Spearpoint’s Cure For the Global Financial Crisis

So, global markets have decided that, having already received unbelievably vast amounts of public money to shore-up those financial institutions brutally raped and pillaged by grasping and greedy traders and speculators, they want even more free money to be pumped into their private little game and will not play anymore until they get what they want.

Having pushed their grubby and sticky hands as deeply as possible into the cookie jar of financial services, grabbing so much loot that their distended fists cannot now exit the neck of that jar of goodies, thereby blocking the legitimate movement of those goodies in and out of the jar, these traders and speculators are now refusing to let go enough of their ill-gotten gains to allow the movement of enough money to enable the rest of the planet to get on with earning a living.

Well, screw them.

Spearpoint has some suggestions for how this economic and financial crisis might be approached. Forget, for the moment, that what Spearpoint knows about economics and finances could easily be written – in three-foot high capital letters – on the back of a postage stamp. We need some common sense (albeit of the Spearpoint variety) rather than esoteric jargonised bulldust designed to maintain the vested interests and status quo of the present global economic system.

Firstly, a global economy (which, whether we like it or not, is what we have) requires a single, global currency. Remove the opportunity for speculation on a myriad of monetary units and the subsequent distortion of prices and values induced by the artificial and arbitrary determinations of one currency against another.

To all intents and purposes we have that universal currency now – the United States Dollar. So let goods and services be priced in Dollars. Let everyone be paid in Dollars, be they in America, South Africa, Pakistan, Argentina, France, Samoa, Russia or wherever. Let the price of, for example, a loaf of bread be the same everywhere in the world. Let one hour of a labourer’s work, (or a dentist’s, or a clerk’s, or a shop assistant’s) be equivalent worldwide in value according to skill, education and training.

If you don’t like the Dollar, then pick another name for it – or find something else to use as a currency.

Secondly, regulate, regulate, regulate. Make it difficult for selfish and unscrupulous individuals and companies to profiteer at the expense of others. If need be, restrict the number of trades permissible on any particular item or parcel being hawked. Similarly, restrict margins and commissions per trade. Let’s make it difficult for individual traders to make enough money to buy a C-class Mercedes on a single trade.

Thirdly, license every trader, every stockbroker and every trading house. Introduce stiff operating requirements and stiffer penalties for contraventions. Enforce those requirements and penalties and, for the purposes of audits, have every transaction fully recorded and signed off by the trader(s) in person.

Fourthly, in respect of the current crisis, issue blanket indictments against every trader, speculator, bank and trading house for investigation into unethical practices, recklessness, rank greed and potential fraud and/or criminal behaviour. Stop rewarding the rape and pillage of the system. Jail the bastards and seize their assets and those of their families and other beneficiaries.

Never mind about instilling confidence into the existing system – confidence which, strangely enough, was in plentiful supply up until a few weeks ago when every man and his dog in these banks, trading houses and bourses was happily screwing everyone else in sight. Rather set about instilling respect for ethical business behaviour and fear of the consequences of improper and reckless actions and mindsets. Confidence will follow as inevitably as the balls of the bull follow the ring in the nose of the beast.

Fifthly, operate the stock market system more along the lines of Lloyds Insurance – limit any one individual or company to trades that they can personally guarantee. If a trade goes wrong then the traders carry a personal liability to their investors and can lose their own assets to compensate their victims. Bankrupt the reckless and criminal thieves. Do this and watch sensible business caution permeate the world of trading.

Finally, and again in respect of the present crisis, close all stock markets for the next seven days. Then re-open them for four hours and gauge the response; if the traders resume their bad behaviour close the markets for another week – and continue doing so until the traders are prepared to play the game in an equitable and fair manner, sharing the bad risks with the victims of their excesses rather than only wanting to pocket profits without sharing the losses. The bulk of the global population will be no worse off than they are now (the markets are, essentially, shut owing to the actions of the banks and traders) and those banks and trading houses will risk being out of business in short order.

Simplistic? I have no doubt. But perhaps a start. Take the Golden Rule and work from there.

Spearpoint.

12^th October 2008

The ANC and Ideology – I

It’s strange how even the best of intentions can produce results contrary to what was planned.

It’s also strange how the most meticulous planning and foresight can fail to predict outcomes at variance with what the planners had hoped to achieve.

Strange, too, is the fact that the more motivated and inspired the planner the more likely is the plan to go awry and the less likely the planner is to admit that the plan is not working.

The more ideologically pure is the plan then the more likely it is to come off the rails. The world is noted for its penchant to inject varying degrees of reality into the best thought-out and executed of Man’s schemes, dousing dreams with hefty sluices of ice-cold sanity. There are always those, however, who – regardless of the teeth-chattering shivers and goose bumps of the Arctic chills of real life – will persist in their cherished and cockeyed perceptions of the world as they believe it should be. Like the KFC advert in South Africa, showing two grown men sitting on a park bench in the depths of winter, both consuming some iced KFC confection and progressively shedding items of their warm winter clothes (down to their underwear), each seeking to show the other that he is not cold and is, in fact, quite warm, thank you very much, the ideologues and the proud will go to almost any lengths to deny the existence of the reality of the situation they find themselves in.

Recent South African history has more than its fair share of such idiocy.

The episodes earlier this year of xenophobic violence between different national, cultural, racial and economic groups within the townships and squatter camps of South Africa are but one example.

Having had the images and stories of the brutal black-on-black savagery that was perpetrated in the townships of South Africa flashed around the world – to the astonishment of the global population, given the previous propaganda of the ANC government that all was sweetness and light in the new ‘democratic’ and ‘egalitarian’ South Africa under the benevolence of the ANC – the government of South Africa was, initially, just as surprised as the rest of the world and failed to act in any meaningful way against the hatred and violence for a couple of weeks.

When, eventually, the government began, slowly and inadequately, to address the problem, the official line was merely that the attacks were merely spontaneous and random criminality – ignoring the widespread nature of the onslaught throughout much of the country.

