The Hampton Economics Digest
From The Editor
Hello, and welcome to the second edition of The Hampton Economics Digest!
In increasingly turbulent times, the intersection between Politics and Economics has never been greater. In this edition we will take a look at a wide range of topics, from an insight into Why the UK won’t Bet Big, to Rethinking Inequality in the 21st Century, and even across the globe for an in-depth look into India’s MiddleClass Debt Struggles and Barter Trade in Zimbabwe.
Despite being in the run up to our end of year exams, and with personal statements looming, our writers have been working tirelessly to produce some incredibly high-quality articles. For this, I must thank the entire writing team, Mrs Mullan, and the Media team at Hampton for publishing our work. With that done, all that’s left to say is enjoy!
Charlie Childs
Founder and Editor Writers: Charlie Childs, Alex Nelson, Alex Rust, Nathaniel Carson, Zaid Ahmed, Oli Hudson, and Rohan Ladva
Why the UK won’t Bet Big
The cost of caution - can institutional investors be persuaded to invest in the businesses of tomorrow?
For many centuries, the UKhasbeen at the forefront of inventing cuttingedge technology. From the steam engine to the telephone, and more recently the World Wide Web and Penicillin. Yet lately we have experienced a severe decrease in start-ups and new inventions, with places like Silicon Valley taking the spotlight.Thiscould beduetoashift in the culture of investing in the UK, towards a more risk-averse, conservative approach. This has had a knock-on effect of contributing to the slow economic growth we have experiencedinthepastdecade.
In the UK’s financial sector, some of the largest institutions have shifted their strategy when it comes to investing. Banks, pension funds, and insurance companies have significant amounts of capital which theyinvesttoturnaprofitandensure they can pay back customers either through interest on savings, pension income or insurance claims. There are 2 major issues with their current strategies, in that they favour lower risk investments for a more stable flow of income, and that they don’t invest enough in UK-based
companies, with outward foreign direct investment flows reaching £78.7 billion in 2022 compared to £61.4billionin2021.
Financial institutions aren’t the only ones to blame. The UK government has created an environment of high regulation, which discourages startupsastheiradmincostswillincrease duetotightercompliancerules.Akey example of this is the difficulty UKbased companies experience when floating on the market during an IPO.
The London Stock Exchange has stricter listing rules than those in, for example, America, leading to plenty of UK-based companies moving to theUStoIPO.
The consequences for start-ups are dire. A lack of funding in the early stages of development can be the deciding factor in whether the company fails or not. In addition, it can force founders into difficult situationswhere they must sell more equity at earlier stages, which is a massive disincentive to entrepreneurs. These effects are felt the most in sectors which require incredibly large upfront investment
followed by a prolonged wait for returns. This is seen in industries suchastechnologyandgreenenergy, where R&D is a massive area for businesseswiththepotentialtomake plenty of money, but also the potentialtofailaswell.
It is clear to see that there is a difference in culture and attitude towards investment between the UK and the US. In America, the development of the ‘Silicon Valley Model’, characterised by high innovation, investment and failure tolerance, clearly reflects their positive attitude towards fostering start-ups. Back in the UK, 73% of the population didn’t reach the financial literacy benchmark in 2023. This highlightsakeyreasonforourlackof investment, whereas in the US retail investment and 401(k) contributions are much more popular and widespread. Yet, frugality could be seen to be a more deep-rooted and difficult problem to solve in the UK. During COVID lockdowns, the American government sent cheques to Americans to supplement their incomes. Plenty of Americans then went and invested that money in the stockmarketwiththehopeofmaking even more. The unfortunate reality is that in the UK the majority of people wouldn’tdothesame,theywouldput it in a savings account, opting for the lowerrisk,lowerreturnoption.
InordertostoptheUKfrombecoming an‘incubator economy’, where startups are founded here, but then move to other countries due to FDI and better prospects for growth, the government can intervene. In 2012, the government introduced schemes such as the Seed Enterprise Investment Scheme (SEIS) to provide tax incentives for backing risky startups. If these tax incentives were increased to match other large economiessuchastheUS,we could begin to see more IPOs and a new position of global influence. For example, the SEIS allows individuals to invest £200,000 in approved businessesofwhichupto50%willbe tax-free; whereas in the US the equivalent QSBS allows tax relief on returns of 10x their original investment which is capped at $100 million in returns from a $10 million investment. The London Stock Exchange Group (LSEG) is already looking at ways to reduce the strict regulations we have in place to provide confidence to start-ups that they will be able to easily list in the UK. Last but not least, possibly the hardest of them all, will be to encourage a cultural shift in investment. Financial literacy courses being included in the school curriculum, along with campaigns to encourage investing and pension contributions could have a large impact on changing the views of the
53 million adults in the UK, and youngergenerationstoo.
