South Africa – Is Communism Inevitable?

Numerous indications exist that the ANC is moving South Africa increasingly towards the rules and methods of Communism. 

The State Intelligence Bill seeks to place all intelligence agencies under the Minister of State Security, without any effective oversight by independent elected Members of Parliament, and to permit interception of electronic communications from a foreign source without a Warrant.  One of the prime features of totalitarian regimes has always been the control of State Intelligence by the regime and in the interests of the regime, without oversight by a true representative of the electorate.  This was a very conspicuous feature of Stalinist Communism – more of that later – as well as of the Nazi Party under Adolph Hitler, and of many other repugnant regimes, including, of course, the Apartheid regime of the National Party in South Africa.  The ANC Government has shown conclusively that it is not to be trusted in relation to the collection and use of Intelligence, with numerous cases of their duplicity.  Not the least in this regard is the fact that South Africa has a President who reached that position, apparently, by the manipulation of the Security agencies.

The Minister of Defence has gone on record on the ‘need’ to strengthen the Military, declaring that the country needs a Defence Force that is able to stand up to the superpowers!  There appears at present to be no credible military threat against South Africa, any more than there was in the 1990s, when the ANC Government plunged the taxpayers into a corruption-inspired $5,4 billion pool of expenditure on submarines that are no longer serviceable, jet fighters that are unable to take off with the load of ordnance specified, and frigates that we appear to be unable to put into service against the only possible danger to the country that they could counter – the Somali pirates that have increased dramatically the cost of importing goods from Europe -  at a time when there was equally no credible threat against the country.  Surely the country is not intending to enter into a conflict with one or more superpowers?  Was the recent visit of the President to China aimed at bringing South Africa into a possible future conflict of the American-led forces of democracy with the increasingly militarised China, almost certainly on the side of China?  What other reason could the Government have for increasing the size and strength of the Military?  Could the desire to do so have anything to do with the (now frequently repeated) exhortations to the ANC-allied electorate to defend the re-election of the ANC ‘with their lives’ if necessary?  (Given the likely consequences of this scenario, one could perhaps be forgiven for hoping that the real reason for the proposed new wave of Military spending is simply a desire to repeat the personally-lucrative Arms Deal corruption of the 1990s!)  Every oppressive regime in history has used the Military forces to maintain their illegitimate rule, and Communist Russia and Communist China stand out as prime examples of that!  One cannot forget that, among the friends and supporters of the ANC in its bid to gain its version of democracy in South Africa, the discredited regimes of Gaddafi, Mugabe and Asad stand out, alongside Communist Cuba, Communist Russia and Communist East Germany.  Is the ANC intending to use the Military to overturn a duly-elected Government if it is not the ANC that is so elected?  Recent events certainly justify concern in this regard.  Recent statements by senior members of the Tri-Partite Alliance calling on ANC members to become activists and revolutionaries reinforce that need for concern.  Calling on the voters to be prepared to ‘sacrifice our lives’ for the re-election of the Party is surely not a standard method to gain re-election in a peaceful democracy!

Statements by various Government Ministers and senior officials in recent months have extolled the virtues of expanding relations with Communist countries, particularly China.  President Zuma even went so far as to imply that the European Union is a less desirable trading partner than China!  Of course, this flies in the face of the trading statistics, which indicate clearly that it is in the interests of the country to cultivate the relationship with Europe and the United States.  The exports to the United States presently total more than three times the exports to China, and the exports to Germany alone are more than double the amount to China.  Even Zimbabwe, a weak and struggling economy, imports more from South Africa than does China!  The majority of South Africa’s exports to China are of unprocessed ores and foods, such as sunflower seed.  The Government’s stated policy to increase the level of beneficiation of these products is in conflict with the Chinese desire to import raw materials for beneficiation in China, an important element of China’s drive to increase employment of its citizens.  It has been said that the largest export from China to the United States in recent years has been unemployment!  The figures to calculate this in the South African context are not available, but it is reasonable on the face of it to assume that the same would apply in South Africa!  With the increasing drive of Western economies to increase the strength of their languishing industrial bases, it can be expected that the change in the export-import and home-production v imports ratios of those countries will be largely at the expense of China.  At the same time, in Western countries, which represent a huge trading potential for South Africa, there is presently a positive sentiment towards African countries.  It would be foolhardy, to say the least, to alienate those developed countries, unless there is an excellent reason additional to trade!  Development of one market should not be presumed to require abandonment of another market!