As, finally, the scale of the problem began to be realised the government then turned to one of its old favourite lines of reasoning in times of crisis – viz; the attacks were said to be the result of the work of some unidentified and shadowy ‘third force’ (by implication, disaffected whites and their lackeys lusting after a return to the pre-1994 days of perceived power, privilege and glory) conspiring towards the destabilisation of the country and the overthrow of the ANC government. At which point, notably, the army was called in and troops were put on the streets in support of the police.

(Strikingly similar arguments had very quickly been produced by the ANC government when the country’s only commercial nuclear power station had been crippled by a technical failure, just prior to the realisation that the government and Eskom (the national parastatal solely responsible for the generation and distribution of electricity in South Africa) had blithely led the country into an economically disastrous power crisis. These politically bankrupt, inept and transparent arguments were quietly – and quickly – abandoned in the face of the incontrovertible evidence of the rank incompetence and stupidity of both Eskom and the government.)

Then, as the violence and xenophobia reached its height, the ANC government declared that, once the orgy of hatred had subsided, the victims of the attacks seeking refuge and safety in hastily set up tented camps away from the townships and squatter camps would, as a matter of government policy and ideology, be (forcibly, if need be) re-integrated back into the very same areas and neighbourhoods that had attacked, dispossessed and killed the poor bastards in the first place.

Such is the ideology and illusion of ANC thought and propaganda. The desperate need of the ANC to promote and defend its communist ideas of what, according to their cherished conceptualisations of the world, should be – rather than what actually is – drives them into a denial of reality. The sad part is that they then drag everybody else who is subject to their power into a world that does not exist – much to the discomfort and danger of those who do not share or enjoy the benefits and privileges of the ANC leadership and their ivory tower ideologues.

The concept of different tribes, races and socio-economic groups living peacefully side-by-side in joy and harmony is alluring. It should, perhaps, be an ultimate goal of mankind’s. But in the here and now of human social life on this planet opposites tend to repel and likes attract. It is a simple fact of human behaviour in this day and age, as well as throughout our history.

Elsewhere in Africa where refugees seek shelter from whatever political, military or economic storm they wish to avoid they are usually placed together in camps away from local populations where frictions could ensue. Even without coercive factors such as wars and famines to drive people away from their own homes, those fleeing less life-threatening situations have, historically, tended towards one another; the economic migrations of the nineteenth and twentieth centuries in America and Australia saw Italians, Jews, Greeks, Poles, Germans, Chinese, Russians, Armenians and Slavs naturally coalescing into their own communities and neighbourhoods because that was what they felt most comfortable with and where they felt safest until, after a number of generations, they were able to assimilate enough of the predominant local culture to be able to venture out into that culture without undue threat.

So, the ANC and its government is intent upon farting against the thunder of human nature. Already many of those displaced during the xenophobic attacks have been returned to their previous abodes. (Others, seeing the writing on the wall, chose to return to their home countries, preferring the known evils and hazards of life in Zimbabwe, DRC, Mozambique, Somalia and Sudan to the uncertain hospitalities of South Africans.)

Already the rumblings in the townships and the squalid squatter camps have begun. Already the voices of dissent and despair over the re-integration have begun as mumbles of the ordinary people. Already have begun the not-so-quiet and subtle statements of local councilors that the ‘nkerekwere’ are not welcome – especially, for example, those Somali shopkeepers in the Western Cape townships who are seen to be too hard working and undercutting the prices of the local spaza store owners. It will only be a matter of time.

Criminality aside, it is only the ANC and its dogmatic and slavish adherence to its unrealistic and disgraced theories of a Marxist Utopia that is to blame for the initial outburst of xenophobic and genocide-intended violence and dispossession. It was the ANC and its inept and corrupt government that admitted millions of illegal migrants into the country and it was the same crowd that failed then to put in place the necessary social structures to police and care for those immigrants. And it is the ANC that, as with the Zimbabwean situation, continues to steadfastly maintain that no problem exists – as if ignoring or wishing away anything that is inconvenient to one’s perception of the world is really going to achieve something.

Nor is it any good to say that the USSR and the old Soviet bloc managed to keep racial and social peace in a wide-flung empire. That was only achieved at the point of a gun and under the constant threat – and utilisation – of ruthless repression from state organs such as the KGB and the Red Army. Despite recent talk from the ANC of instituting so-called ‘street committees’ as a means of doing what the South African Police Service clearly are unable to achieve – controlling and reducing crime – the ANC has neither the skills nor the stomach for such direct social repression, to say nothing of its lack of desire to admit to the world that only force could integrate a tribally diverse society and that its theories are valueless.

But such are the consequences of any system of political, social and economic control that is applied, willy-nilly, as a complete solution to the theoretical ills of mankind rather than as a set of aspirations and objectives which need to be realised within the context of the real world and the differing sets of circumstances in which different people find themselves from time to time. Such systems, applied without care and consideration, de-humanise and alienate those they are intended and theorised to more fully humanise and empower. Human beings are, first and foremost, individual beings within a social environment – not the other way around. And therein lies the danger of systems of thought in which people are primarily catagorised as, variously, (and by way of example) ‘the masses’, ‘serfs’, ‘consumers’, ‘the proletariat’, ‘peasants’, ‘communists’, ‘Democrats’, ‘Republicans’, ‘Tories’, and so on.

De-humanise humans for long enough and, eventually, they will behave as animals.

Spearpoint.

9^th September 2008

African Statesmanship

The recent death of Zambia’s President Levy Mwanawasa is a tragedy for not only Zambia but also for the entire African continent.

My understanding is that Zambia has prematurely lost a leader of exceptional calibre who was striving to make a genuine difference to the lives of Zambians, particularly in his determined fight against corruption.

Almost uniquely amongst world leaders, Mwanawasa publicly confronted and then prosecuted his predecessor Frederick Chiluba for corruption and fraud. Mwanawasa’s decision to do so cannot have been easy. Chiluba had, after all, been the one to groom and present Mwanawasa as his successor and there must have been some considerable pressure from within the ruling party not to rock the boat (thereby spilling the cash) and to spare Chiluba public humiliation – to say nothing of Chiluba’s underlings, hangers-on, presumed beneficiaries and possible co-conspirators.

