In instances such as Zimbabwe or Argentina, where hyperinflation spirals out of control, how do people feed themselves and pay for the bare necessities? Does the government step in and provide the support needed to prevent mass starvation?
In: Economics
– Lots of suffering
– Lots of bartering / trading
– start using other countries currency. In Zimbabwe, South African money is commonly used. Other countries use USD, Euros, or Yuan.
I asked an Argentinian this very thing in the 1990s, in the early days of the public internet. I can’t believe it took this long to get a Milei type of presidente.
Basically, movies and games are good and cheap entertainment. Guns and booze were good not only for their intended purposes but for trading as well. This fellow traded his skills for food.
The “informal” economy picks up, if you’re lucky. They keep working in jobs where the pay has become worthless, because when money is trash, social status is everything. People do favors for one another. “You can sleep at my place.” “I have some spare bread, take it.” “I’ll help take care of your kids while you’re away working on the farm.”
Zimbabwe made a genius move by declaring hyperinflation illegal. Soon the currency fixed itself.
Prices can’t go up if people can’t pay them. Inflation is the increase of prices, and prices increase for numerous reasons but ultimately cannot overshoot people’s spending power.
High inflation generally happens when there’s a supply shortage. Like, there’s less stuff for some reason. So prices go up. But to make sure people survive, the government creates even more money to basically spread out the pain (and not just have the poorest get priced out). As less stuff + same money = inflation, less stuff + even more money = even more inflation. And until the stuff shortage gets solved, this process usually keeps going and prices get really high.
But during this process, wages get really high, too. Not relative to prices, but relative to before, and enough to keep up with prices.
Purchasing power, however, is usually dropping, as that’s related to the *root cause*. But the inflation itself, the numbers going up everywhere all at once is rarely the problem, but the reaction to the problem, and that reaction is intended to increase how well everyone survives the root problem.
I lived in Argentina from 1981 to 1984, when inflation went up to some 60% a month, at least once. Basically, the salaries go up also, although not so fast as the prices, so people use a lot of mechanisms to cope with :
* On pay day (monthly – not weekly like USA) , everybody would leave the office for some 15 minutes and buy dollars at the nearby exchange and travels agency. We were downtown, and took shifts to avoid emptying the office by everybody leaving at the same time, bosses didn’t mind because they also did it. Then you convert the dollars back along the month, as the bills pop out. There was a lot of dollar selling/buying inside the office among the workmates, you just warn the people at coffee break and the word spread out.
* Most people purchased large freezers and built large kitchen cupboards or cabinets, and made grocery shopping for the whole month on pay day, or asap.
* You never buy anything on installments (prices were adjusted every 2 or 3 days, salaries also, but only monthly), you save the money for months as dollars, convert back and pay at once.
It’s a pain in the neck, honestly, but not starvation. I paid house rental at the time, and remember needing to renegotiate price with landlord every month. If you were planning to buy some stuff, like some home appliance, and saw a sale with good price while commuting, you should stop and buy it no matter how much you were in a hurry or have an appointment : if you leave to buy the stuff the day following, you mostly would find it by the double price, no kidding.
People use different currencies, whether it’s a foreign stable currency or goods. So everything ends up in a secondary “illegal” economy that isn’t highly persecuted because everybody is using it. If a government goes into a hyperinflation spiral, it’s because things are already out of control, and they lack the power to provide support. Usually, they will try to crack down on the growing black market.
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