Tuesday, August 30, 2005

Protectionist producers Vs China

The world economies are now back to kindergarten. The teacher’s pet (local manufacturer), not happy about the outcome of a fairly played game (world markets), runs to the teacher (respective government) to beg for favours. Maybe the outcome of the game might be overturned or the rules changed to suit the teacher’s pet.
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Ask any real/true economist and the answer will be that China is doing well and the manufacturers in developed economies feel threatened. But the western manufacturers SHOULD FEEL threatened because of comparative advantage. China has it, the west barely has any!
To quote Adam Smith's "The Wealth of Nations":
" If a foreign country can supply us with a commodity cheaper than
we ourselves can make it, better buy it of them..."
Rostow’s stages of development theory seem to be working for China. The developed economies, however, seem to have stagnated around the services (technology) part of development but are well past the manufacturing (industrialisation) stage.
Developed economies are now almost entirely run on the services sectors and their manufacturing is going. Common sense dictates that those countries in which the cost of living is cheaper, wages are lower, production is cheaper and the necessary factors of production are in abundance become the next manufacturing hubs for the world. Who wants to buy one T-shirt for £30 from Italy when you can buy the EXACT SAME T-shirt for £5 from China?
One problem with my argument, of course, is that it assumes that people are rational. It assumes that people will want more T-shirts to less. However, this assumption is voided by a study that concludes that emotions play a big role in decision making, even if those decisions leave the people worse-off. To quote from the research:
"..The problem, of course, is that people don’t always behave rationally. They make decisions based on fear, greed, and envy ...Economists understand this as well as anyone, but in order to keep their mathematical models tractable, they make simplifying assumptions. "
In this day and age, when developed economies apply protectionism, it is down to 0% economics and 100% political noise. Some fat cat somewhere with a large factory is worried about his/her "position" and wants the government to do something to prevent job loses. However, this ludicrous stance is partly the fault of the respective governments for not having policies that engender flexible labour mobility so that in the likelihood of job losses due to legitimate shifts in comparative advantage, people can move to new jobs in the expanding sectors. In theory, this is what's supposed to happen.

The large fashion houses are in Italy and France. It is therefore not surprising that the producers in these countries oppose Chinese textile imports the most. However, retailers are happy with cheaper products because they can make easier profits without excessive pricing. Consumers are happy because they are not being ripped-off under the forced illusion of "prices for quality". But when the European manufacturers voice their opinions, all I hear is bla, bla, bla, job losses, bla, bla, bla, protectionism. No sound economic points.
But it is useless to impose restrictions on China (another sign of the myopia at play). To quote the FT article "Lessons from the China textiles stitch-up":
"Indeed, the quotas may prove largely futile, because imports from
China will in time be replaced by imports from other developing countries, not by products made in Europe"

Each time a developed economy interferes with the market to protect sectors that have long lost their competitive edge, it compromises any future stances taken, it ridicules the country that does it, it is extremely childish and cannot possibly ever warrant any respect.

The FT aptly concludes that the latest fiasco (EU-China textiles) will at least have done some good if it prompts politicians to think twice before succumbing to the demands of protectionist-minded producers.

Friday, August 26, 2005

Economist magazine garbage !!!

I have this morning come across complete garbage in the form of an article by the Economist magazine discussing how criticising the police is “dangerous”. What absolute nonsense. I must say that the respect I have for this publication is seriously dwindling based on the recent obvious lack of meaningful content, resulting in page-fillers about issues that we (as a market) already know about or just plain nonsense that can only be the one-sided view of some individual with enough authority to publish their own article.
No criticism means no feedback, which means no improvement. Does the author of the economist article (and its publisher) think that the police force is so perfect, so well refined, run like a fine-tuned machine that it warrants no criticism? See this (PDF) report by Sir David Calvert-Smith, and this article from The Times newspaper.
Without criticism, society is dead! Systems would fail us and see us to an early grave. Without criticism, the world economies would not be as refined as they are now. Without criticism, there would be no economics!!!

I am disgusted!

See this site to find out what real people think about this issue!

The police should be more accountable than Tom, Dick or Harry. With more authority comes more responsibility and more accountability. YOU CANNOT SEPERATE THE THREE! The police have authority and it can be abused. Can I remind The Economist that the police have been found institutionally racist but I suppose the relevance of this finding is an all or nothing shot depending on firstly, which side of the colour line you stand and secondly, your personal ethics and morals.

The economist article states:

“A poll for The Economist in late July found that just 21% thought the police had been wrong to shoot Mr Menezes”

...which means that 79% of those polled thought the police were right to shoot the poor innocent chap!

Who exactly are these people that were polled? What planet do they live in?