Ifwemanagetosolveourproblemof cautious, risk-averse investing, we can help to foster a start-up ecosystem which boosts productivity, economic growth, employment, and much more. It is imperative that our investment culture evolves with the next wave of innovationwewillexperience.
Charlie Childs
Immigration: A More Nuanced Approach
Earnings, age, and long-term fiscal impact can create effective immigration policy – the data is now out.
Immigration is one of the most controversial topics in Western politics, influencing most election results.Mainstreampartiesthatdon’t discuss it tend to lose votes to populist parties that do. There’s an emerging consensus that a discussion based on facts and economics is needed rather than the often-polarised debate of recent years.
Too often, the word ‘immigrant’ is used to refer to one homogeneous group. Attempts to differentiate can be controversial - as the Danish governmentfoundoutaftertheir2018 study. Here, annual fiscal contributions were measured by the immigrant’scountryoforigin.
This study reached three main conclusions. High fiscal contributions correlated with Western immigrants. Immigrants from MENAPT (Middle East, North Africa,PakistanandTurkey)countries were shown to be a drain on the public purse at all ages. Those older than 65 are fiscal drains - regardless of origin. This was used by populist politicianstosuggestthatimmigrants from certain countries were not welcome. It was the UK’s OBR that developed a different perspective, dividing immigrants by three salary categories,regardlessoforigin.
This 2024 study showed that lowerwage migrants (earning half the UK averagesalaryorless)areaburdenat everyage.
Italsoshowedthevalueofprime-age high earners. If you examine a cumulative version of this graph, the average 25-year-old immigrant only becomesanetfiscaldrainbytheage of 92. In contrast, the average Brit only repays the cost of their childhood (education etc.) at the age of46,becominganetdrainaged81.
However, lenses such as salary and educationcanonlymeasureapartof societalcontributions.Thelowerpaid have jobs which our country could not run without, such as carers and cleaners. The value of this cannot be measured by the small (if any) tax generated, so any attempts to measureamigrant'sworthshould be aware of limitations like these. Another question is one of compassion and moral obligation, which cannot be forgotten in this process.
highestscoresareinvitedtoapplyfor visas.
Let’swalkthroughtwoapplications.A 25-year-old (+30 points) with fluent English (+20), a bachelor's degree (+15) and four years of skilled employment (+5) received 65 points. A44-year-old,whohasbeeninskilled employmentfortheiradultlives,with little English and no degree receives 15points.Thoseaged45andoverare ineligible for a skilled visa; visas for unskilledworkersdonotexist.So,itis possible to tailor immigration to fit a country's needs, although it is important to also leave some room for those who don’t quite tick all eligibilityboxes.
A better understanding of the differenttypesofimmigrationandthe relativefiscalcontributionswillallow a deeper, evidence-based approach to migration policy. Australia, a country almost entirely populated by immigrants and their descendants, routinelywelcomesmoreimmigrants than most European countries as a share of population. They use a system which has wide public support and is regarded as fair. It awards points for age, English proficiency, education and work experience. Applicants with the
Nearly all of the UK’s visas are only accessible to those with a job offer. The others require niche circumstancessuchasadegreefrom a list of 42 universities, being a ‘leader’ in digital technology, or having won an internationally recognised academic prize. The Australian model is much more transparent, opening up routes for more people and creatingless space forconfusion.
Controlling emigration is often overlooked. In a 2020 OECD report, Britain wasrevealedtohavethethird highest emigration rate of the highly educated among the G20. A recent UBSstudyprojectedustolose17%of our millionaires over the next five years.ThisplacesBritainworstoutof
the 56 countriesstudied - and one of onlyfivetoseeadecrease.
Attracting and retaining high taxpayersisvital:lastyear,13%ofall incometaxwaspaidbythetop0.1%. Ifweexpandthefiguretothetop1%, itcovers28%(HMRC).Onlytwoofthe top ten richest people residing in the UKwerebornthere.
