I’ve been here in for 8 weeks now and I’m ready to follow up blogged my comment that I said on my second which was “manufaturing for outh africa”. In the interim I have been volunteering at an informal settlement and praying and writing lots. I’ve had a great time in the rainbow nation.
I’ve delayed forming an opinion or writing about life here until I could suss things out. Life here is intensely multi-cultural and it takes a while to get used to. It’s radically different to other countries I’ve had the pleasure of living in over the last 13 or so years.
But after watching and learning for 2 months, I can say I am delighted to be here. I love the people. I love the atmosphere and vibe. The outspokennes of the people is shocking at first, but having been in politically and mentally sterile places in the past, I soon overcame my shock and began to tremendously enjoy hearing other people’s points of view – no matter how jarring or upsetting to my ears. I love the diversity and energy. This place is alive and willing to laugh at itself.
And then I stumbled on a possible solution to the word I was given “manufacturing for South Africa“.
Within a few h0urs of landing at the massively impressive Oliver Tambo Airport (AKA Johannesburg International Airport), I had this word or impression placed within me: low cost manufacturing boom like in China. – Manufacturing for South Africa
In recent weeks I have felt led to pray for jobs, not just locally but globally.Then in Jacob Zuma’s national adress he spoke of massive job creation. I was excited. Then in the last few days I got a glimpse of HOW we can achieve that creation.
This post describes how we can do this, but it also explains WHY we should do it, and it explains what my view is of the context in which we live – the material world.
Capitalism matures… slowly
I am excited by the maturity that I see developing in capitalist circles. I know that God is in favor of us making a profit, because He said of Himself
Thus says the Lord, your Redeemer, the Holy One of Israel: I am the Lord your God, Who teaches you to profit, Who leads you in the way that you should go. – Is 48:17
That profit doesn’t prove God is a capitalist, but only that He loves us and He wants to help us to improve our conditions.
Nevertheless, when I wrote this post “Opinion – The role of governments in this financial mess” …
Let’s understood that in the same way that children cannot moderate their own behaviour, capitalism cannot moderate it’s own behaviour. This idea of letting the market decide was obviously a terible idea and it was invented by the out of control children themselves. It’s like letting the inmates run the jail – an idea put forward by the inmates that can only end badly.
Most parents know that – generally – children are a great blessing. BUT. If they are left unsupervised they will eat junk food until they vomit and run around naked and uncovered. In the same way capitalism is a blessing. BUT. If it is left unsupervised it will eat junk bonds until they vomit and they will run around naked and uncovered.
To solve this problem, a parent has to take the wild child under their wing and watch every step, retraining them. This is called reparenting. The child will yell, scream and rebel. But the change is needed. Children are fabulous and a treasure. We need well behaved children.
And a few days ago I was delighted to hear George Soros say almost the exact thing – except he used the correct economic phrases!
‘Decidedly the worst (of the crisis) is already behind us. This is not like previous crises but marks the end of an era. ‘The system to date had been based on the false assumption that markets can independently regain their equilibrium and that the system is self-correcting‘.
He also said the regulation in the economy should be aimed at controlling market bubbles. ‘We need international regulations to retain international markets. This won’t be easy… If we won’t be able to do this… then globalisation, as we now know it, will fall apart,’ he said. He said the current crisis should be tackled with intervention. – Reuters
Without new international regulations, “globalization will fall apart,” possibly spawning a system of “state capitalism” like the one that exists in China, he said. – Bloomberg
Remember those words: “state capitalism”. This recognition that the state must get involved (in helping people and stabilising economies) dove-tails nicely with my idea to attract jobs to South Africa.
Here is my logic:
- Manufacturing jobs are being exported from rich countries to poor countries. It’s a reality. Whoever gets those jobs benefits.
- South Africa is a poor country and should be benefitting from this bonanza
- BUT. The jobs are going where there is a cheap labor force and lots of university graduates
- Crime, red tape and other negatives don’t put companies off, they expect the local government to step in and assist – as India removed red tape in Bangalore to attract call centers and then to attract IT companies. Companies main concern is to lower their input costs (salaries, taxes) so that their products can compete internationally.
- South Africa has lots of universitites and an investor friendly government which is willing to do what it takes to win the FIFA World Cup 2010 and Rugby World Cups etc. We can host big events. We have shown that we can reshape our landscape to suit the event.
So what is missing?
Yes we have workers available to work. And yes we have many universities and graduates. No problem there.
But companies are looking to lower their input costs and this means tax vacations and especially it means lower slaries. And here is the problem. When I mention my idea of lowering salaries to people they all say COSATU won’t permit it. But I think they will, if we do one thing. Let’s lower the costs of houses and land prices. We can do this by passing one law, which will upset the richest few, but delight the vast majority.
