illiteracy will haunt Hopewell’s village as production and exchange relations completely break down.

Ironically, the Headman in Hopewell’s village will also have followed the practice of buying cows, maize, tobacco, and other items with goats at the 1 goat to 1 cow exchange rate; and keeping these with friends and family in the neighbouring village.

That is how African Bandit Economics work. It is when decrees are used to over-ride market rules and economic common sense.

Those villagers who are subject to these decrees are left impoverished; while those who are able to continue playing in the real market escape poverty.

Under African Bandit Economics, those with access to cows from State-owned farms can exchange 1 goat for 1 cow; and they too escape poverty and can amass substantial wealth.

Dr Mungai Nginya Lenneiye is the former World Bank Country Manager for Zimbabwe.

He now runs the Udugu Institute in Harare and was one of the first senior civil servants in postcolonial Zimbabwe.

He is also the author of Ushe’s Mission in Zimbabwe: Lessons on Change Leadership.

A book looking at the times and works of the late health minister, Dr Herbert Ushewekunze.