Recent changes to inheritance tax and the non-domicile status have sent the rich fleeing for the departures lounge. Other countries arekeenlycompetingforthelucrative residency of the super-rich. Monaco is a tiny European country that has mastered this strategy, evident in their $240,000 GDP per capita. They offer zero income tax, capital gains tax and inheritance tax. Monaco also makes residency easy to achieve (for the very wealthy). Sir Jim Ratcliffe, once the UK’s richest man, saved an estimated £4 billion in tax after moving to Monaco. Lewis Hamilton, the famous British racing driver, also movedthere.
immigrationpolicyisnolongersimply a moral or cultural issue - it is an economicimperative.
Alex Nelson
The future of managing economies liesinthemanagementofpeople.As most countries experience decreasing birth rates, they will need to balance this out by attracting and retainingthebestandthebrightest.In a world where human capital is the most valuable resource, smart
Rethinking Inequality in the 21st Century
With the Gini coefficient losing relevance in increasingly polarised economies, the Palma ratio offers a clearer view of inequality by highlighting the growing divide between the rich and the poor.
In examining inequality across nations, the Gini coefficient has long been the dominant metric.
Introduced in 1912, by Italian statistician Corrado Gini, the index quantifies income inequality across an entire population, assigning each nationavaluebetween0and1-with 0 indicating perfect equality, and 1 representing a scenario in which a single individual holds all income. Despite its widespread use by governments, international organisations, and academic institutions, the Gini coefficient’s limitationsarebecomingincreasingly apparent in today’s polarised economies.
Derived from the Lorenz curve, the Ginicoefficientisespeciallysensitive tovariationsinthemiddle50%ofthe income distribution. Paradoxically, this makes it relatively unresponsive to shifts among the top and the bottom, where inequality is most pronounced.
Anincreasinglypopularalternativeto theGinicoefficientisthePalmaratio, a more targeted and policy-relevant
measure. First proposed by the Chilean economist, Gabriel Palma, the ratio comparesthe income share of the richest 10% to that of the poorest 40%, based on the observation that the middle 50% typically captures a stable share of national income across most countries. By isolating the distributional extremes, the Palma ratio shifts focus to where inequality is most prevalent – between those with vast wealth and those with very little.
Mexico provides a compelling example: while its Gini coefficient recorded a 5% decline in recent years, its Palma ratio rose sharply, signallingawideningriftbetweenthe richest and the poorest. This divergence exposes the Gini’s tendencytoobscureunderlyingshifts in income concentration, providing anoverlyoptimisticnarrative.
The disparitiesthe Palmaratio reveal are often stark. In 2023, Colombia’s Palma ratio stood at a staggering 18.2,meaningtherichest10%earned over18timesasmuchasthepoorest
40%. South Africa followed with 16.0 & Mexico at 13.8. By contrast, more equal societies, such as Iceland & Czechia posted figures of 1.5. In the UK, the Palma Ratio reached 2.8 nearly triple its 1977 level highlightingasustained expansion of income at the top relative to the bottom, even as the Gini coefficient remained relatively flat (currently 0.366).
CriticsofthePalmaratioarguethatit oversimplifiesinequalitybyexcluding the middle 50% of the population. Nonetheless,itssimplicitymaybeits greatest asset. Among policymakers, particularly in development economics, its relevance is gaining traction. Nobel Laureate Joseph Stiglitz has called for its inclusion in globaldevelopmentframeworks,and boththeOECD&UNnowfeaturethe Palma ratio in their inequality databases.
The Palma framework is also being extended beyond income: climate economistshaveproposeda"Carbon Palma ratio" to compare emissions shares between the wealthiest and thepoorest,apromisingsteptowards integratingequityintoclimateaction.
not as a matter of averages, but of extremes. In an increasingly divided world, that focus has never been morevital.
Inequality is not merely an abstract measure; it fractures societies, fuels division, and locks millions out of opportunity.Whilenosinglemeasure isdefinitive,thePalmaratioreflectsa shift in how we perceive inequality:
Alex Rust
UK-EU Negotiations Intensify
The UK and the EU are locked in battle ahead of crucial summit.
Sir Keir Starmer’s landslide-winning election manifesto contained promises to‘reset’relations with the European Union, and to‘deepen ties with our European friends, neighboursandallies’.Sincethen,the focus on the EU has diminished –Rachel Reeves’s Autumn Budget contained no mention of Brexit; the ‘Five Missions to Rebuild Britain’and the ‘First Steps for Change’, put forward by Starmer, contained no mention of nurturing the UK’s strained, if not broken, ties with the EU. However, on Thursday 25th April the spotlight was firmly on European relations, as Sir Keir met Ursula von derLeyen,theEuropeanCommission President, in London, ahead of the crucialUK-EUsummitonMay19th.