You see, if we go to COSATU and tell them we are dropping everyone’s salary by 50% they will have a rolling strike action because they are actually demanding higher salaries at present. This is because people’s morgages are going higher, because land prices are going higher.
But if we said that we are dropping salaries 50% and that at the same time land prices will go down 80%, then in fact I think COSATU and the people would be delighted!
All it takes is one law
If we passed one law, just one, then house prices would adjust and salaries can be safely lowered. What is this law? I got the idea from my reading of Isaiah
They will build houses and dwell in them; they will plant vineyards and eat their fruit. No longer will they build houses and others live in them, or plant and others eat. – Is 65:21-22
I suggest a change in our thinking. Unrestrained capitalism consumes resources until they are so scarce that they can be traded for profit. For example…
- We consumed clean air until it had a negative effect on the ecology and now we are about to begin trading schemes to barter permits that allow us to produce filth.
- Capitalism consumes bush and natural habitat until animals are rare enough that they are seen as desirable and people visit expensive game parks and zoos.
- OPEC long maintained that the output of oil in the world exceeded the actual demand… and that it was gamblers who were making a $50 per barrel of oil turn into $160 and could go as high as $200. It was clear that this was utterly true when the gamblers were taken out of the market by the financial crisis, then oil returned to $50. Now that gamblers are back on their feet, oil is on it’s way up.
The predatorial behaviour and correlating events is sickeningly clear.
Don’t drive up prices on necessities needed to live
I’ve already clarified that I’m in favor of sensible and moral capitalism. But how do we determined where to place limits? What should we limit?
We don’t allow a market economy in children’s school books to drive up the prices until the breaking point of what people are willing to pay for school books. Why not? It seems that someone somewhere realised we should not drive up the prices of basic necessities needed for people to live.
I suggest that having a house is a basic necessity for the stability of a society. A job is too.
So if we passed a law that removed the gambling from housing, then prices would return to simpler “supply-and-demand” levels. So the law change I propose is this: a house is a necessity for a family, so each family can only own one. This simple change would remove all gamblers and profiteering from houses.
Supply and demand would still exist, because houses at the beach will still be far more expensive than a shack in an informal settlement. And it should be more expensive! It’s in a more desirable place!! But now that only one family can own one house, rich people can invest in other instruments, companies can look elsewhere for their profits.
With house prices coming down dramatically – just as oil did when the gamblers were temporarily removed – then we will see the true price of residential land. Far lower. And then upward salary pressure will be reduced.
Come to South Africa and employ our people
Then let’s get everyone we can over to any country and every company which is looking to move to China and India.
Ask them… why go there?
- Come to South Africa. We will give you a tax break for 10 years, provided you employ our people (the people will pay taxes, so the government still wins).
- Come to South Africa. If you encounter red tape, we will fast track changes you need.
- Come to South Africa, we have the workers and the university graduates for you, ready and willing to work.
- Come to South Africa, we have held over 200 major sporting events in recent years, we have improved our telecommunications and transit system for 2010, we know how to do things BIG.
Pursue excellence in every area and respect
And we simply must pursue “excellence” in every aspect of government delivery. As I arrived in the country at the hugely impressive Oliver Tambo airport in JHB, I saw excellence in every aspect. When I learned about the banking changes and FICA laws, I saw excellence. If there is conflict between “the African way” and excellence, we must pursue excellence. It is a required change in mindset, if we are to attract 4 million jobs by 2014.
“Between now and December 2009, we plan to create about 500,000 job opportunities,” Jacob Zuma told MPs. He promised his government would create a further four million jobs by 2014, but did not explain how. – BBC
Bringing companies here on a tax holiday must be given with the proviso that they create significant employment for a time period. There is no tax loss because companies pay no tax, because that company was not here to begin with. There is a lot of tax gain because people pay income tax and the resources used in the manufacturing has VAT on it.
Resolve the wage pressures by taking the gambling out of house prices, because it is a necessity for a stable family and by extension and stable society.
Keep some perspective about things
State capitalism is symbolized by the “sovereign wealth fund” and it is already a FAR FAR larger source of income than the measly few private equity investors and hedge funds which get all the media attention…
private equity’s assets under management reach $2.5 trillion (€2 trillion) last year, a rise of 15% despite the economic turmoil…
The figure, which includes real estate funds of $495bn, dwarfs the hedge fund industry, which controlled assets worth $1.56 trillion in October – wealth-bulletin.com
So private equity and hedge funds seem to control lots of cash. Do they?
Assets under management of SWFs increased 18% in 2008 to reach $3.8 trillion… There was an additional $5.5 trillion held in other sovereign investment vehicles, such as pension reserve funds, development funds and state-owned corporations’ funds and also $6.1 trillion in other official foreign exchange reserves. – Wikipedia: Sovereign Wealth Funds
So a total of $15 trillion in SWF – much larger than private equity. Is that large or small? What is the size of the US economy?