After news came out the victim was not running, in fact, he collected a newspaper and walked to the platform like we all do and that he was later pinned to the chair before he got shot (according to the news), what were the 79% who support the shooting thinking? Inconceivable! Is this the real society that we live in? Somehow, I don't think so!

If the news reports are accurate (they haven’t been challenged), it means that you, your brother, cousin, nephew, etc could have been shot on that day! Whilst I emphasise that we don’t want to be terrorised, we expect that, given all the taxes that we pay, we do not face the random chance of being accidentally shot dead by those who work for us (police - public service provided through tax payers money).

And, in the event that we get shot dead, can somebody have the dignity and integrity to handle the case properly! For crying out loud, somebody died. It wasn’t anybody close to you (friends or family) but you may have noticed that it takes more than a handful to make a society/community and in society everybody is equal and is equally important (at least on paper because in reality this is not evident).

The Economist concludes:

“Even when the police make obvious blunders, criticising them is dangerous.”

What utter tripe! This is such a useless article, it's not even worth printing.
Do we live in a democracy or a police state?

I think The Economist magazine should stick to economics, though its recent article on brain drain was extremely one-sided (unlike real economists who look at both sides of an argument).

Thursday, August 25, 2005

Development economics


I am sure by now it is rather obvious that development economics captures my heart. My undercurrent (to quote myself from my article on discrimination) is that I oppose the very unfair policies that are hindering the progress of less developed countries. I am also appalled by the blatant stance of the perpetrators of unethical policies to ignore the cries of the victims. It is inhumane and I am amazed that it still persists.

I recommend the following articles:
1. Can Extreme Poverty Be Eliminated?
"Public opinion in affluent countries often attributes extreme poverty to faults with the poor themselves--or at least with their governments. Race was once thought the deciding factor. Then it was culture: religious divisions and taboos, caste systems, a lack of entrepreneurship, gender inequities. Such theories have waned as societies of an ever widening range of religions and cultures have achieved relative prosperity. Moreover, certain supposedly immutable aspects of culture (such as fertility choices and gender and caste roles) in fact change, often dramatically, as societies become urban and develop economically."
...
"Being economically isolated, they are unable to attract much foreign investment (other than for the extraction of oil, gas and precious minerals). Investors tend to be dissuaded by the high transport costs associated with the interior regions. Rural areas therefore remain stuck in a vicious cycle of poverty, hunger, illness and illiteracy. Impoverished areas lack adequate internal savings to make the needed investments because most households live hand to mouth. The few high-income families, who do accumulate savings, park them overseas rather than at home. This capital flight includes not only financial capital but also the human variety, in the form of skilled workers--doctors, nurses, scientists and engineers, who frequently leave in search of improved economic opportunities abroad. The poorest countries are often, perversely, net exporters of capital."
...
"Western society tends to think of foreign aid as money lost. But if supplied properly, it is an investment that will one day yield huge returns."
...
As U.N. Secretary-General Kofi Annan wrote earlier this year: "There will be no development without security, and no security without development."
And video:
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* Video: Jeffrey D. Sachs
Director of The Earth Institute at Columbia University, and Special Advisor to United Nations Secretary-General Kofi Annan.
The video link is from Columbia News

Tuesday, August 23, 2005

Fairness and equality?

Freedom and equality? Dream on!

1. Does real freedom of speech exist or does society just say that it does?
2. Does real equality exist or do we settle for the "set" equilibriums?

Society is based on hypocrisy, where subjectivity - not objectivity – govern the way things work. For instance, it is a well-known fact that if you call a company’s customer services department to complain about poor service, the level of problem resolution and subsequent recompense that people get differs widely depending on who they speak to and their ability to articulate their discontentment.

Therefore, those in society who are both eloquent and persistent, generally get better outcomes than those who are frequently shocked speechless by the action of poor service/goods/etc. Why doesn’t society have standards/benchmarks from which everyone can benefit regardless of their ability to express themselves? The challenge is that in most decision making, democracy (consensus) is ignored and those with the official authority to make a certain decision do what is best for themselves and impose their decision on society. In comes the spin-doctor...

For instance, company CEOs often look after their pockets more keenly than they listen to the owners (principals) of the firm – the shareholders. Even when shareholders attend annual general meetings, until recently, their grievances were just "considered" but the resultant action was beyond their control despite them being the owners of the firm.

When do you think people off all races, sexes, religions, etc will ever have mutual respect for each other?

Why do we live in hypocrisy? I don’t mean having another personality that nobody knows about (see a shrink) but having a blatantly different set of rules in society for different groups. Off course, everyone wants to be better off but these days, it seems, it is at the expense of someone else (forget pareto optimality). Every last man wants to shut the door of opportunity behind them.

Some individuals are indeed above the law. Off course nobody would admit to it because we all want to feel as though justice is really blind. However, I submit to you that celebrities can escape your everyday litigation purely because they are celebrities. How’s that for blind justice?