TheUK’seffortstoplaceBritishgoods directly on the European Single Market, through certifying product standards, has been rejected today by the EU. An EU diplomat said: ‘It’s notgoingtohappen.Switzerlandhas this, but they pay into the EU budget and accept free movement’. This comes as negotiations are beginning to intensify ahead of next month’s meetinginLondon.
The summit will cover a handful of primary points, including defence, carbon pricing, migration, youth mobility,energy,andfishing.Perhaps the most pertinent issue out of these is the fishing arrangements. The current post-Brexit transition period isduetoendinJune2026,afterwhich fishersfromcountriessuchasFrance andDenmarkwillnotbeabletofishin Britishwaters.Thisisperceivedtobe a deal breaker for the EU, as France especially (the second highest contributor to the EU budget – over £20 billion in 2023) will rebuff any agreements without plans to extend this period until 2029, the expected dateofthenextUKGeneralElection.
The UK also looks set to agree to implementingEuropeanrulesonfood sanitation (an SPS). This would move toliftexportchecksonfoodanddrink destined for Europe. However, these rules would be in violation of the Trans-Pacific Partnership, a trading bloc which the UK joined in 2023, as well asdenyingthe UKthe chance of atradedealwiththeUSinthissector. After all, a driving factor of the UK’s decision to leave the UK was to relax European bureaucracy and red tape, allowing the country to trade more
freelywithcountriesfromotherparts oftheworld.
Furthermore,therearetalksonadeal to allow 18 to 30-year-old Brits and Europeans to live and work in each other’s countries, if only for a limited amountoftime.TheUKalreadytakes part in a similar youth mobility scheme,with23,000peopleentering theUKin2023,9900ofthemcoming fromAustralia.
One of the main reasons this impending summit is so important, however, is because of the advances on a defence deal which may be made. Under the presidency of Donald Trump, America has distanced itself from issues of European defence and security. Therefore,aunitedEurope,atleastin terms of defence, is crucial, especiallywiththewarinUkrainestill raging, only 2000 km from Brussels. The goal for Keir Starmer’s Labour is to gain access into the EU’s £150 billiondefencefund.Withoutthis,the UK may be left isolated and vulnerable.
process. A dealisnot expected to be finalised until late 2025 at the earliest, but breakthroughs made at the long-awaited May summit will undoubtedlybekey.
While these issues are all separate and have no daily bearing on each other, they are all interlinked in the negotiation process. The EU is desperate for a fisheries deal, while the UK is pushing hard to be part of the defence scheme, and for the mobility scheme to be extended to theEU.Failuretoagreeonjustoneof these points could result in a breakdown of the whole negotiation
Last year, the Office for Budget Responsibility (OBR) stood by its estimatesthatBrexitwoulddecrease theUK’sGDPby4%,inthelongterm. The UK has not been able to take advantage of Brexit fully, by joining other international trade blocs, and agreeingbetterdealswiththebiggest players on the trade stage. Progress on the UK-US Free Trade Agreement hasstagnated,andtheworld’slargest exporter,China,isresponsibleforjust 7%ofUKimports,and4%ofexports. In light of these failures, it makes sense to try and strengthen relations with Europe, and there has never been a better opportunity than next month’ssummit.
Nathaniel Carson
India’s Middle Class Debt Struggles
Household debt in India makes up 42% of its GDP, emphasising India’s current debt crisis within its middle class.
Inacountrywhichhashistoricallynot beenrecognisedasa‘rich’nationand is officially considered a ‘developing country’, the increasing financial pressureonmiddleclasshouseholds in India is becoming a particular cause for concern. These debt struggles have been made clear in multiple forms: a huge surge in personalloans,increasingcreditcard debt, and a large number of households facing difficulty repaying loans and managing daily expenses. But why is this happening, and what does this mean for this developing nationwithsomuchpotential?
India is a country which has developed massively over the years, with one main aspect being economically. With the fifth highest GDP in the world of $3.6 trillion, it is fair to say that they are improving financially. Through, for example, government initiatives and digital platforms, one particular aspect that has improved is the availability of credit. This makes it easier for households to borrow, and it has therefore caused a major increase in this.Ofcourse,thisisallfine,aslong as the households are able to
eventuallyrepayit.Buttheproblemin India has been that this increased availability of credit has ended up incentivisingfartoomuchborrowing, to the point that many are unable to repaydebtssoonenough,buildingup lotsofinterestintheprocess.