Instead, Levy Mwanawasa chose to be a statesman, deciding – as far as possible in a political environment – to honour his promises to the electorate by adhering to the principles (oft-repeated but rarely practiced by the power hungry) of his country’s Constitution. In so doing he appears to have honoured himself and his country, as well as having set a worthy example to his constituency.

Although Spearpoint never had the opportunity to meet and know Levy Mwanawasa personally, the hope is that Zambia will allow Spearpoint to join (albeit remotely) in their mourning as a fellow African.

For the demise of Zambia’s Mwanawasa is a loss not only for Zambia but is also a loss for the whole of Africa – especially southern Africa.

As at home, Mwanawasa displayed the courage to stand up and be counted in the face of the prevailing antipathy in the southern African region towards corruption, fraud and dictatorship in the form of Robert Mugabe’s tyrannical and outright criminal regime in Zimbabwe.

With the tacit support of Ian Khama, the President of Botswana, Mwanawasa alone named and shamed Mugabe for what he is, what he represents and what he perpetrates against his own country and people.

In so doing Mwanawasa also implicitly named and shamed all those other African leaders who, despite mounting and convincing evidence, have given Mugabe political support and sustenance either directly and openly or through their failure to criticise and isolate Zimbabwe for its current policies and situation.

Principal amongst these has been South Africa’s Thabo Mbeki and his ANC government.

Appointed by SADC to mediate in the Zimbabwe crisis, Mbeki has epitomized the approach of many other African leaders: don’t rock the boat; don’t embarrass Mugabe; don’t expose Mugabe; don’t fracture the façade of imagined African so-called solidarity; don’t further reinforce the global perception of Africa’s inability to identify, address and remedy its own problems, including those of poverty, corruption, crime, ignorance and indolence.

Notwithstanding recent critical comments from Jacob Zuma (as President of the ANC) regarding Zimbabwe, the fact remains that South Africa continues to pussyfoot around the person of Mugabe and the crisis in Zimbabwe and refuses – publicly, at least – to acknowledge that a problem exists. In Mbeki’s own words on the subject, “There is no crisis”. Sentiments echoed by the Minister and the Deputy Minister of Foreign Affairs.

The ANC must be living in gaga land.

It’s obviously not a crisis when a neighbour of South Africa destroys its economy (inflation admitted by the Zimbabwean government just this month to be running at not less than eleven million percent – that’s eleven followed by six zeroes, folks), and driving no less than four million of its own citizens into South Africa – mostly illegally – to escape starvation and political persecution (and who knows how many into other neighbouring countries).

And how can it be a crisis when even the great ANC, champion of the art of rule by smoke and mirrors, has been appointed (in the person of Thabo Mbeki) by SADC to mediate between Mugabe and the Zimbabwean Opposition.

Yet the appointment of a mediator implies conflict, dispute and actual or potential crisis. That much SADC has got right; where it went wrong was appointing Mbeki and his team as mediators. Not only do the mediators deny the existence of a situation which they have consciously agreed to fix, but they are unsuited and unqualified to carry out such a role since they have consistently and laughably maintained for many years now that within their own borders there are no crises in law enforcement, the judicial system, education, HIV, AIDS, TB and other health matters, housing, and so on.

SADC erred in appointing the ANC and Mbeki. It is patently clear that these guys couldn’t organise an orgy in a brothel, given their record of domestic service delivery and good governance.

The mediation between the parties in Zimbabwe has stalled. Naught has been achieved. Mugabe continues to do as he pleases – even to the extent of re-convening Zimbabwe’s parliament (which, according to Zimbabwe’s Constitution, should have occurred months ago) before there is any clarity and agreement on how power division and sharing will prevail in the new government.

Now, doesn’t that just speak volumes on the dedication and abilities of the so-called mediators?

Excepting Zambia and Botswana, no-one in SADC has had the courage to slap Mugabe silly and to tell him to stop behaving like a spoiled brat and to stop embarrassing all of Africa with his puerile behaviour. Mugabe’s arrogance and assumed impunity – watch his disjointed marionette-like swagger in public – has never been challenged by South Africa and its continental cronies.

Indeed, South Africa has shown great concern over Mugabe’s dignity and has been keen to protect that dubious quality. But at what price? Where is the dignity of those Zimbabweans, forever on the cusp of eviction, arrest and starvation, free-falling into the black hole of faster-than-light inflation who have had to separate from their families and homes in order to cross the borders of neighbours looking for some means of sustenance and to live in the additional and constant fear of deportation as illegal immigrants? Where, in South Africa, is the dignity for those South Africans already suffering under the laissez-faire incompetencies of the ANC dictatorship who now have to make room in already overcrowded cities, townships and squatter camps for swarms of desperate immigrants who also want a share of what is clearly an inadequate, mismanaged and ill-divided political and economic cake?

Does the ANC have no shame? Is it not ashamed that it continues its rhetoric and spin doctoring even though it clearly cannot do its job – either at home or around the table in Harare? Just what are the criteria against which it measures itself and which, obviously, allow it in its collective politburo mind to continue its rule?

Of course, shame and admission of error are not matters for easy admission by any politician even in the normal course of events, much less at any other time. Such is the nature of the beast. (Also, incidentally, such is the nature of those that look for and permit the politicians to rule; populations and electorates tend to be lazy in thinking for themselves and constantly seek the comfort of having someone else do their thinking for them. A contradiction of the human condition is that, of all the creatures on the planet, humans have the greatest ability to deal with change, challenge and chance yet are the most persistent in their – often unconscious and unspoken – drive for certainty and comfort.)

Admission of error in Africa is very difficult. Culturally the strong man must be seen to be strong, even if – especially if – wrong. The advent of colonial rule, with all the embarrassments that that brought, together with the displays of power and material goods by the colonial powers, then provided the need to display to the world that Africa and Africans could achieve the same themselves without outside intervention.

The loss of face when African nations screw things up is immense – far more so than the purported Oriental perceptions of face. This is why, for example, racism and colonialism are frequently used as catchphrases to divert attention away from the true reasons for African failure.

