Swellendam: – It was a chance remark on a TV news bulletin by an energy expert that reminded me again of how little we appreciate the magical power of markets. He was lamenting the fact that the solar heating manufacturing industry had failed to live up to expectations of wealth and job creation because of cheap Chinese imports.
Of course, there’s the first problem right there! Failing to meet expectations of making money and creating jobs is the major concern, and letting down the South African consumer is not even mentioned.
Customer neglect by the industry was made clear in a previous report by Dominic Goncalves, Africa Energy and Power Research Analyst that in the initial stages after 2007 the industry was “plagued by malfunctioning products, fly-by-night companies, and incorrect installation and application of the products”.
Like in so many other cases in South Africa, the absolute sovereignty of the consumer and the need to be driven by his or her needs is lost in the obsession with profits, wages, and state action. It is basic economics that the latter can only be the result of allegiance to the former, and yet we keep on blunting our market focus by relying on state subsidies, legislation, trade restrictions, lack of domestic competitiveness, commercial xenophobia, a cheap rand, low interest rates, 30 year plans, systems, and wage extortion.
They may work in the short term, but if the umbrella provided does not lead to improved efficiencies and global competitiveness, and continues to protect mediocrity, then we are wasting money and effort and heading for eventual asphyxiation in our own pathetic little economic laager. In its early post war industrialisation, Japan protected local industries only if they could show they would no longer need protection and would be globally competitive within a few years. Australia experienced a similar miracle after opening its economy during the Hawke-Keating Government in the 80’s.
Take the debate on beneficiation and adding value to our commodities for export. It’s a discussion that has gone on for decades, and I remember the then Minister of Economic affairs, Jan Haak, pleading this case way back in the early 70’s. If we were finely tuned to the needs of the global market we would have had a viable global jewellery industry decades ago, or we could have been the first designers and manufacturers of auto catalytic converters that use platinum. Selling gold is being market led. Selling jewellery is being market driven. We seem to have the research, technology and innovative capabilities to be a world player. What we lack is the ability to translate that into actual production and sales.
World trade is full of unfair practices, protectionism, collusions and barriers that severely tarnish the ideal. Do we have to be part of it? And to what extent? We can only answer these questions comfortably if we have a clear conscience about our own dedication to that ideal…not in our own interest but in the interest of customer sovereignty and the buyer’s freedom of choice.
19th century French Economist Frédéric Bastiat said it best: “If you wish to prosper, let your customer prosper. When people have learned this lesson, everyone will seek his individual welfare in the general welfare. Then jealousies between man and man, city and city, province and province, nation and nation, will no longer trouble the world.”
The macro evidence of our trading unfitness is revealed in the latest Global competitiveness report and the latest OECD survey. We seem to be quite good at certain controls such as auditing, banking soundness, and the legal framework – but very poor where it really counts such as domestic competitiveness, stability, education and training, and labour market efficiencies. We are good at making the rules of the game, but terrible at playing it! The latest alarming R25bn trade deficit shows how reliant we have become on imports and less adept at exports.
The top five competitive nations of Switzerland, Singapore, Finland, Sweden, and the Netherlands confirm World Bank findings of some decades ago, that the key to national prosperity lies in having an external focus and developing people. Switzerland’s consistency in top rankings never surprises me – after all, their best known export is the Red Cross. It’s actually a very simple formula: surpluses and prosperity are created when people by and large are giving more than they are taking. Deficits and poverty are created when people by and large are taking more than they are giving. You can never achieve the former if you are primarily focussed on the latter.
We are simply not market driven. That statement alone is bound to bring out the ideological super heroes in their different capes – left and right, capitalists and socialists!
But being market driven is not about a system. It is about behaviour. It is about an attitude. It is about being seriously concerned about the other, and putting their interests above all else within the rules of legitimate transaction. Being profit driven is the opposite. So too is being wage driven. At every turn in South Africa today, there is an incessant and hysterical babbling about getting; about profits, wages and hand-outs; a near exclusive focus on wealth distribution and redistribution, rather than wealth creation itself. The latter comes from being market driven and the former comes from the latter.
We don’t need all the scientific evidence to prove that this is so. Just follow events and the debate around us; or refer to Felicity Duncan’s article on lack of competiveness in our businesses; and just think of how we are treated as consumers, as customers, as citizens, as people, by our institutions, both public and private.
Our destiny as individuals, as companies and as a country is locked up in one fundamental axiom: that our true value lies in our capacity to make a contribution to others.
Above all else, that’s what gives us meaning.
That is the real magic of markets.