Another, potentially more alarming thing to consider is what these loans are actually be used for. Usually, one would expect a loan to be used for investment or perhaps large, longterm purchases. Especially with investment, this can support economic growth, as investing is used to build assets, which can later generate income in the long run. However, it has been found that 48% ofthisborrowingisbeingusedforthe consumption of goods and services instead. This signals the concerning point that a very large portion of borrowers in India are doing so only for their daily needs, and therefore havenootheroption.
Of course, the natural question is, why are households struggling this much with their daily expenses? The answer to this, or at least part of it, lies in the modern-day topic:
inflation. For example, food prices have surged in the last decade or so, compared to Indian middle-class wages, which have stabilised. The gap between the two is increasing, causing households to rely on borrowingtomakeupthedifference.
What all this is causing for India’s economyisthat,eventhoughtheyare increasingly achieving economic growth, they are unable to become a high-income nation. Also, the accumulating debt is decreasing consumption in the economy, which means the country’s GDP is facing problems.Infact,itisexpectedbythe government that GDP growth will retreat to 6.5%, compared to 9.2% lastyear.
So, India’s middle-class population continuestofaceissuesarounddebt, and the question now is, what could potentially be done? One idea is to better inform households about borrowing tactically to increase wealth by building assets. Plugging a possibleinformationgapiskeyinany economy to see the best results, but also to help make households better off. The upcoming period of time will be key to see what the nation does about the concerning 42.1% of GDP beingmadeupofhouseholddebt.
Zaid Ahmed
The Problem with Thames Water
Thames Water has let down the British people. Here’s how.
In 1989, under the conservative government of Margaret Thatcher, and as part of the sweeping privatisations her government undertook,thegovernmentprivatised the supply of water in England and Wales. This meant that the 10 public bodies responsible for water supply in England and Wales – known as regional water authorities – were dissolved and replaced by 10 private companiestomanagethesupplyand treatment of water. Today, England and Wales are two of the three countries who have a fully privatised water system, with the only other being Chile. This change did not affect Scotland and Northern Ireland who retained public ownership over theirwatersuppliers.
Aspartofthisprocessofprivatisation the entire regional water infrastructure network of pipes was also transferred to the private companies, creating the conditions for the monopoly control that would develop. The complex and interconnectednatureofthesepiping systems and treatment facilities meantitwaspracticallyimpossibleto have more than one company competing in a region. Instead, each
regioninEnglandand Waleshad one water supplier with consumers unable to choose, giving the water companiesatotalmonopolyoverthe supplyofanessentialservice.
This is problematic as water is a ‘common pool resource’, meaning it is both non-excludable in consumption and rivalrous. This meansthatonceitissuppliedforone consumer it is supplied for all, but also that it is diminishing or subtractable – the more one consumer consumes, the more that subtracts from the overall stock. These qualities, along with its widespread uses and essential nature make it prone to being overconsumed, at the expense of other consumers, and therefore it is accepted that water supply must at leastberegulated,ifnotnationalised. For this reason, the government set up Ofwat as a water regulator to ensureconsumersareprotectedand that water companies behave responsiblywiththeirfinances.
Despite this, in the case of Thames Water the company is widely viewed as having mismanaged or even abused its position. This is for many
reasons, but mainly their irresponsible finances and excessive borrowing which is now leading to soaring bills for consumers. Also, a total lack of investment in critical waterinfrastructureisnowleadingto sewagebeingpumpedintoriversand pollutingtheenvironment.
dividends going to shareholders totalling £10.4 billion since 1989, although it is worth noting that these have been reducing in recent years due to the increasingly dire finances ofthecompany.
The creation of Ofwat was designed to ensure that water companies behaved responsibly and to protect consumers. However, in a potential example of regulatory capture where an industry regulator operates in favour of the industry, they have also become increasingly concerned with the need to keep water companies profitable to attract investment and stay functioning. This led to them allowinghugeborrowing,whichinthe case of Thames Water has led to the company being in £19 billion of debt as of Spring 2025. The company was set to run out of money in March which would have likely led to a temporary government takeover under a Special Administration Regime,butthiswasavertedwitha£3 billionloaninFebruary2025whichis expected to last the company a year. However, the company also plans to raisemoneythroughhugebillrisesfor consumers who have no choice in their provider and no say in its management. Thames Water asked Ofwat to raise bills by 53%. This was declined to cap bill rises at 35% instead–whichisstillahugeincrease for ordinary consumers. They have also been criticised for large
The other major criticism of Thames Water and the water companies in general is their lack of investment in critical infrastructure. There has not been a single major reservoir constructed in the whole of England since 1992, despite a growing population. Also, there is a planned, and much needed £100 billion investment into upgrading ageing water infrastructure across the countryduetodecadesofinsufficient investment. For example, in London 24%oftreatedwaterislostvialeaks. An FT article contrasts this with the Cambodian capital of Phnom Penh where only 6-8% of treated water is lost despite it beingalessdeveloped country with less access to capital andtechnology.