Mugabe blames the racism and imperialism of Britain and America for his devastation of the Zimbabwean economy and social structure. Mbeki and many of his colleagues blame racism in South Africa for the failure of many of the ANC’s policies and programmes. It is far less embarrassing and far easier to fix the blame rather than the problem – particularly where personal political careers and ambitions might be at stake. It’s an African pastime; it didn’t rain enough; it rained too much; we don’t have enough money; foreigners are taking our women and jobs; the Whites don’t share; the British conspire against our sovereignty; the Chinese steal our resources; the Indians are lazy and greedy; the Zulus cannot be trusted and steal everything not nailed down; the World Food Programme gave our starving people the wrong food; it goes on and on.

Spearpoint is not suggesting that there are not grains of truth and reality in some or all of the above excuses. But that is what they are – excuses. Fourteen years after shouldering aside the burdens of apartheid the ANC and its stalwarts still glibly trot out racism, colonialism and imperialism as reasons behind its failures in almost every arena of life in South Africa. They fail to see that history is history; it is past and passé. History is a guide for and to the future, not a Balkan-type motivation for perpetuating old horrors as justification for interminable inefficiencies and inadequacies.

Unfortunately, it is in the past that the ANC finds itself mired. Starting its existence as a protest and liberation movement the ANC has been unable to shrug off that mindset. Fourteen years into government the ANC is trapped in a time-warp, still slavishly employing the same slogans, gestures and thought patterns of its Communist Party origins and history dating back to the October Revolution and the Long March when those who were not for the movement were targetted as enemies and to be treated accordingly. Defunct ideology and the mindless mouthing of Cold War rhetoric serve little useful purpose when the living are here and now in a world that has moved on from what may or may not have happened centuries ago.

The ANC has failed to heed its own ideological teachings and raison d’etre which were to grow, improve and develop. The ANC has fallen at the first hurdle of metamorphosing from a liberation movement into a credible political party and sustainable government. The eyes and thoughts of the ANC remain firmly fixed on the perceived glories of its past where, by virtue of the then prevailing circumstances, it was easy to exhibit and enjoy disciplined solidarity since the goals of the organisation were simple to define and explain and the enemy was easily identified. Now in government the aims and objectives are far fuzzier in the face of the need to be a responsible and credible representative of an entire and diverse population; the temptation for which the ANC has fallen has been that of remaining a lobby group for a narrow and specific segment of the populace. The ANC continues to view everything non-ANC as being ‘the enemy’ and has behaved and responded accordingly.

Thus, for example, ANC officials will blame ‘white mentality’ and resistant racism for poor results on the rugby pitch or athletics field where points are not awarded for ideological or racial purity but for excellence in performance. Excellence cannot be legislated or enforced. It must be scouted, nurtured and developed organically. A fat runner cannot be expected to be able to produce satisfactory results in the marathon, regardless of any racial or socio-economic origins from which the individual may have come; the athlete must be made fit and then trained in his discipline before adequate results can be reasonably expected. Likewise, a school leaver, unable to add, subtract and so on cannot become a computer technician or electrician until he has had the time and resources granted him to master sufficient of the basics to enable him to then progress on to more specialised (and better paid) areas of competence.

Similarly with the Zimbabwe situation. The ANC remains locked in its perennial ‘circle-the-wagons’ mentality of giving greater weight to old loyalties than to recognition of getting the job done and removing those who fail to produce results. The support given the ANC by Mugabe and Zimbabwe during the ANC’s years of opposition to the then South African regime are viewed by the ANC to be perpetual bonds of debt that far outweigh any consideration of the abilities and rationale of the creditor in that relationship. That Mugabe is an egomaniacal despot who has so alienated the people of both his own country and others around the world that the economic and political fabric of Zimbabwe now lies tattered and fallen appears to matter less to the ANC than the perceived debt owed to Mugabe by the ANC. Worse still, the negative impact upon South Africa and other SADC countries stemming from Mugabe’s depredations is clearly considered by the ANC to be of little import; it could be argued that what happens in Zimbabwe is their own affair and they should be allowed to get on with it, but the argument fails if the actions of Zimbabwe directly impact on South Africa. Would the ANC retain its present stance if the Zimbabwean army were to invade South Africa in order to seize assets no longer available in Zimbabwe? Or would the ANC turn a blind eye, again, and insist that no crisis existed?

As the governing party of South Africa the ANC’s prime responsibility is to the country and all the people of South Africa. The ANC’s responsibility to Zimbabwe (or any other country, for that matter) is secondary, at best. Get your own house in order. Only then – not before – and if there is something to spare, can you turn your charitable efforts elsewhere.

Hubris can be a terrible thing. It blinds one to failings and shortcomings which, if pride be briefly set aside, could be corrected with a minimum of fuss and damage. There is no shame or loss of self-esteem in saying “I don’t know” or “I don’t have the skills right now to correct this situation” and then turning to others who possess the requisite knowledge. Knowledge and skills know no skin colours – but where they are claimed when, in fact, they are absent then there is a real and severe humiliation when the deficit is finally revealed.

Levy Mwanawasa’s legacy – in part, at least – will be of declaring to the world that just because fellow black Africans now largely control their own destinies it is still not right or acceptable when laws and principles are broken and cast aside – just as it is unacceptable when ordinary people suffer because their leaders are too proud or ideologically blinkered to acknowledge that they are relatively new to the business of running their own affairs and to bring in the required expertise.

Spearpoint.

26^th August 2008

More on Food and Fuel Prices…

 

 

 

 

 

 

A thought occurs…

 

Eskom, as we are all probably aware by now, seems to be hell-bent on hiking their tariffs to the ordinary South African electricity consumer by 53% this year and by a similar amount next year.

 

I now wonder if, just maybe, we poor and long-suffering victims of the South African corporate and political robber barons might reasonably expect a small glimmer of light at the end of this seemingly endless tunnel of despair in which we find ourselves.

 

In the vein of any good communist or socialist government, it was recently announced by our inefficacious Minister of Health that certain (unspecified) interventionist steps were being considered on the present crisis over rocketing food prices.

 

Just to digress for a moment – why such an announcement should be made by the Minister of Health rather than the Minister for Trade and Industry or the Minister of Finance I find to be confusing. Whilst I am sure that there are public health concerns to be considered if the very poor cannot afford to buy their staple foods, I do feel that any interventions – even in the form of food stamps – would be better managed as part of an overall economic and financial strategy led by the Department of Finance and whose Minister has shown some reasonable degree of competence over the past few years.