The international stance of South Africa has, over the years, drifted ever more towards a closer relationship with China, driven largely by President Zuma.  The joining of the BRIC trade grouping was a clear statement of intention, the payment to Cuba of several million Rands a few months ago an affirmation of the close ties of the ANC with that Communist country which has little capability to become a significant market for South Africa (and thereby a significant driver of labour-utilisation), the importation of large numbers of Cuban doctors (effectively a subsidy paid by the South African taxpayers to Cuba’s ailing economy), the sending of South African students for medical training in Cuba (where those students, who failed to qualify for entry to the South African medical universities, will face the huge burden of gaining a technical education in Spanish!), and, most recently, the clear statement of South Africa distancing itself from the West in favour of China and Russia by abstaining from supporting the UN vote to impose sanctions on Syria, are all very clear signals to an increasingly concerned thinking electorate. 

South Africa is moving purposefully away from the countries that founded democracy towards the roots of Communism.

What does this mean for South Africans?

Communism is a system of Government that has clearly demonstrated its failings in every country where it has been adopted.  Communist Russia is the clearest example.  After seven decades of ruthless Police and Military suppression of citizens who became aware of its failings, the Soviet Union collapsed, not as a result of its citizens having outgrown the need for that system, but as a clear demonstration of the failure of every element of the thinking of Carl Marx.  The Soviet Union simply could not afford the inefficiencies it imposed on its industries, the need to prop up failing regimes that displayed these inefficiencies earlier or more dramatically than did Russia.  The Soviet Union could no longer afford to pump huge amounts of money and arms into the ‘freedom’ groups it was supporting to overthrow capitalist Governments, including the ANC.  It could no longer pay the cost of the central control that was essential to ensure the enslavement of the millions of citizens of Communist countries (the number of lives lost to purges and Secret Police activity to keep the Communist Party in power in Communist Russia exceeds forty million!).  The satellite countries of Soviet Russia still show the effects of the devastation wrought on their economies and their citizens by the system of Communism.  East Germany, which has been the recipient of hundreds of billions of Euros invested since 1990, continues to lag behind the ‘decadent’ West Germany in its economic performance, despite once having been the showpiece of European industry, before it was subjected to Communist rule.  The other ex-Communist countries of Europe could hardly wait for the collapse of the Soviet Union to shake off their bonds.  Poland and Czechoslovakia attempted to do this much earlier, and the Soviets had to suppress these desires to be free by the use of the Military, brutally and with much loss of life, with an additional result that the use of the Intelligence Services was sharply increased, to spy on the citizens of the Communist countries for any sign of deviant thinking.  A statement made by one uninformed commentator that the Soviet Union produced some breakthroughs in industry and science is sadly mistaken, probably as a result of old Soviet propaganda.  The claim was made that the Soviet Union developed jet aircraft, the atom bomb, rockets, and similar items.  The truth is that these technologies were, in fact, stolen from Western countries.  The Russians gained a five-year advance in their nuclear program by stealing the research secrets of Britain and America, they developed their aircraft industry by backward-engineering aircraft taken from Britain and America, they developed their jet engine technology by backward-engineering jet engines given them by the British, they developed their space industry by taking German rocket scientists after the Second World War.  One has only to look at the Trabant and the Volga to see how far behind the developed world their automotive industry was!  It is clearly not correct to say that the Soviet Union achieved no development, but it is equally clear that the world economy, if it had been subjected to Communist rule, would in no way resemble the advanced state that the Western World has achieved.  It is far more likely that the world would have been a mirror image of Cuba!

