When I first visited Zimbabwe in 1996, $1 US would buy about $8 Zimbabwe. When I was there last November, US$1 would buy Z$7,000 at the official rate, but Z$12,000 when traded on the black market. Today’s bank notes are printed on only one side and with an expiration date, bank collapses occur on a regular basis and, not surprisingly, unemployment is about 80%, and national income has halved in the past five years.

But what caused the recent collapse in Zimbabwe? It is not the loss of freedom of the press, or unsound monetary policy, or high military expenditure, or low health expenditure--although all these factors have a negative impact. The real reason that Zimbabwe has collapsed is that there is no protection of private property. The executive rides roughshod over the judiciary in all matters of property, especially land rights. The result is ‘dead capital’, a term invented by Hernando de Soto, and total economic annihilation.

In short, Zimbabwe provides the reverse of the good news offered by de Soto. In The Mystery of Capital, de Soto exhaustively demonstrated that where private property rights are delineated and enforced, economies grow rapidly. When someone can borrow against their one large asset (for nearly everyone this is their home) they can establish businesses, buy supplies, establish marketing programs, sell products and make a profit and their families can thrive. In some countries the vast majority of capital is dead--one cannot prove one owns it outright, and hence no capital market will lend against it. As de Soto jokes, by barking at strangers the dogs demonstrate they know where the property boundaries are even if the people don’t.

In the mid-1990s when de Soto was asked by President Mubarak to assess the situation in Egypt, de Soto found that 90% of the capital was dead. Today the situation is slowly improving as more and more people can prove they own their property.

Zimbabwe had a system of property rights and the rule of law, which were more than adequate. It also had a decent titling system, a judiciary that upheld rights of landowners in the face of an executive branch that was largely Marxist in orientation. And this same judiciary continued to try to do this in the face of mass expropriation of land rights in 2000. Even as late as 2003, as the final major swathe of white farmers were thrown off their property and their land left idle, some judges tried to uphold the constitutional rights of these farmers. But finally all the good judges were fired, resigned or escaped the country in peril of their lives.

Craig Richardson, an economist at Salem College, North Carolina, USA, claims that the land seizures broke a vital ‘trust’ and everyone ‘wondered if their assets were safe’. His analysis leads no room for doubt as the causes of collapse. While the international community (and certainly African commentators) blamed the drought for the collapse of food production in Zimbabwe, Richardson shows that the drought of 2001/02 at most counted for 13% in the drop in the value of the agricultural economy, 87% was due to collapse of property rights.

So while politicians and their advisers should accept the reality of the causes of Zimbabwe’s collapse, this is not all bad news. By way of hope, Richardson draws a parallel with Nicaragua. Nicaragua also suffered economic collapse based on the destruction of property rights under the Sandinista government in the early 1980s. But in recent years, with a more capitalist-minded government, the Nicaraguan economy has grown at over 4% per annum, with inflation below 10%, which is mainly due to the protection of property rights and private-sector development, he claims. Richardson found that the other institutions of a free society matter, but, as predicted by de Soto, none matter so much as the right to the rewards of one’s own labor.

Zimbabwe needs reinstatement of land rights because turning dead capital into something with life will do more than anything else to reverse the disaster that is Zimbabwe. This cannot happen with the current government. But Mugabe will die, become too infirm to govern or be the victim of a coup at some stage. Then there is a chance for democratic reform. While political reform is a necessary condition for economic growth, it is not sufficient--the enforcement of private property rights is crucial too.

Roger Bate is a resident fellow at AEI.