 

Anyway, to get back to the point I wish to make…

 

Now, if the South African government is demonstrating a willingness to change its stance and to interfere with normal market forces on food prices then surely, in order to be consistent, it should also consider a similar intervention on fuel and electricity prices.

 

There are several ways in which considerable assistance could be offered to the consumer without necessarily distorting the market and its operations.

 

For example:

1.       VAT could be reduced or removed for all foods, fuels and power supplies;

2.       Eskom could be required to either cease the supply of one third of our total production of electricity for export at the ridiculous price of eleven cents per kilowatt or to export it at prices which would give a far better return, thereby obviating the need to impose punitive tariff hikes on South African domestic consumers;

3.       The fuel industry could be de-regulated so that competition could be allowed on the forecourt and so that supplies of oil could be sourced in a manner that would free South Africans from the artificial and arbitrary pegging of spot prices to the Singapore market;

4.       Introduce new trading rules to control and penalize the exorbitant profiteering in the various commodity (particularly foodstuffs and fuel) markets that results from the unfettered and unnecessary trading, re-trading and re-re-trading of essential goods and commodities.

5.       As previously advocated by Spearpoint, the government could also abolish all direct and indirect taxes (e.g. income, provisional, dividend, corporate, payroll, VAT, fuel levies, compensation, UIF, provincial, municipal, etc. etc. etc. etc….) and replace them with a single, simple “consumer” tax on all goods and services (excepting food, fuel and electricity) in various bands. Thus, incomes would be maximized and protected and the tax burden for individuals and companies would be defined by how much they spent within all sectors of the economy. The tax could be designed and collected on much the same basis as VAT, thereby saving vast amounts in collection costs and public service staffing costs.

 

I am sure that there are other ways in which commerce could be stimulated whilst making the sharing of the tax onus across the entire population far fairer than it is at present. It just requires a little imagination on the part of the government.

 

Most importantly, however, the government, through its own initiative on food prices, has now opened the door to the possibility of constructive intervention in other, critical, sectors of the market economy.

 

Now they must get on with it…

 

 

Spearpoint.

13 May 2008

 

 

 

 

Eskom – Such Great Guys….pfft!

 

 

 

 

Why am I not too terribly surprised that the mismanagers of our electricity utility, Eskom, have done it again?

 

It’s a wonder that these guardians of our national electrical infrastructure don’t have tails wagging from their foreheads and noses on their behinds. Yet again yesterday they demonstrated, to mix the metaphor slightly, that they can’t tell their elbows from their fundaments.

 

After the unprecedented introduction of unnecessary, random and widespread power cuts (‘load shedding’) throughout South Africa late last year, these mismanagers then proceeded inexplicably to relax those early this year – quickly followed by a programme of what they variously called ‘pre-emptive’ or ‘predictive’ scheduled periods of blackouts based on a two-week cycle.

 

So we all begin to think to ourselves “Great! At long last these guys have finally begun to show a little competence and professionalism by getting their act together and allowing us all to be able to plan our lives around a fixed timetable of power cuts”. Still a bad situation, but one now that appeared to be showing signs of being managed.

 

Then, last week Eskom announced that, owing to the fact that South Africa was to chaotically cram three public holidays into a single week (between 28^th April and 2^nd May), load shedding was to be suspended for that week because the bulk of energy-hungry industry would be closed and its personnel enjoying itself either on the coast, in the bush somewhere or cowering at home trying desperately not to spend the money they will be needing in the near future to meet the increasing costs of food, petrol and their mortgages.

 

This time we all think “Great! A bit of relief from having to juggle our lives to Eskom’s tune”.

 

Now, to cap it all, yesterday Eskom announced that, with effect from 4^th May (next Monday) they would suspend all future scheduled load shedding because they were confident that the bulk of what they claimed to be necessary in terms of saving electricity could now be achieved without imposing blackouts on the country.

 

Now I’m not one (normally) to look a gift horse in the mouth – even an equine of such doubtful pedigree and value as this. But the constant about-facing of Eskom over the past few months really takes the biscuit and reinforces my personal belief and assertion that every one of the board and senior managers of Eskom should be removed from their posts and put in a place of safety – ours, not theirs.

 

(Those of you wishing to have a look at my previous posts on this particular matter of the spleen can find them by back-tracking on this site. I’m sorry, but I haven’t yet figured out how to insert those sexy little links into my posts. Maybe I won’t anyway – I want to encourage as many people as possible to actually read the other posts on other subjects that I have, so far, managed to wrench from my keyboard. See – an ulterior motive for ignorance and indolence.)

 

So…what began as a crisis, with recriminations and screams of outrage flying in every direction, then eased, then escalated into punitive scheduled blackouts and now appears to have relaxed so much that one is tempted to assert that there never was a crisis in the first place.

 

Shortly after the ‘crisis’ began it became known that Eskom was exporting one full third of its total production to neighbouring countries. It has now been stated that those exports were sold at prices significantly below the cost of production.

 

In other words, the South African consumer of electricity was subsidising – to a considerable degree – the governments importing South African electricity. (I can’t believe for one moment that the end users in those countries benefited from that subsidisation).

 

Excellent economics, Eskom. What’s the betting you got some nice fat bonuses for that little sleight of hand? And, no doubt, some kudos (or, perhaps, something rather more substantial) for the ANC politicians from their buddies around the continent…

 

Oh, and by the way, we South Africans contributed directly to the repression of the population of Zimbabwe by Robert Mugabe and his henchmen.

 

Gee, thanks. That’s really going to help me get to sleep at night.

 

On top of all that, we now learn that the serious consumers of electricity in South Africa – the mines, heavy industry and business in general – have been paying tariffs some 275% lower than the domestic consumer.

 

Bulk discounts (not normally a feature of the South African business mentality) I can understand. But 275% less is not a discount – it’s an outright gift. Subsidised by the domestic consumer – again.

 

There is no way that the vast majority of the electricity produced in this country (and consumed by industry) is sold at a loss. The stated profits of Eskom cannot possibly come solely from the domestic consumer.