One clear example of what could happen in South Africa lies to the North, in Zimbabwe.  Robert Mugabe is a confirmed Communist, yet he is also a man who has accumulated enormous wealth, while his country has descended to the level of the worst of the basket-case African economies.  He uses the bloated Military to suppress any opposition, and he uses the ‘Youth’ to terrorise anyone who is not clearly supporting him.  Contrary to very clear undertakings made by him on his accession to power, he has used the question of land redistribution to punish the Whites and to reward himself and his supporters, and he has consistently diverted the lucrative contracts and State activities to the benefit of himself and his cohorts.  The result of Robert Mugabe’s rule is clear to see.  He has destroyed a once-strong economy and killed tens of thousands of dissenting citizens, most of them Blacks.  In order to consolidate his hold on power, he has alienated the tribes who were not allied to his Party and the Whites, who, however they achieved that position, represented, and still represent, the biggest hope of putting Zimbabwe on its economic feet.  In the tradition of the major Communist leaders such as Stalin and Mao, he has perverted the ideals of Marx, unrealistic as they always were, to his own benefit, regardless of the damage that he, Marxism and Stalinism have done to their economies, and of the cost, in economic terms as well as in terms of the lives of the citizens.  He has reached the situation that Communist East Germany did, of having a need to erect a wall around his country, not to keep the alien intruders out, but to prevent his own countrymen leaving the country that they loved, taking their skills, talents and abilities with them.  If you doubt the wisdom of what is being said here, ask any of the thousands of exiled Zimbabwean whether he or she would wish to live in a Mugabe-style Communist democracy!

Against this trend towards Communism, there is a rapidly-increasing realisation by Blacks that the ANC does not really represent them, that the ANC has brainwashed them to believe that the Party desires to deliver to the electorate what it tells them are their rights.  In the Freedom Charter, these ‘rights’, strongly influenced by Communist doctrine, were held out to be the rights of all people in the country.  The actions of the ANC, however, has demonstrated that the rights are available primarily to Blacks, and, over time, that the persons entitled to receive the rights are ANC card-holding members.  This was clear even in 2001, when a foreign mine owner met with a senior official in the Department of Mines to ask whether a proposed Black-ownership deal would meet the demands of the Department.  He was informed that the Black persons listed would not be acceptable.  When he asked who would be acceptable to meet the target of 26% Black ownership of the mining company, he was given a list of five senior ANC names!  Under the ANC doctrine, the poor do not exist, except at election time, when they must dutifully cast their votes in favour of the ‘Party that brought them their freedom’.  More and more of them are asking what that ‘freedom’ really means.  The ANC will always dispute that this is so, but the ANC policy of ‘cadre deployment’, re-stated at the recent ANC Policy Conference, clearly demonstrates that preference in gaining lucrative positions and, by extension, lucrative contracts and tenders, will always be given to those favoured by the Party, regardless of their ability, or lack of it, to perform.  The increasing numbers of Blacks who are achieving success in business, mining and industry are seeing that their best interests are not served by this brand of ‘democracy’, and the rapidly-increasing numbers of service delivery protestors are realising that the funds that are being siphoned off from Government contracts and tenders are not benefiting them.  All of this growing group hold the ANC responsible for the failings of the theory.  The successes of the Democratic Alliance in practically every field where the ANC has failed are starting to convince the ordinary voters that rhetoric is not a substitute for achievement, that a failure to perform can no longer be held to be a result of the ‘legacy of the Apartheid system’, eighteen years after that system was abandoned.  Given freedom to develop, these trends will certainly result in the ANC being relieved of power in the medium term future.

Unfortunately, the ANC seems to have become aware of the inevitable result of their corruption and incompetence, but they still fail to realise that the cure lies in correcting the basic reasons for that failure – incompetence and corruption.  Recent statements by leaders of the Tri-Partite Alliance are reminiscent of those by Robert Mugabe as he was preparing his putsch, of Adolph Hitler as he was preparing his putsch.  They are preparing the way for a militarization of the political field.  Recent legislation and attempts at legislation, read against this background, must make the public aware that the ANC Government is putting in place the legislation that will be used to terrorise and silence any opposition to it.  The Government bodies have demonstrated clearly that they will not hold back from exercising their powers to achieve ends that the Government desires, even though those ends are not enshrined in the law, and even though the powers were designed to be used for purposes that were in the public interest rather than in the Tri-Partite interest.  South African citizens cannot afford to be complacent, to hope that democracy, honesty and good will prevail.  It appears that the end game has begun, and victory will go, either to the Communist dictatorship that appears to be developing, or to the democratically-elected true representatives of the people, on the basis of what happens in the next two years.

Remember:  in order for evil to prevail, it is only necessary for good men to do nothing.