Justice is not blind, it wears a dark pair of sunglasses that give the impression that it is blind. If a computer were the judge, I wonder whether society would be fairer. It is now commonplace for parents to tell their children that life is not fair. How sad !!!

35 years of professional economics

No, not me, but someone worth listening to has recently completed 35 years as a professional economist and his ten cited lessons worth learning are as follows:

1) Economic events - what economists call 'shocks' - seldom produce just one consequence. Usually the effects ripple on for years.
2) Good economic policies do not guarantee good economic performance; but bad economic policies inevitably result in bad performance.
3) It is structural, not demand-side, policies that most influence economic performance over the long term.
4) People respond powerfully to economic incentives.
5) Economic and social policies have to be considered as a whole.
6) Competition is one of the most powerful of forces that motivate the perpetual quest for more efficient ways of doing things.
7) History seldom, if ever, repeats itself precisely. Economies have the habit of producing new mixtures of circumstances that require new approaches.
8) Complicated economic policies whose rationale is hard to explain usually fail.
9) Some of the biggest, and most important, economic issues remain unresolved.
10) Just because professional economists don't always have a confident answer, it does not follow that all proffered solutions have equal validity. ...often the biggest contribution [they] ..can make is to demonstrate why the current fad or nostrum is wrong and will fail.

For the full article, click on the title (which is linked to the originator).

Friday, August 19, 2005

Why are poor countries poor?

Chris Dillow has commented on the paper titled "The Marginal Product of Capital (PDF)".
I liked his view so much that I have linked to it to share it with those that visit this blog.
He starts...

"How far can globalization raise the incomes of poorer countries? How far can foreign aid help?"

For his full commentary, visit Stumbling and Mumbling.
The paper itself starts...
"Whether or not the marginal product of capital (MPK) differs across countries is a question that keeps coming up in discussions of comparative economic development and patterns of capital flows. Attempts to provide an empirical answer to this question have so far been mostly indirect and based on heroic assumptions. The first contribution of this paper is to present new estimates of the cross-country dispersion of marginal products. We find that theMPK is much higher on average in poor countries. However, the financial rate of return from investing in physical capital is not much higher in poor countries, so heterogeneity in MPKs is not principally due to financial
market frictions.

Instead, the main culprit is the relatively high cost of investment goods in developing countries. One implication of our findings is that increased aid flows to developing countries will not significantly increase these countries’ incomes."
For the full paper, click on the links.

Feedback "brain drain" Africa

I have received some kind emails regarding my "Brain drain" Africa article. Thank you all. However, I would like to post one of my feedback emails to level out the obvious bias in my submission.
One respondent that wrote:
"Thanks curious for your email. I like the article, though I think we have
apportioned too much blame on the west. Africa and its nations need to start
getting their act together and creating a conducive environment for our economic and social development. The western powers and China didn't have any to cry foul about or depend on- and they made it. My thought? Only we can save ourselves. How is the million-dollar question. But for sure, brain drain isn't helping us."
Thank you for your feedback. My response was:
"Thank you for your email. I am indeed a bit heavy on the west but for a very legitimate reason - interference. This word encapsulates all that is key/vital to African development. Indeed, the Africans have a lot of work to do (with all the natural wealth, land and labour resources), but beyond that, they need freedom to find their way through the forest (as it were).

The west had that freedom and that's why, after a few well-known recessions and catastrophically poor financial market decisions, western economies are now better refined. China also had its freedom. But the interesting thing is that the west tried to interfere but to no avail. China ignored the west until it was good and ready, however, in the meantime, the west was labelling it communist, etc, finding all sorts of reasons to ostracise it (with its large population). Today China is a force to reckon with and that is not thanks to the west; their success is all internal. Well done to the Chinese for that achievement. Can Africa do the same? Unlike China, Africa is a continent.

To conclude, and to lessen the obvious bias in my article, I will say that the west is a source of economic inspiration to Africa. The west is the forerunner and Africans will do well to learn from the West. My article is weighted against the west to merely reflect the "strategic" interference that renders most other background activity in Africa as just "noise"; the eventual outcomes having already been predetermined.
As a worst case scenario (leaning towards free trade), I would like the markets for Africa to be uncertain (as efficient markets are), purely determined by supply and demand, not pre-biased against Africa from the onset and in broad daylight.

Nevertheless, my views are never set in stone and can change if I'm convinced otherwise.

Thank you,

Curious"
Thanks again to all those that responded to my article. Reality is fluid

Thursday, August 18, 2005

War rages over oil prices in Kenya

In the last few weeks, the price of crude oil in nominal terms has hit record high after record high. Yet, this has not led to panic in developed country financial markets about the consequences of for global inflation. However, it has been evident that higher oil prices have greatly affected manufacturing and related sectors and transport sectors. The challenge for the companies in the aforementioned sectors is that competition is fierce, therefore deterring any attempt at passing on the mounting input costs on to consumers. The resultant effect has been tightly squeezed profit margins (economics 101).

