More than 1000 years ago, according to ancient English tradition, King Canute set his throne on the shore and ordered the tide to stop rising. A month ago, President Robert Mugabe of Zimbabwe took an equally bold stand, ordering inflation to stop forthwith or else he'd send those responsible to jail.

Canute ended up with the waves sloshing round his knees, but at least he had the satisfaction of teaching his courtiers a lesson on the limits of royal power (he didn't really think his words could stop the tide). Mugabe will end up drowning in the inflation his own policies have created, but it will probably come as a surprise to him, because he doesn't seem to understand that he can't just order it to stop.

"I believe inflation will hit 1,500,000 per cent by the end of 2007 if not before," said Christopher Dell, the US ambassador to Zimbabwe in June. "Prices are going up twice a day, in some cases doubling several times a week. It destabilises everything. People have lost faith in the currency and that means they have lost faith in the Government that issues it.

"By carrying out disastrous economic policies, the Mugabe Government is committing regime change upon itself."

By early last month, South Africa was putting together a proposal to stop the hyper-inflation by pegging the Zimbabwean dollar to its own currency, the rand. Its huge foreign currency reserves would enable Zimbabwe to go on importing essential goods, the flow of economic refugees into South Africa would not become a tsunami, and gradually the internal situation might stabilise.

The price, however, was agreement by Mugabe to key reforms that would restore democracy in the country. But that would ultimately mean surrendering power, something that is inconceivable to the 83-year-old autocrat who has ruled Zimbabwe for the past 27 years. Indeed, the country's rapid descent into poverty and chaos only began when Mugabe's rule was challenged.

For the first two decades after the end of white minority rule, the Zimbabwean economy grew steadily: children went to school, people ate well, and the future seemed bright. But then, to Mugabe's horror, Zimbabweans voted no in a 2000 referendum that would have given all government and military officials amnesty for crimes committed while in office.

He felt threatened, so he came up with a policy that rewarded his closest supporters and kept them loyal. He began confiscating the white-owned farms whose crops earned 80 per cent of the country's foreign exchange, handing most of them over to his own political and military cronies - who had no idea how to run them.