Signs of the Times

A number of indications have become apparent in South Africa during the past few years.  Citizens should pay attention to what the actions of the various parties are telling them, rather than the words they use.  Let us look at some of them.

During a recent congress, Mr Zwelinzima Vavi made an unequivocal call for the people to be prepared to ensure the re-election of the ANC, to the extent of being prepared to die for the purpose.  This is a very clear indicator that the Tri-Partite Alliance is preparing for a loss of power at the next election, a possibility that appears to be becoming more likely with each month of Government incompetence.  This call to arms and a violent retention of power is typical of Communist theory and practice.  It is the way in which the Russian and Chinese Communist Parties gained and held onto power during the many years of their mismanagement of their respective economies, and forced the populace into submission.

The push for a further invasion of the privacy of the citizen by permitting the interception of electronic communications from abroad without obtaining a Court Order is another indicator of a drift towards Communist absolutism.  Under the tenets of Marx, the Party must have a monopoly of power, and it obtains that by means of spying on every activity of its citizens, amongst other means.

The continued push of Cosatu and the Government towards increasing control of the labour market, a push that is undoubtedly increasing the cost of labour in this time of declining markets and economic activity and thereby reducing the incentive to private enterprise to invest in labour-using activity, is in stark contradiction to their professed desire to increase employment.  This is accompanied by a seemingly methodical degradation of the education system by the Government, in its ‘inability’ to provide qualified teachers (in terms of numbers and in terms of qualifications), to provide books to the schools, to provide schools of acceptable quality and standards, to manage the performance of the teaching staff, and to ensure the attendance of teachers at the school (with numerous calls to attend discussions away from the schools during school hours). 

It is a clear characteristic of Communism that it feeds on the poor and the uneducated.

It is equally clear that the South African Communist Party has an inordinate influence on the policies and practice of the, supposedly, ANC Government, and that this influence is increasing.

Read the signs, ask yourself the questions.  You will certainly come to the conclusion that South Africa is headed towards a take-over by the Communists, a result that was planned by Stalin in 1946, when the Soviets decided to expand world Communism by influencing the trend of colonial countries to gain their independence.

Economic Growth in South Africa

The question of economic growth in South Africa is a matter that has been discussed frequently and long, with very few real insights.  There are some very serious reasons why the South African economic growth is so sluggish.  Not all of them are discussed below, but those that are mentioned, if correctly addressed, will be material in accelerating economic growth.

The first real question is corruption.  The first question that is raised in a discussion of, for example, a high-level delegation to China headed by the President, is “Who is getting the pay-off, and how much is it?”  The experience in South Africa is such that any intelligent citizen is driven to believe that the only reason anything is done is that some official, or, more likely, several citizens, are benefiting by bribery, participation in the contract or advantage of some sort deriving from the action.  Witness the Arms Deal, which saw a huge and valueless purchase of munitions driven by pay-offs to a group of top politicians, the Police Head Quarters building lease, the persecution of innocent foreign-owned companies by the South African Revenue Services, which demanded a huge penalty for a ‘transgression of the VAT Act’ that was afterwards admitted by the responsible junior official to have been erroneous, the fact that two Commissioners of Police were discharged for corruption, the huge number of officials in various parts of Government who have lost their positions (often without further consequences!) as a result of corruption, the fact that an Advisor to the Premier of a Province brazenly asked for a bribe of R1 800 000 before the Government of that Province would agree to support a project planned to create 350 000 sustainable jobs!  The full list would cover many pages.  Many countries expressly forbid their citizens paying a bribe, and many investors take the moral position that there will not under any circumstances be a payment of a bribe to achieve any right or any favourable position or contract.  Numerous investors in industry in South Africa, both actual and potential, and both South African and foreign, have walked away from doing business in South Africa as a result of the very high level of corruption in Government.