My RSS feed brought to my attention the situation in East Africa (namely Kenya) where the public transport is in a bit of a crisis due to higher oil prices. The transport operators have extrapolated on the cost-push inflation, resulting in ridiculous pricing strategies.

The article starts (to cite a few quotes for context):

"The Government and matatu operators [privately run public transport] were yesterday at war over increased fares as high fuel prices continued to hit public travel ",


"…the Government is likely to step in to regulate fares",


"…should the Government intervene, the resultant fares
would be lower than the rates charged by operators of public
transport",

…and the government adds:

"It was unfair, for matatu owners to hike the charges by between 50
and 100 per cent when
[local] fuel prices had only gone up by a marginal 0.8 per cent"
Do the matatu operators have the right strategy?
Adam Smith’s invisible hand theory suggests that self-interests guide the most efficient use of resources in a nation's economy, with public welfare resulting as a by-product. Smith argued that state and personal efforts to promote social good are ineffectual compared to unrestrained market forces. From the above, one could argue that the transport operators should be left alone to run their businesses as they wish, at whatever expense to society, because the "market forces" will determine optimal prices.

On the other hand, does the government have the right approach?
John Maynard Keynes (Keynesian economics) was of the view that government intervention was needed to regulate markets. There are numerous examples that place this view in high standing.

So which of the two economic theories applies best and subsequently, who (out of the government or transport operators) is on the right route?
My stance is that both the government and the transport operators have a reason to squeal. The transport operators are bearing the burden of higher input costs from higher oil prices and the government has a responsibility to protect its citizens from exploitation by unscrupulous businesses.

From the statement "It was unfair, for matatu owners to hike the charges by between 50 and 100 per cent when fuel prices had only gone up by a marginal 0.8 per cent", it is evident that the pricing strategies used by the transport operators in Kenya are not well thought through. It suggests pseudo-economics.
Price increments of the 50%-100% order, highly disproportionate to the rise in input costs, suggest greed and short-termism. Such a strategy only allows for profit taking over the short-term and results – almost inevitably – in government intervention to disciple the market. In addition, transport operators (at times of severe cost constraints), can form tacit pricing collusion, with few incentives for any of the participants to cheat by undercutting because the effective cartel is unregulated or under-regulated and can therefore deliver serious consequences to the operators who want to renege on the tacit arrangement. It is in this very market that the government has to intervene because the symptoms suggest a progression towards market failure. The government’s appropriate action – to target the stimulus of the potential market failure – is indeed to set a price limit high enough to give room for competitive pricing strategies by the operators, but low enough to restrain any excessive pricing.

It is well known that price discrimination can be a handy tool for maximising profits, but only when market demographics have been analysed (resulting in high, middle or low income regions, etc). With such analyses, businesses can charge different prices in different regions for the same goods and services, to capitalise on the higher or lower reservation prices of their consumers, which are primarily dictated by the consumers' incomes. Indiscriminate pricing, the kind applied by the matatu operators, alienates segments of the market and cannot possibly deliver the highest potential profits for a significant business period. Correct price discrimination (pricing to market) doesn't require government intervention.

However, transport operators sometimes add subjective pricing to their costs. This means that prices can change from one customer to another, from one minute to the next and can be ridiculously high without prior warning. In such a market, it is of no long-term benefit to anyone for the market to remain unregulated. The strategies are unsustainable because incomes cannot match the ever-increasing prices. At some vital tipping-point, people may even decide to walk in protest - an outcome envisaged by Adam Smith's invisible hand theory because if people walk, transport fares would have to fall. The market would indeed be sorting itself out. However, it is not in the economy's best interests to have a partly ineffective labour force, so caused by transport problems. The government can't afford to wait until Adam Smith's invisible hand cures the transport sector.

Conclusion:
Will oil prices fall back?
One explanation seems to be that refinery capacity cannot keep pace with demand for the right type of oil being demanded (sweet crude). With the current political climate in oil producing countries, oil prices seem upwardly biased. However, prices could fall as fast as they have risen, but, in the meantime, given the lack of definite timelines for oil price falls, the Kenyan government should definitely intervene in its transport market. A stitch in time saves nine!

Monday, August 15, 2005

"Brain drain" Africa

Africa’s brain drain is a bit of a quagmire. Everybody knows that a country [or as in this case, continent] requires an academically intelligent labour force to effect development (I am aware of the other forms of intelligence).
According to Rostow's model* of the stages of economic development, it follows that nations transition through agriculture, then to industrialisation(manufacturing) then technology(services), then … (we don’t know yet, maybe mass consumption). I would say the west is at the technology(services) phase, China is somewhere north of industrialisation but south of the technology phase and developing countries are still at the agriculture phase (as evidenced by the large contributions to the economy - GDP - as a proportion of national incomes solely form agricultural produce).