 

So the domestic tariff, less 275%, as charged to industry, is hugely profitable to Eskom.

 

But sauce for the goose should also be sauce for the gander. Why is the domestic consumer not charged tariffs which are very much closer to the industrial rates (or vice versa, if the lies of Eskom were to be made more consistent)?

 

Why is Eskom fighting tooth and nail for a 100% increase in tariffs over the next twelve months? For the domestic user of electricity that is a killer of a hike in rates, but for industry it will be verging on the insignificant.

 

If Eskom needs funds to expand its generating and transmission capabilities (now doubtful, given the revelations about how much electricity is exported across our borders at charity prices), then why do the mismanagers of Eskom seek to extract the cost of their own screw-ups from their captive South African domestic consumers?

 

What is wrong with requiring higher charges for both the foreign customers and local industry? Why, in the name of all that is accepted as good practice in economics and business protocol in general, should we in South Africa subsidise the inefficiencies and malpractices elsewhere on our continent? Why should South Africa beggar itself for the rest of Africa?

 

And why does Eskom have only a one-dimensional approach to the problem – namely raising capital through tariffs?

 

There are other ways, such as, for example, raising a bond issue or creating and selling additional shares in its business. At least then those who can afford to subscribe to the capital expansion of Eskom could do so and those who can ill-afford mercilessly higher tariffs could continue to use electricity without having to sell their mothers-in-law and children into slavery.

 

It is clear that neither Eskom management nor the ANC government has the skill or the imagination to run and operate our precious electrical generation and transmission utility.

 

And because Eskom is a strategic national asset it should not be privatised, either. We neither want nor need the dubious benefits of parity pricing and gross profiteering that would, inevitably, result from such a move. Witness other countries around the world which have trodden that particular route. Power and water are public service utilities designed for public benefit and have no role within the commercial sector; they are too fundamental to the well-being of our nation and its people to be exposed to the rapine of the highest bidding speculator.

 

Rather operate the public utilities much as the State Electricity Commission was run in Victoria, Australia back in the 1960’s and 1970’s. A public utility, set up as a government commission charged with operating as a business – but without profit being the underlying raison d’etre.

 

We are being served by maleficent incompetents who have lied to us, failed in their due diligence and are, generally speaking, a pathetically sorry bunch of unimaginative time servers anxious more for their own benefices that those they are charged to protect and enable.

 

Please go away – all of you. Find something else – preferably in another place – that you can pervert and destroy.

 

Allow us to find those who are operationally able to run Eskom without destroying it, under the guidance of commercially competent managers who can foresee and prevent losses within a non-profit organisation.

 

Spearpoint.

1^st May 2008

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rampant Food and Fuel Prices.

 

 

 

The hiatus in this blog of the last couple of weeks resulted from me traveling a bit through southern Africa on business.

 

You should understand that, being a white South African male over the age of fifty, affirmative action and all the “-isms” of age, gender and race render me all but unemployable in this Rainbow Nation of critical skills shortages – notwithstanding my degrees and international experience in my field. So when work does periodically present itself I am compelled to grab it and to fiercely focus on the tasks that promise, for the time being, to maintain the temporal connection of body and soul. When money beckons I must then temporarily forego some of my other – more pleasurable and satisfying – pursuits such as blogging. And, much as I enjoy writing, it pays no bills and I have this expensive addiction to breathing which must be periodically slaked with cash – preferably lots of it – whenever possible. Hence my recent absence.

 

I am not so enamoured of driving as once used to be the case; my politically-incorrect car is an ageing brute that punishes its driver for forcing a few thousand extra kilometres out of its creaking carcass. But, in addition to providing a solid upper-body workout, such driving allows time to reflect on Life, the Universe and Everything and thereby provides some of the material which old Spearpoint then tries to convert into the approximations of pearls of wisdom that he seeks to muster in these posts.

 

During this journey I found myself mostly pondering on all the recent shocks of the astronomical price increases in food, fuel and other commodities around the world.

 

We’re all familiar with the price increases. Petrol and diesel prices threatening to push us back to the horse-and-buggy age; staple food escalations promising the prospect of global population decimation; real estate prices destined to shunt us all back into grass huts in a feudal economy; other commodities increasing to the point where the little baubles and the technologies which brighten up and buttress our otherwise drab lives are beyond reach; the threat of drastically higher electricity charges which promise a return not to the age of hurricane lanterns and candles – we won’t be able to afford to buy the oil – but to the age of rush lights and goose grease; the list goes on.

 

Trying to figure out why all of these events have come about in such an apparently short space of time has been an interesting exercise and has led me to some conclusions that are distinctly challenging.

 

We might as well face it: for a considerable period we have had it relatively easy. Ignoring, (for the sake of the point being made), the half or more of the world’s population that has always been too poor to afford to worry about the fibre in its diet (instead being more troubled with the grit, stones, twigs and other detritus in such food as may be available), the world has enjoyed a relatively benign time of late where the basics of life, plus a few luxuries, could be had whilst still having the prospect of putting some money aside for the odd rainy day or two.

 

Then, of course, (being human) we then proceeded to hurry, helter-skelter, to bugger up the nice little zone of comfort within which we found ourselves.

 

Finding the products of our technologies to be pleasant and convenient we then got greedy. We wanted more and, in that wanting, gave space to other greedy people who, for a price, were willing to provide us with more.

 

Let’s look at some of what we wanted in terms of food and fuels since these are the most immediate of our daily needs and desires.

 

• Better quality food – less grit, for a start – with brighter colours and more varied flavourings, artificial or not, which would enable us to differentiate our “lifestyle” from those less well off than ourselves (including our silly kid sister who was dumb enough to marry that throwback who digs ditches for a living).
• Greater quantities of food so that we could gorge ourselves three or four times a day rather than eating small amounts continually through the day as our bodies were designed to do when we were evolving as hunter/gatherers – thereby fostering the growth of global industries in slimming products and remedial medical healthcare.
• Faster food so that the tedious nature of the preparation and processing of cooked foods could be lessened.
• Ever greater supplies of power in the form of electricity because we didn’t want to wear lots of clothes around the house or work and also because the old wood-fired kitchen range was too dirty and too much hard work to clean every day.
• Even greater supplies of fossil fuels because we needed to power the electricity plants and to propel larger, faster vehicles of personal transportation which could give us a shirtsleeve environment in which to wait out the traffic jams on the way to and from work and the supermarket.