The second factor is the very low level of education and skills training in the country.  During the abovementioned jobs development project, research found that the locally-available skills were substantially lower than the acceptable level required to support a large investment in the country by European companies seeking to establish industries to undertake the work outsourced by those companies in high labour-cost countries.  The project was designed to supplement these skills shortages, but the Premier of the Eastern Cape Province remained unwilling to provide any support to the project.  The promoter of the project was informed by a senior person in the civil sector that the reason for the failure of the Provincial Government was that the promoter had failed to bribe the correct person!  The failure of the education system in at least two of the Provinces has demonstrated the absolute incapability of the Governments, both central and Provincial, to manage this most vital aspect of a country’s development.  The very poor performance of the Education Departments, coupled with the surprising improvement in the Matric pass rate when the average citizen and the average employer has not been able to see any improvement on the ground, has caused a high level of distrust in the value of the pass, and the statistics of the pass rate.  It is now a fact that, where previously a degree by any of the major South African universities was accepted by foreign employers as absolute evidence of capability, now such a degree is treated almost with contempt.  Personal experience of recent graduates has tended to validate this attitude, and the continuing reports of the fact that law graduates have difficulty with language illustrates the problem.

The very high cost of labour, in total terms, when compared with the low productivity of that labour, is a significant disincentive to investment in any industrial activity that is not location-bound.  Where an industry can be undertaken in any of several locations, the industrialist makes a rational assessment of the total costs of labour, among other factors, and goes where the balance of productivity and cost is most favourable.  Included in the cost of labour are factors such as wage and benefits conditions, the cost of reporting to the numerous bodies, the likelihood of strikes and their duration, the hours of work per year, the cost of BEE requirements, the cost of complying with employment equity requirements and many other similar factors.

A factor that is now frequently taken into account by potential investors is the uncertainty of future Government actions.  This is exacerbated by the clear unwillingness of central Government to distance itself in clear terms from the harebrained demands of Youth League leaders for ‘expropriation without compensation’, by the continuing anti-White and anti-West stance of the Government, and the general bumbling behaviour of the Government and its seeming unwillingness to state clear policies that are conducive to the establishment of industries in the country.

A further factor is the amount of taxation, in the widest sense, that the Government imposes.  This includes direct taxation of earnings, the double taxation of such earnings by the taxation of dividends or other withholding taxes on the earnings of foreigners, the indirect taxes in the form of road tolls, airport taxes, Eskom prices, import duties and the many other charges, fees and levies imposed by Government.  The proud statement by the Minister of Finance in his Budget speech, that the Budget now exceeded one trillion Rand, is a clear statement that the Government sees its function as extracting as much of the income and capital of the citizens and investors as possible, rather than providing the environment in which those people can maximise their own personal income and wealth, with the Government share at the lowest possible level.  Further proof of this is given by the bullying tactics and the illegal extortion of penalties practiced by SARS, a practice that appears to have originated under the stewardship of the current Minister of Finance, a practice that has served as a significant deterrent to investors who prefer to invest in countries where the rule of law is upheld by Government.  This practice was given a strong encouragement by the recent imposition of regulations that permit entry and search by SARS without Court Order, a practice that flies in the face of every rule of democratic government.  Many investors recognise the fact that the policies and the strong Communist/Stalinist tendencies of the Government in power must inevitably result in higher taxes and operating costs, and therefore lower net income, in the future.  They also recognise that these tendencies may result in the grabbing of their assets without any form of normal legal process.  The example of Zimbabwe looms large, and the Government appears to view the maniacal rule of that dictatorship as a shining example of good governance.

In short, any rational assessment of the economic situation in South Africa must conclude that the economy is set to decline, that the level of employment has little hope of rising, until the Government makes a substantial turnaround in its attitudes, in its encouragement of the organised criminality that its members appear to consider to be their right, and until people are appointed to senior positions, from Ministers to senior clerk, on the basis that they are competent to do the job, rather than on the basis of their ability to contribute to the power base of those who appoint them

Did Mandela Sell Out the Blacks

On the occasion of Mandela’s 94^th birthday, a number of Black people, particularly those who were either very young or not yet born in 1994, have taken the opportunity to castigate him for the ‘failed negotiations’ that brought the Black majority Government to power.  They base this criticism largely on the fact that he did not enforce the requirements of the Freedom Charter.