U.S. GDP is $12 trillion – International Monetary Fund
Ouch. Money controlled by SWF is larger than the whole US economy. But it gets worse…
the total value of traded securities (debt and equity) denominated in U.S. dollars is estimated to be more than $50 trillion, and
the global value of traded securities is about $165 trillion – International Monetary Fund
These are BIG numbers, so it’s really no wonder that when the stock market turns down the world goes into recession, and when it reinflates we see green shoots and talk about the end of recession. We really MUST manage the gamblers as they are a huge risk to the world, don’t you think?
Unfortunately, there’s a lot we don’t know about sovereign funds. Very few of them publish information about their assets, liabilities, or investment strategies.- International Monetary Fund
I could rant on about this, but it’s pointless. We can only focus on what we can do, not what we can’t.
We must decide what we CAN compete on
We need to be realistic about what we can do to get to full employment. I’ve been thinking about what each country can do to create growth. It is vital that each country uses this time of change to invest in an “enabling technology”. That means that the government sinks money into something that enables a massive number of innovations and new products and companies.
- The iPhone is an enabling technology, you can tell because it spawned 15 000 applications and with the latest refresh in technology, released on the 15th of June 2009, is set to enable not just free applications, but paid applications. This is a BIG enabler.
- The internet was a phenomenal enabler technology (and the decision not to tax ecommerce done in the USA was genius!)
- For Melbourne, France and Geneva it was pouring money into the science black hole – but now that super-colliders are about to benefit medical science, these places look set to bring in the revenue from all the technologies that will be enabled.
- For Australia investing into an enabling technology means building the NBN. It is an enabling technology which can spawn great benefits.
- And for the USA the biggest enabling technology that will shortly be invented is the even larger “smart eletricity grid“. The impact of this enabling technology is staggering and I can only guessed at the amount of changes it will bring to every day appliances. The amount of innovation enabled will be staggering. When the electricity grid is “smart”, then every appliance can decide when to switch on and off, based on the cost of electricity at that time. A fridge will be made smart and it will know the price of electricity and it will make smart decisions. Every appliance will be refreshed with this new technology in ways we can hardly imagine. The first country to enable this will take the lead.
- Everyone knows that nano-0tech and biotech will also enable new products.
But what about South Africa? If we are competing for investment and land/income costs is your choke point, then be aware that your competitor China is not against lowering their land prices in order to attract even more investment and jobs for their people!
BEIJING, May 14 2009 (Xinhua) — China’s Ministry of Land and Resources has announced a 30-percent cut in the minimum purchase price of land for industrial use in order to boost investment. – Source
So let’s make the changes we need to, let’s get everyone over there and start knocking on doors. We need our people employed in order to stabilize the nation. 25% unemployment and 40% poverty must change. And it can, with boldness. As Hillary Clinton said: never waste a good crisis“. Now is the time to make bold and even radical changes. Ask President Obama, he’s doing it. He is forming health care, banks and anything else he can think of. Why shouldn’t we be reforming too?
When the income starts coming through, we can focus on bigger and more expensive enabling projects.
Don’t be fooled. What Soros calls “state capitalism” is already here – as I showed above. It is fantasy to think that the market will simply work. It’s size is dwarfed by comparison to the sovereign funds. The nation must have a top down strategy to prosper.
I remember describing SWF and saying it was “inevitable”, while I was having breakfast about 4 years ago. This world works on a fittest-will-survive mentality. Unfortunately. But we ARE learning that we must moderate our behaviour, or suffer the consequences.
I believe that global openness will resume again and become the larger and dominant force, it is in it’s infancy now. But that will only happen when China’s voracious hunger is satiated and it has to move to the next level of maturity… but that is a way off.
“Old Europe” became settled long ago and has been a steadying force in the world for a while now. America recently moved to the next level of maturity, discovering that it’s safety depends on other people, and suddenly realizing that it’s happiness is not provided only through it’s own consumption. But China only recently became a teenager and it is now tearing around the world, buying buying and spending. It will take them time to mature and not be entirely ego-centric as teenagers always are.
Africa has hardly begun down this road. But the fact that South Africa displays it’s TV schedules in “CAT” (central african time) is indicative of the growing co-operation that is occuring in Africa. There is a huge hydro-electricity project happening in central Africa to provide power to many partners, that is great. The wars are gradually lessening. That is great. But it’s depressing that we haven’t managed to achieve more. But it’s also exciting, because so much of life is still ahead of us and we can learn from others who are in front of us on this learning curve!
And the greatest enabler of all is the favor of Jesus Christ. Wherever that lands, you can be sure that the country will turn around and benefit. If you are truly looking to be in power until Jesus Christ comes back (2nd) then you must follow through on that and seek His favor.