 

Lots of wants.

 

My point here is that we have ourselves to blame for many of the reasons behind high prices. Someone has to be paid to produce, package, store and deliver the objects of our desire. Our desires also open us to exploitation by those who would wish to manipulate and escalate those same desires in order to provide more so-called “choices” as a means of generating further sales and revenues by way of marketing and advertising.

 

But there are other ways in which we are subjected to ever increasing pricing which, when all is said and done, we have little control over.

 

Now, before I proceed any further, I need to stress a couple of things.

 

Firstly, I am not too different from the bulk of Western society in that I enjoy the products and services that have been created and made available to everyone who can afford them. I have even managed to be able to buy some of them. I also feel the occasional twinge of lust for the latest mobile phone or big hairy 4×4 – although one of the very few benefits of advancing age is the ability to exert some measure of control over those twinges and to refrain from impulsively either reaching into my hip pocket or signing some usurious agreement to hire the object of desire for a period way beyond the object’s value and practicality.

 

Secondly, within certain limits of taste and capability, I am just as capitalistic as the next man. I like to turn a profit – and the more the better. Admittedly, I am a small-time capitalist, never quite having managed to beat my conscience into the required degree of insensibility to be able to view my fellow humans merely as targets for plunder. I guess I must be a failure – although I do manage to get by. My sleepless nights are caused more by worrying about how I shall survive, sans pension etc., (don’t ask – it’s a long story, as the cricket said to the ant), rather than subconsciously stressing over the deep patina of tarnish building up on my soul.

 

My problem is not so much with the de-skilling of the past couple of hundred years or so – an inevitable consequence of the need to develop an increasingly complex society necessary to cater for the rank stupidity of humankind as it remorselessly breeds itself into global Ebola-like parasitical extinction.

 

My problem with the current situation regarding price increases in the very basic needs of life rests more with the fact that most of these increases are totally artificial and are motivated by the plain outright grasping greed of a relatively small number of individuals wishing to enrich themselves even more than they already are by further impoverishing the already poor and vulnerable.

 

There are a number of parties to this concerted “conspiracy” (don’t you just hate that word?):

1. Governments seeking to ensure their national interests;
2. Commodity and stock exchanges and their associated traders, speculators and brokers;
3. The large wholesale, retail and distributive chains (increasingly often integrated under single ownership);
4. Consumers – as both participants and victims.

 

Each of the above parties is motivated solely by greed and self-interest at the expense of others. Each is able to operate and gain by virtue of the fact that, whether we like it or not, the world is based upon the capitalistic models and theories developed and honed over the last few hundred years or so. Even former and current communist/socialist governments and ideologies have found themselves forced to modify their pretty theories in order to survive – in the case of mainland China to positively thrive – in the harsh world of capitalistic trade and business. Everybody wants to turn a buck.

 

However, capitalism – as with every other economic theory, I guess – contains within its corpus some fundamental flaws which, long-term, will probably render the entire edifice unworkable without some speedy rectification.

 

The main long-term problems with capitalism are, as I see it, the concepts of firstly, eternal economic growth and, secondly, charging prices based on what the market will bear at any given time.

 

These two fundamental underpinning ideas are, ultimately, unsustainable and will create the conditions under which capitalism will, sooner or later, fail unless modified.

• Untrammelled economic growth can only cause an eventual saturation of the marketplace – even allowing for provisions such as the inbuilt obsolescence of products and services (which, already, is a major feature of modern production and economic methodologies) and the enrichment of the entire population of the planet in order to provide sufficient markets for greater and greater production outputs (and which we are most certainly not seeing at present). There seems to be no inherent concept of reaching for and attaining a sustainable equilibrium.
• The idea of charging the very most that the end user of the products and services produced can afford can only result in the near- and long-term widening of the divide between the rich and the poor. Those at the lower end of the economic scale have little or no opportunity to accumulate anything from their labours since so much, if not all, of their incomes are utilised in acquiring just the basics of life – simple foods, rude shelter and public transport. Thus, the poor remain poor and, as such, are of little benefit to capitalism other than as a pool of cheap labour. Their poverty prevents their empowerment as producers and consumers of products and services and their value to the capitalist model is minimal. Even raising their wages accomplishes nothing due to the impact upon production costs and subsequent price rises.

 

Having said all that, let us now return to the “conspirators” in the current tidal wave of price hikes in fuel and energy.

 

The prime example of a government serving its own self-interests in recent times has been that of the United States creating (much as Nazi Germany did in the 1930’s) the conditions to explain and excuse their invasion of Iraq five years ago. In so doing they began the entire process of market uncertainty and price escalations in which we find ourselves today. Oil prices commenced their upward march towards the top of a hill of which no-one outside of the oil industry knows the height. In starting and maintaining an unwarranted war (“We’re prepared to fight for 100 years!”) the inevitable consequence was to shake the global oil market into pessimism and the resultant supply fears – even though, notwithstanding the predictions of the 1960’s and 70’s, there is, in fact, no shortage of oil in the world. Indeed, hardly a month goes by without some announcement of a major oil discovery somewhere on the planet.

 

The only real beneficiaries of the Iraq war have been the oil companies. Oh, yes – and the current oil industry-dominated US political administration.

 

Gee, what a coincidence.

 

De-stabilising the global oil market then gave others the chance to cash-in on the uncertainty.

 

Commodity exchanges, brokers and traders could then “legitimately” demand ever higher prices for the black gold on the pretext of supply uncertainties and the claimed natural balance between supply and demand based upon the old market maxim of charging whatever the market could bear.

 

This, of course, totally ignored the fact that, despite the best efforts of the OPEC oil cartel, oil supply then and now has never been under anything remotely approaching threat. Nor were oil production costs on the increase.

 

Traders and speculators were, in effect, given license to artificially generate and exacerbate a supposed crisis in oil for the sole purpose of increasing their turnovers, margins and personal commissions under the guise of serving the best interests of their stockholders.