This lack of investment can also be linked to the growing problem with sewagebeingdumpedinUKrivers.As of November 2023, 72 billion litresof sewage have been pumped into the Thames, by Thames Water, since 2020. This problem has been getting progressively worse as the company isunabletotreatthesewageithasto manage and increasingly lacking the fundstobuildthefacilitiestodoso.
In short, since privatisation, the failure of Thames Water to invest in
and develop infrastructure, whilst irresponsibly borrowing has led to unsustainable finances which are now both endangering the company and harming consumers who are forcedtopaythepriceinhigherbills. Inanyothermarketthesebehaviours would be fatal to a company as consumers would choose to take their business elsewhere, however the total monopoly and dominance Thames Water has over the market they supply to, meansthat thisisnot possibleandhasledtoaseriousand harmful situation for the average consumer with few benefiting from thecurrentsystem.
Oli Hudson
Barter Trade in Zimbabwe
The separation between Zimbabwe’s countryside and central cities leads to barter being a key method of exchange. This stabilises the economy but also limits the country’s growth.
Barter trade, the direct exchange of goodsandserviceswithouttheuseof money, has seen a resurgence in Zimbabweoverthepasttwodecades. Once a relic of pre-currency economies, barter has become a practical solution for many Zimbabweans in the face of economic instability, currency devaluation, and chronic cash shortages. While it has provided a necessary lifeline for survival, the return to barter has also highlighted deeper structural issues in the country’s economy and poses challenges to sustainable economic development.
Zimbabwe’s economy has faced multiplecrisessincetheearly2000s, including hyperinflation, which reached an estimated 89.7 sextillion percent in 2008. During this period, the Zimbabwean dollar lost all practical value, leading to its abandonment in favour of foreign currencies like the US dollar and South African Rand. However, even with dollarisation, access to cash remained a major problem. In rural and even some urban areas, people resorted to bartering maize, sugar, livestock, or labour in exchange for essential goods and services. This
practice has continued in various forms to this day, especially in farmingcommunities.
One of the key drivers of barter trade in Zimbabwe isthe lack ofliquidityin the formal economy. Banks often experience cash shortages, and the informal sector, which makes up a significant portion of economic activity, operates largely outside the bankingsystem.
As a result, trust-based local exchanges become more viable than monetary transactions, especially wheninflationerodesthevalueofthe local currency or when digital payment platforms are inaccessible duetopoorinternetcoverage, Bartertrade,whilehelpfulintheshort term, carries mixed effects for the Zimbabweaneconomy.
On the positive side, it allows economicactivitytocontinuedespite systemic financial challenges. It supports local supply chains, keeps marketsfunctioninginisolatedareas, and enables subsistence living for those who have little or no access to formal employment or banking services. In this sense, it acts as an economicstabiliserintimesofcrisis.
However, the widespread use of barter also has significant downsides. It undermines the developmentofastable,cash-based economy and reduces the government’s ability to collect taxes, since many barter transactions are unrecorded. This, in turn, limits publicinvestmentandweakensstate institutions.
Furthermore, barter trade is inefficient compared to monetary exchange. It depends on a ‘double coincidenceofwants’asbothparties must have what the other desires; this can delay or prevent transactions. This inefficiency hinders the scalability of businesses andreducesproductivity.
Inthelongrun,relianceonbartermay also discourageinvestment in formal economic structures, such as banking, insurance, and credit systems.Withouttrustinthenational currency and financial institutions, people remain trapped in a cycle of informal exchange and economic vulnerability.
In conclusion, while barter trade in Zimbabwe is a resilient response to economic hardship, it also reflects a lackofconfidenceinformalsystems.
Until then, barter will remain a necessary, but ultimately limiting, part of Zimbabwe’s economic landscape.
For Zimbabwe to move forward, effortsmust be made to stabilise the currency, rebuild trust in financial institutions, and foster inclusive economicpoliciesthatintegrateboth urban and rural populations into a functional, cash-based economy.
Rohan Ladva