The Freedom Charter is a document that was motivated to a large extent by the principles of Marxism, as interpreted by Josef Stalin.  The Russian Communists and their allies, particularly China, Cuba and East Germany, were strongly instrumental in supporting the Freedom Movements, including the ANC, and certainly had considerable influence in determining the details of their objectives and goals.  Any objective reading of the Freedom Charter will reveal the strong influences of the Stalinist philosophy and ideology.  It is noteworthy that several leaders of the ANC leading up to the adoption of the Freedom Charter were strongly against any association of the movement with the Communists,

The rightness or otherwise of these philosophies and ideology is clearly shown by the rapid and abject collapse of the Communist States following 1989.  That collapse demonstrated clearly what any realist would have known for years – Communism, as it was practiced by the Russian State, was not economically viable, it was not capable of delivering the promises it made to the people, and it was a destroyer of people.  The tyranny of Adolph Hitler was almost a blip in history in comparison with that of Josef Stalin, who was responsible for the death of over thirty million of his people!  Anyone who has visited a Communist State cannot fail to have been horrified by the abject condition in which most of the people live.  Cuba can hardly be claimed to be an economic Paradise for the workers!  East Germany, one of the world’s major industrial areas before the Second World War, was dragged down under the tyranny of the Communist dictatorship to a level that required the investment of hundreds of billions of Euros in bringing it to the standards that West Germany achieved in only a couple of decades after the end of that war!  Only now is a large part of Europe starting to recover from the depredations of Communism, nearly a quarter of a century after the demise of that abhorrent system.

The behaviour of the Communists in the brutal repression of the Polish uprising of 1956, in which the Army gunned down 400 people in a peaceful protest for human rights, is surely indicative of a total lack of interest in the rights of the people, one of the great achievements of the change in the political scene in South Africa in 1994.  That is the behaviour that one would expect from Robert Mugabe’s brutal regime.  Similar behaviour was exhibited in Czechoslovakia, when a fear in the Kremlin of the consequences of the free flow of information within the country led to an invasion of the country by the Warsaw Pact on 25^th August 1968 and a replacement of the leaders of the Communist satellite State.  Is that what the critics of the negotiations of Mandela leading up to 1994 would want for their own country? 

Even China, the other major supporter of the ‘freedom fight’ did not provide that support because it was ‘good’ in the abstract.  The motivation of the Chinese leadership was clearly to obtain a preferential position in the country, a treasure house of minerals and agriculture, both producing goods sorely needed by China.  The Marxism practiced by the Communist leadership has proven to be as ineffective a system as that of Russia, and the methods of control of the populace applied by the Chinese Government was as brutal as that of Stalin.  The changes that China has made, in the direction of capitalism, has enabled that country to make the giant steps forward that it has achieved in the past decades, and the final moves away from the remnants of Communism are now in the process of happening.

The particular matters that the complainants refer to are the clauses dealing with the nationalisation of the banks, the mines and the land.  Each of these elements are clearly policies advocated by Marx, in the naïve belief that the State will provide a better living for the people than would any form of capitalism.  This has not happened anywhere in the world, and there is no reason to believe that a move in this direction would achieve any better situation for the citizens of South Africa.  On the contrary, there are numerous indications that the tentative steps that the ANC has taken in the direction desired by the complainants has resulted in a marked decline in the productivity of the assets.  A clear example is the restitution of farmland, in which proof abounds that the transfer of farmland from productive White farmers to Black ownership has resulted in a virtually complete collapse of the farming activity on that land.  The same picture emerges in Zimbabwe, where the ‘indigenisation’ of land has produced a food crisis unparalleled in its history.  The operation of mines by the State in South Africa has resulted in a demonstration of incompetence.  The bank business of Postnet can also surely not be held up as a shining example of effective operation!  The inability of Eskom to provide electricity to the country at reasonable cost has resulted in soaring cost for the product.  Management within the utility and within the Government is entirely responsible for this.  The incapability of the Department of Basic Education, although endowed with an annual Budget more than three times the per capita average for developed countries, to deliver textbooks within six months after the start of the school year, not to speak of providing a competent education to the children, must surely point to the incapability of the State to perform adequately.

The moral of all of this is clear – the Communist-inspired ideals of the Freedom Charter, although enticing on the surface, do not stand up well in the rigorous testing of the real world!