 

Consider this:

• Several days ago a US Navy warship fired a few warning shots across the bows of a couple of (supposedly) Iranian speedboats.
• Immediately upon that news the price of a barrel of oil rocketed by $3!

 

Where was the threat to world oil supplies that merited a 2% increase in the oil price in the space of a couple of hours?

 

There was, of course, no justification – other than the traders and speculators grabbing a chance to further gouge the world for their own personal benefit.

 

We have seen similar situations recently when a refinery closes for a day or two because of bad weather. Or when a Nigerian pipeline gets looted or attacked by those who feel excluded from the national bonanza. As if a single locus of supply or transport is going to impact upon the needs of the entire world. In a time of plentiful supply and growing reserves known to be far greater than current production for the next fifty years.

 

Please. Don’t. Insult. Our. Intelligence.

 

The same applies to the traders of other commodities – particularly food. They have been only too pleased to hitch themselves to the coat tails of the oil traders and to take similar advantage.

 

Sure, the world’s population is growing and, yes, the new kids on the middle class block – the Chinese and the Indians – are, not surprisingly, wanting more and better food than they have had for the last couple of thousand years, as well as all the shiny toys that the West has been flaunting in their faces since the 1800’s. But, thanks to the Green Revolution of the past few decades, the world is not, in fact, short of food and we have the land and technology to feed many times the present global population. Properly set up and managed, just Zambia, Zimbabwe and Mozambique could, on their own, provide almost half the world with staple cereals.

 

On the pretence of a supposed food shortage, staples such as wheat and rice are traded and re-traded many times, each trade generating a profit for the traders until we have the crazy situation where, for example, rice has risen in price by at least 70% in the last three months and Thai rice farmers are having to put armed guards on their paddy fields.

 

Then there are the speculators who purchase large stocks of certain commodities (often in Third World countries) when prices are low – usually at harvest times when the market is glutted – and then hoard those stocks away from the marketplace until existing supplies diminish and prices rise in response. The use of foodstuffs and fuels as mechanisms of profiteering against the human right of access to affordable food is cynical and barbaric.

 

Contributing to the lunacy of the current price rises in commodities is the next group of “conspirators”, the large retail chains.

 

Without contributing one whit to the production of the foodstuffs or oil products they peddle, the retail chains can charge the consumer anything from 25% to 500% above cost for the doubtful privilege of distributing the goods to within reach of that consumer. (Real estate chains, for example, can’t do that but have been accused recently of deliberately and artificially inflating the asking prices of properties in order to increase the size of their commissions. The concept of charging whatever the salesman thinks the dumb schmuck in front of him might be stupid enough to commit himself to prevails everywhere). No wonder property prices now prevent first-time buyers from entering the market and forcing people away from their ancestral roots to seek survival in the global urban migration.

 

Perhaps it might not be so grotesque were these chains to pay their workers over the legal minimums; or to employ people on a basis other than casual and temporary; or to stop using their commercial volume purchasing advantages to coerce farmers and independent distributors through restrictive practices into accepting prices which then render those businesses marginal.

 

Matters are worsened when one considers the fact that these chains spend many millions (Rands, Dollars – it doesn’t matter) advertising in the print and electronic media with the constant and perennial claims of being the cheapest and offering the greatest savings to the consumer.

 

Such claims would only be justified if retail prices were not the result of price fixing and collusion between the wholesalers and retailers, as well as between the retailers themselves. Recent investigations in Australia, Britain and South Africa indicate that price fixing is rife and may, in fact, be prevalent – especially through the good old “recommended retail price” mechanism.

 

The final party to the “conspiracy” of artificial prices is the consumers themselves.

 

Consumers are their own worst enemies. Motivated by their own personal greed, stimulated by enticing advertising, too many consumers will willingly pay whatever is asked. Their desire to have whatever it is that they are desirous of feeds the concept of being allowed to charge whatever the market can bear. They have forgotten the old days of the village market where prices were negotiated to the satisfaction of both buyer and seller. If neither party was happy with what was being offered then that party could decline to trade and depart the scene.

 

A high street supermarket, for example, is nothing more than a village marketplace for the local community (many such supermarkets, in fact, claim such a heritage for purposes of brand identification). But because a supermarket has got pretty displays, clean floors, banks of glittering refrigerators and piped Muzak, people have been intimidated into thinking that they are no longer permitted to haggle. The price tag on a shelf is nothing more than an indication by the retailer of what sort of offer he is prepared to consider for that particular item. If the consumer accepts that tag then that is what he is offering and the retailer is only too happy to accept both the offer and the settlement.

 

So, although the consumer is all too often the victim of artificially high prices, he is also stupid not to realize the power at his command were he to challenge the exorbitant prices confronting him and to make an amended offer. If the retailer doesn’t like the offer he can ask you to leave his premises and thereby lose a sale. If sufficient consumers likewise challenge the retailer’s overly high margins that retailer would soon have to re-consider his position or face the prospect of going out of business.

 

The consumer as a group also fails to realize that, if push came to shove, he could forego one or two meals or delay by a few days or weeks the purchase of that washing machine/fridge/lounge suite/car as a way of demonstrating his power to the retailers. Aside from the health and moral benefits to be had, the temporary drop in sales for retail chains could create sweaty brows and an increased consumption of antacid tablets sufficient to bring about a re-consideration of extorting monstrous margins in favour of reasonable returns within a stable price environment.

 

I do not know the answers to solving the present crisis in food and fuel prices. But I do know that we need to do something to curtail and control the excesses of what is an otherwise workable system.

 

Capitalism needs – desperately – to find a path away from the boom and bust short-term maximum gratification of the profit motive. Sustainability and eventual equilibrium needs to be achieved so that the one can profit but not at the expense of the other.

 

Additionally – and equally desperately – the concept of pricing to what the market can (only just) bear needs to be adjusted to one where prices are directly related to fixed and fair margins over the cost of production.

 

Only once such equity is achieved can capitalism then be justifiably linked to democracy.

 

Money could still be made in large enough amounts to continue attracting the interest of the intrepid. But we must also find a way to enable the less intrepid to survive in relative comfort and security.

 

 

Spearpoint.

27 April 2008