So an educated labour force is imperative to economic and social development. Africa’s challenge (amid the raft of challenges) is that its apparently intelligent individuals leave the continent in search of better lives in the west. Africans in Africa complain about their "crème de la crème" leaving and the west cite the "brain drain" as an unfortunate scenario that should be tackled to engender Africa’s economic development. So it appears that – for once – Africa and the west are in agreement about some quasi-economic issue but for completely different reasons, quite obviously. Western immigration policy suggests that emigrating Africans are not as welcome in the west. Policy to govern the movement of "third worldees" into the developed countries is quite visibly heavy-handed and conspicuously skewed in favour of non-third worldees.

However, my mind boggles as I wonder why – in the numerous texts covering "brain drains" – the following questions are usually not dealt with:

#1. Why do Africans leave Africa?
#2. Is it only the "brainy" that are leaving?
#3. What is the attraction of the west?
#4. Why is the number of exits from Africa disproportionate to the returns?
#5. What are the incentives or disincentive for returning Africans?
I have therefore decided to attempt at answering them.

#1. Why do Africans leave Africa?
All manner of persecutions aside (which causes migration for life or death situations), consider the following scenario. A force with far superior weaponry invades your country; you are subsequently conquered and become subject to a kingdom you know nothing of. You are maltreated and belittled. In the meantime, your backyard is being plundered of all its resources. All that can move is moved and all that poses geographical and logistical challenges is fenced in and protected like a fortress so that plundering can continue far beyond the foreseeable horizon.
When the indigenous folk finally decide that it is time to die for their land, the oppressors leave but have already left in place policy to ensure continual plundering. This policy coincidentally unites the colonisers from different regions and though they have their differences, sometimes leading to war, on this one issue [policy that allows the looting of Africa’s resources] they are allies. United by cause!

The cause is the skeleton, the organisations that have subsequently been formed to govern world policies become the muscle through which, over time, blatantly unjust/unethical/economically unsound ideas that benefit the colonisers (as a whole) are enforced.
Agriculture/Horticulture - Africans can’t keep farming forever, it is not logical to expect them to do so. They too want to move through the stages of national/economic development and continue progressing. So how has the west done it? They have engaged the factors of production: land, labour and capital (now including technology). Africa has labour but some of the land is unworkable, some is agricultural, some is maintained as game reserves to generate tourism revenue and some is mined for its natural resources.
Mining: the wealth of highly demanded natural resources - Who mines Africa’s land? The big western corporations with political clout and influence. Do they create jobs in Africa? Well, in proportion to the amount of wealth that they generate for themselves and the subsequent number of jobs they create in their own countries (trading, operations, analysts, etc) the answer may as well be no! In their respective countries, these big conglomerates contribute to their own economies. So does the west expect all Africans to become farmers? And if so, how much land is available? Well, look at Zimbabwe’s case (not taking a stance on the rights or wrongs of Mugabe’s approach). I have heard that most of the fertile/workable land was owned by a very small minority (apparently less than 10%) who all happen to be the offspring of former colonial masters. So where is the land to be farmed?

African’s leave Africa because the west is everywhere around them and is all they know. Go to Africa and in the mud hut, you will be astonished to find CNN or SKY News whilst searching for your so called "safari" or "jungle" experience. The west owns Africa's fertile land (in one form or another), the west takes Africa's natural resources (and subsequently creates jobs almost entirely for western citizens), the west tells Africans what to grow, pays Africans what it likes, loans Africans money with many strings attached, denies Africans fair access to world markets, etc, etc. If roles were reversed, westerners would be flooding to Africa! That is plain common sense.

#2. Is it only the "brainy" that are leaving?
Some people swim across dangerous waters for a better life and I cannot find empirical studies that suggest a correlation between education and good swimming. So I would rephrase "brain drain" to just drain.

#3. What is the attraction of the west?
Seeing as all the money is going to the west, all power is in the west (though China is a serious contender), why not?

#4. Why is the number of exits from Africa disproportionate to the returns?
Let me see…..Hmmm…..
So you’ve left Africa, now in the west and enjoy some of the wealth that has partly been generated by your own continent (especially so if you work for an oil or mining company) and partly generated by sound economic policy (giving credit where credit is due). From the west, you see Africa in a continuing state of disrepair and the west ceremoniously giving morsels with one hand and defiantly taking bucket-loads with the other. Do you want to be on the wining side? I hear the laws of self-preservation kicking in. How exactly will you survive in Africa? Will you have a job? A roof? Or do you have relatives in high places?

