Thursday, May 28, 2009

Think For Tommorrow

This article I wrote in January 2007 for a defunct blog by Mat Mathews It turns out it was a good warning but illusionists did not want to listen, Mbeki lost his job for not listening, South Africa Will go the way of all the other African countries if they do not listen. The western consultant will Never want to give proper advise, two plus two will never be five. We care about the world, we believe all are capable and should utilize their knowledge. Read it.

No doubt we have seen a sustained boom in commodities so far. This boom has brought fortune to many individuals and societies. It is usual that during commodity boom markets that many what would be called left leaning governments would tend to demand to take control of their resources.

There was once a poet I read that said “Why can’t two plus two be five, why can’t it be anything I like, does it have to be four.” That is close of the poem as I can remember; the old saying is poets do not make good rulers. Two bottles plus two other bottles and we would have four bottles on the table. However when one wishes there to be five bottles they can either be illusionists and say there are five bottles anybody who disagrees will be persecuted. On the other hand one can be practical and decide to increase the number of bottles by means that produce bottles, buy another bottle or make another bottle.

The commodity boom is allowing nations that are commodity producers, most are very underdeveloped countries in terms of economics, to increase their wealth substantially and many of these countries like Venezuela and Bolivia feel that during the boom, now is the time to take control of the commodities and redistribute to the people. The same happened in the 1970’s when Zambia felt that copper prices allowed it to take charge of the resources from private hands, the same Zambian government found it very difficult to find a buyer for the copper assets when the commodity cycle had gone the other way. Not forgetting that nationalized industries are rife with corruption.

Russia too has taken steps to control its petroleum sector for the same reasons as

Being a poet Hugo Chavez feels its is not right for oil prices to be at record levels whilst the people get nothing. However there is a serious side to the argument that is missing, people and governments are acting for now when they feel they should get more control of the resource sector because of the high prices. Rather, the high commodity prices are an opportunity for real reform to occur in an economy. Real reform rather than those suggested by the IMF and World Bank to suite the voices of mostly those controlling the institutions.

High commodity prices means that there is more money in government coffers than what was planned for by means of the higher taxes and royalty earnings. This higher than expected revenue gives a chance for the government to free up the other sectors of the economy reduce taxes in other sectors as well as reduce tariffs. It means less economically developed countries can afford to privatize as well as allow for competition in sectors that where once deemed natural monopolies by redundant economists, these being power generation, telecommunications, media, mail, national parks, water systems, and higher educational institutions.

This might seem similar to what the IMF suggests but it is not. The IMF forces a privatization policy and the privatized entity is protected from competition like the government before it, in Bolivia it went as far as suggesting that the privatized entity could enjoy no competition from nature by demanding that it be a crime to collect rain water, one had to use the American outfit that brought the water mains from the government. Economic facts demonstrate that monopolies are inefficient, a government cannot give a monopoly to private investors, the free market is about competition. The government is inefficient because it is a monopoly and does not allow competition, that same monopoly would be inefficient under private hands. The IMF and World Bank claiming to support free market ideals yet in reality demanding that less developed countries sell of assets that are themselves protected from competition, it is better they remain in government hands.

The commodity boom has given countries a chance to think about tomorrow and not the now. Nationalization and increasing taxes is thinking of the now, Zimbabwe is a crucial example of that, a country now in ruins because of the thinking for now. Tomorrow society will be more knowledge intense, higher commodity prices allow countries to create reforms that will allow a country to allow competition in terms of knowledge and to acquire knowledge from other societies be that knowledge in the form of text books or goods and services.

One must now forget that capital is created by human beings, the basis of creating capital is knowledge. Capital is good for up cycles, but a society that follows the basic laws of knowledge will be fine when the commodity boom is finally over, if ever that happens, some are talking of a fifty year boom. Possible if China keeps it up, but there is also India, if the boom continues well good for the world.

Think for tomorrow and reform other sectors of the economy by allowing a more free market in the domestic arena the higher revenue from higher commodities then will allow a more smooth transition. Allow a knowledge society the basis of which is to be allowed to think and act on those creative thoughts. Commodities are only of value because of the knowledge humans have of their usefulness. One of the saddest comments I have heard in recent years came from President Thabo Mbeki of South Africa, he said he would welcome a hydrogen society as it would help South Africa because the platinum needed as a catalyst in the hydrogen fuel cell would come from South Africa most likely. The sadness is he has missed the point, why does South Africa not produce the fuel cells and be a technology leader in the future hydrogen society, it is the mind that is the most important resource, it is this kind of thinking that keeps Africa back, hence no sustainable10% growth in Africa.

Bhekuzulu Khumalo

No comments:



Blog Archive

Bhekuzulu Khumalo

I write about knowledge economics, information, liberty, and freedom