#5. What are the incentives or disincentive for returning Africans?
Yes corruption is a problem but it is not restricted to Africa. My stance is that corruption is the birthchild of greed and is prevalent all over the world but most obvious where people are desperate. Economic/financial desperation in Africa causes people to embezzle money in broad daylight and then deny it (I know, it beggars belief). However, in the west, there are frequent colossal scandals involving far much more money (Enron anyone?). These take time to unearth because people are comfortable and have therefore taken some measures to hide themselves/their actions. In fact, dare I say, maybe those that commit offences in the west do so because they are bored, a far cry from not knowing where your next meal will come from. However, I am not condoning crime in whatever form or whichever society. I am simply pointing out that there are different stimuli.

Honest, educated Africans in the west work really hard and subsequently make money (despite all the odds against them, starting with the well known ill-assumption that their education is inferior to western counterparts - for example, a maths qualification from Africa is inferior to one from the west. This is a major hindrance and often Africans have to start-out at disproportionately lower levels).
Africans want to continue to be economically active but are faced with the strong probability of not only becoming economically inactive upon their return to Africa, but also dissuaded by the idea of being dependant on a continent that is itself a dependant. There is no welfare state! Sleeping hungry whilst worrying about the shoes on your feet disappearing if you sleep becomes a real/tangible concern.
A second large problem is the reason why Jesus himself was persecuted the most in his own hometown by his own people. Some African expatriates go back to Africa with bursting CVs and tons of advice for systems already heavily riddled with corruption that the only other logical step for their governments is to imprison the returning expatriates under the accusation that they are trying to be revolutionaries (a.k.a citing the truth about mismanagement or poor management). Some expatriates go back to incompetent parliamentarians (an example) and systems that collapse at dawn, and stay down until it is in an official's personal interest to revive them. There is market failure, political failure, judicial failure, all sorts of failure, but the once thin parliamentarians are now fat and wealthy and well known for being consistently incoherent. The majority of Africans are good honest people, but they have no power!

It is only wise to deal with the cause of a problem, not the symptom.
Solutions:
  1. Natural resources should firstly be of benefit to the stewards/custodians, then as a secondary outlet, to the rest of the world. Diamonds, gold, oil, etc, should be state owned, create jobs for the respective citizens and feed economic growth in the respective country. The current situation is the reverse. International conglomerates own (in the literal sense) the natural resources and create jobs in their own countries and fuel their own economies (then the westerner complains that those whose reources are being plundered are migrating to where their resources are taken to - following the money trail). Unfortunately, some conglomerates go on to engender civil unrest in the country that they are plundering so that in the confusion, it is business as usual.
  2. Following economic growth and rising employment, the governments should install effective capital markets to address that market failure. It is therefore required that ill defined, crippling loans from international institutions are removed.
  3. Functional capital markets engender entrepreneurialism, which is high in Africa (the informal sector). More economic growth results.
  4. Implementation of ethical/moral/logical trade policy by the west. This has implications for Africa’s exchange rates, which in turn feed into numerous other economic variables.
  5. Fair global labour mobility. The conspicuous favouritism for "one kind" over another will only create more problems. "Third worldees" are not the favourites, they don't need to become the favourites but a move by the west towards levelling the playing fields of labour mobility will help.
  6. A coalescence of well functioning and developing capital markets, buzzing economic activity and rising employment then creates a demand for highly skilled (higher education) labour. African expatriates are itching for such an opportunity because they want to be part of a revolution - the African economic revolution. In addition, all the local calculus experts can apply financial engineering principles to become very successful Black-Scholes practitioners. Another hub for financial services?
The final outcome (assuming consistently progressive fiscal and monetary policy) is a force to reckon with and ultimately one of the big players in world markets. However, so far international and local policy are a hindrance.
See also "Brain Drain - cHIT cHAT for the Brain Dead?" I thought it made interesting reading.
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* It is noteworthy that Rostow's stages of growth model has been critised by many development economists who argue that it was developed with Western cultures in mind and not applicable to less developed countries. It addition, its generalised nature makes it somewhat limited. It does not set down the detailed nature of the pre-conditions for growth. In reality policy makers are unable to clearly identify stages as they merge together. Thus, as a predictive model it is not very helpful. Perhaps its main use is to highlight the need for investment. Like many of the other models of economic developments, it is essentially a growth model and does not address the issue of development in the wider context.
>>>>>>>>>>>>>>>>>>>

Tuesday, August 09, 2005

Corporate delivery

Click on image Apparently the larger the organisation the higher the likelihood
Originator unkown to blogger.

Friday, August 05, 2005

Discrimination: the costs to society

This is in response to the article "When discrimination is right"

Where do I start?

I can write a thesis on this but ultimately we all know what we want to think and what we don’t want to hear.

I will start by stating the obvious – discrimination exists in all its forms (mild and extreme):
1. One colour against another,
2. One sex against another,
3. One tribe against another,
4. One region against another,
5. One religion against another,
Etc.

The single most consistent point that precipitates from all the above forms of discrimination is that people prefer to ignore it/pretend it doesn’t exist/justify it, everything but admit it’s wrong and then subsequently proceed to help curb it.

For instance, some might argue that women these days are paid the same as their male counterparts doing the same job or that "minorities" in any given context are paid the same as the "majority" doing the same jobs. Some people even want to justify racial profiling . To these proponents I say read the numerous credible surveys/studies (1, 2, 3, 4, 5, 6) and stop talking rubbish.

Call a spade a spade:

Life would be far easier if people just stopped pretending! Why do I say this? Because in doing so, you fool nobody but yourself. Those you are discriminating against "feel" the undercurrent* of your discrimination, though they may never be able to prove it. So, if the perpetrators of discrimination know they are engaging in it and the "receivers" of discrimination know they are receiving, then what is the pretence about?

I have far more respect from the onset for people that not only
speak their minds (because apparently even cowards speak their minds) but also and more importantly back their opinions with valid evidence.

The problem is that discrimination can never be validated, on whatever grounds. Anyhow you dissect it, it leaves a heap of collateral damage, a vast group of innocent people who were not the precise/intended target but because of the representative heuristic, they get marginalised, maltreated and left feeling dehumanised.

Principally, what happens when people discriminate in society is that relations become irreconcilable and respect is lost. There is too much downside risk, no medium to long-term benefits. However, in the short-term, the perpetrators may feel a sense of accomplishment.

So to answer all those who spend time splitting hairs on issues that are quite obvious, discrimination is wrong full stop. All that gibberish that follows on about how it can be right is just undercurrent* that finally found an outlet. Plain and simple; you've been told!

Ask yourself, why capitalise on an incident to channel your undercurrent*? The answer maybe that before the incident, you may have felt wrong to think a certain way, maybe even guilty. But, once you realise that you are not alone in feeling that way, it is easier to voice your opinion under the guise of collective opinion. This is a coward's stance that warrants no respect. You want to be in a crowd shouting "stone them" when you can't do it on your own; just voices, no faces.

Discrimination is most effective when the "majority" or those in power find a channel for a common, collective undercurrent* and use it. This is why those that are the minority need correct legislation as their insurance that undercurrent* will not become mainstream life. Let’s not dismiss this, I submit to you that apartheid existed in South Africa for many years because the undercurrent* of those in power became mainstream life until the victims decided to claim social justice, even at the cost of mass loss of life. In fact, some of the offenses committed by those in power were inhumane (man fed to lion). Correct legislation is unquestionably the only form of insurance for the real potential victims of discrimination.

Above all, discrimination makes the victims feel dehumanised and no monetary premium can be worthwhile recompense for that feeling.

It is easy for the majority or those in power to maltreat the minority or those without authority, too easy. But, just because real discrimination has never/is not/will never be a real issue at your doorstep (all else constant, e.g.: where you reside) doesn't mean that you need be a perpetrator because even in the collective act of discimination, all those involved make personal decisions.

So before we air our views regarding an issue such as discrimination, we should ask ourselves:

  1. Have we been a victim of it?
  2. Do we personally know somebody that has been a victim of it?

The short answer is that if we can't answer yes to the above two questions, then we don't deserve to give our twopence. For some opinions in life, one has to walk in the shoes. There is no point in casting our inexperienced views - a bit like recommending medication without medical training.

If you ever get discriminated against in a real sense, you will know about it and it will cost you sleep.

* Undercurrent : Pent-up emotions/predisposition from personal biases channeled through any opportunity (however unrelated) but at the required/desired target. >>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>>

Tuesday, August 02, 2005

Suffering developing countries

I pause for a moment as I ponder over why Africa and the West have such a heavily skewed relationship - one side is a net taker and the other poor, manipulated and mistreated.

I will start with a comment that I heard on a comedy show on TV. This comedian (can't remember his name) was "solving the world's problems in 60 seconds". That was the name of his act. When he got to the Africa part, he asked, "Why don't you [Africans] move out of the desert?" My surprise was that the audience found it funny.

Hmmm!!, almost everyday I see ignorance of vast proportions passed on from one person/group/body to another within society. We hear very insensitive comments from our colleagues that leave us wondering what planet they live in. Yet, in their minds, there's nothing wrong/insensitive about what they say.

I recently read a report compiled by an ex-world bank official for the Commission for Africa in which the trade policies used by the West against Africa were deemed unethical, immoral, illogical, etc, etc. Yet the West continues to use the same policies in broad daylight. I guess if you're [Africa] deemed defenseless, there is no need for the west to wait for the cover of darkness.


When we examine agriculture, we soon arrive at the use of terminator seeds (more text on it). How can the West recommend these seeds to Africa when right this minute there is food crisis in Niger? This is why so many Westerners do not understand the causes of Africa's problems. All they see on TV are the symptoms, which they have no knowledge of how they come about but readily assume that Africa is inflicting problems on itself. When Africa is mentioned in the west you get one of two responses: safari stories or corruption stories. The latter is a symptom of a far bigger problem that involves the west. Offcourse, this final point is not appreciated!!!

What about medicines? Why are some key medicines more expensive in developing countries than they are in developed ones? The cost of some medicines is so high in developing countries that if Westerners themselves were subjected to the same prices, they would be in Africa's desperate medicine position. It's not rocket science, it's common sense.

I think Africa's position today is down to two broad actions by the West:
1. Exploitation (by a powerful handful)
2. Ignorance (of the masses through propaganda or lack of information all together)

Exploitation:

  • The large futures contracts on Africa’s mineral resources speak for themselves. These financial positions are large enough for some companies to "facilitate" or "engender" civil unrest within the nation that they are exploiting.
  • Agricultural produce (still mostly organic) does not benefit the farmers as much as it should. The final price of these organic, premium priced perishable goods does not confer enough benefit to the poor farmer and his family. He/she lives from hand to mouth. Yet some in the west dare to say that what Africa gets is better than nothing. I say this, in the context that you have nothing and get something then the statement is accurate. However, in the context that you are resource-wealthy and produce some of the most exotic products on earth and have nothing, the statement is foolish and inaccurate - obviously. Africa's position is the latter therefore invalidating such a comment.
  • Colonialism not only took a lot from Africa but it left a legacy that still continues. In fact, some super-wealthy Westerners in Africa (born in Africa) owe their property to their grand and great grand parents, not due to highly successful investments over time. When colonialism ended, not all "wealth" that was taken from its rightful stewards was returned. Therefore, some generations of the westerners simply inherited the "wealth" and its workers etc. This constitutes gross misallocation of Africa's limited resources. In some poor countries, inherited land (from former colonial masters to their offspring) is amongst the most fertile and very large in size. I am amazed at those who insist on maintaining that kind of "position" whilst the masses [rightful stewards] suffer. Can they not foretell the possible outcome of their greed? I heard of a story where the offspring of colonial masters were about 9% of the population but owned 80% of the land and wanted to continue owning it to hand the inheritance to their offspring. How ludicrous!!!!! Yet the West did not butt an eyelid.

Ignorance:

  • The masses/ordinary people want to get on with their lives. They have their own problems so when they give today to one charity, and tomorrow to another it gets too much. They become immune to the suffering of others, however, not all, but a large enough amount of people. However, if when being urged to give money for food aid to Africa the ordinary westerner was equally informed about the unethical terminator seed, he/she may not only give money but may also lobby against this obviously destructive use of technology, thereby eliminating a cause (seed policy), not alleviating a symptom (food crisis). Through large-scale implementation of the terminator seeds, Africa will become far more dependent on the West for food than it is now. The ordinary westerner doesn't want this and Africa definitely abhors the idea.

  • Put simply, imagine the subsistence farmer who feeds himself and his family and trades his surplus. He collects the seeds from his harvest for the next season. With terminator seeds (genetically engineered), once the crop has yielded a harvest, there will be no more food until the poor farmer buys his next batch of terminator seeds from western companies. The seeds only work for one season! The saddest thing about this is that there are Africans advocating the "benefits" of these seeds to the masses in Africa. Are they insane? I would like to know what kind of pay packet they get because what they propose is clearly crazy. Once the poor farmers can't afford the next batch of seeds, we will have the Ethiopian and Niger food crisis over and over and over again, but this time it will be all over Africa and will never stop.
  • Westerners may also wonder why there is so much civil unrest in developing countries. I would say to this, look for the correlation between civil unrest and the abundance of natural resources. In countries where natural resources abound, no amount of "noise" from humanitarian organisations about child labour can prevail. It happens nonetheless.

Conclusion: The simple truth to a complex issue concerning Africa/developing countries and the West. To solve the problem, consider the inter-generational impact on both Africa and the West of decades of exploitation and mass ignorance by the West.

Now Africa is mostly corrupt. Those in power have a keen desire to survive at all costs. They look out for themselves alone and ignore all voices of reason. I wonder where they learnt that?
They annex public resources for private consumption. I wonder where they see that?

In the meantime, whilst we wait for social justice to wake up (if ever), Africans can read a book called "Decolonising the mind". Knowledge is empowering.

The point of this book is in the principles of what it speaks about. Africa’s position needs freedom of the collective mind. It is a rich continent and shouldn’t be a basket case.