Nelson Mandela is a man of great ideals.  He had, fortunately, the opportunity and the mental fortitude to examine these ideals in the light of experience, his own as well as that of many South African greats like Harry Oppenheimer, and to modify those ideals in such a way that they would be able to survive in the world in which we live.  For that, and for the fact that Nelson Mandela survived the conditions he was forced to endure by a semi-Fascist Government, is something for which all South Africans, and all citizens of the world, should be grateful. 

Now is the time in which we live.  If anything should have been done differently in 1994, we should recognise that it was not, and that it now will not be done differently, and build on what now is fact.

The world economies and the Employment of Labour

The current state of the world’s economies, from great to small, shows a change that appears to have been missed by the economic planners.  It appears that the change is likely to be permanent, and by not understanding the significance of it, the political leaders and, more particularly, the financial leaders of the economies are tending to use tools of economic management that are outdated and increasingly ineffective.

The economic history of the recession that started in 1989 is a clear indicator of what is now happening on a world scale.  The basic cause of that recession tends to be overlooked or, perhaps, misunderstood.  The collapse of Communism in Europe gave West Germany the opportunity to reunite, the fulfilment of an aspiration held as a prime objective of West Germany since the end of the Second World War.  That reunification brought with it an intensive investment effort, to bring the 15 000 000 East German people up to the economic standard of the wealthy West Germany population of 65 000 000.  The Government commenced pumping huge amounts of money into East Germany, taking the funds first from its own Budget, then imposing a tax levy on the West German people.  They responded with characteristic German discipline, and the investment proceeded.  Soon, the Government found that even that huge source of funding was insufficient to remedy the destruction of the once-thriving East German economy that had been wrought by Communist policies.  The German Government turned to the world financial markets, using the strength of the German economy to borrow huge amounts of money.  These funding efforts drained the world economy of free funds, depriving the capital markets of the ability to supply the credit needed by the world to support international trade and investment.  The world economies faltered, and, as in the recent situation of reduced lending by the world’s banks, the general economy went into a nosedive.  In West Germany, the results were dramatic.  Faced with reducing demand and a rising cost of supporting their borrowings, the industrialists cut costs in whatever way was possible, attempting to maintain their legendary quality while reducing prices in order to remain competitive and thereby to hold sales at a survivable level.  Inevitably, the factor of labour was a prime field for the cost-cutting efforts.  Within a matter of months, the number of unemployed started rising, going from about 2 000 000 to over 12 000 000.  Where a factory had previously employed two men per machine, they now automated their production processes, using one man to tend five machines.  Where the work could not be automated sufficiently to cut costs by the desired amount, those manufacturing processes were exported, to China, Vietnam and the other low-labour cost countries.  Although Germany lost hundreds of previously profitable companies, these actions saved the bulk of the German manufacturing base, now in a much stronger state than before the recession, and better able to face the changing world that had emerged from the ruins of Communism and the distortions that the Cold War had brought.  The picture of German industry changed dramatically with a few years, going from having large numbers of highly-skilled workmen, to few workers and many automated machines.

The financial crash of 2008, that followed the excessive lending of the banks in the pursuit of profits for the shareholders, the drive for ever-growing quarterly profit improvements with concomitant share price growth, and incredibly high bonuses for the bankers in control of the policies of their companies, resulted in a recession that bears remarkable similarities to the experience of Germany following 1989.

The (artificial) shortage of loan funds to businesses and consumers has resulted in a dramatic and massive loss of jobs and failure of otherwise capable businesses.  The efforts of the world’s central banks, by means of reducing interest rates, sometimes to 0%, and by increasing the supply of money in the economy, to drive funds to these markets have been largely unsuccessful.  The world’s economies remain stubbornly sluggish, and the number of unemployed remains high.  Where growth in employment has taken place, the numbers have been small, and the economic growth has not been commensurately reflected in a reduction of unemployment.  There is even a suspicion that at least some of the economic growth has, in fact, reduced the numbers employed in those sectors.  Even China, the recipient of many of the labour-intensive industrial activities exported from Germany and other Western countries after 1989, has developed a cost structure that now forces its previously high growth in GDP down towards the minimum level necessary to appease its citizens and hold an anti-Communist revolution at bay.  Yet the major economies of the world appear to be oblivious to the central fact of the modern industrial economy, a fact that is illustrated clearly by the brilliant economic performance of German, the only country, apparently, that has learned the lesson of the past. 

It is simple:  in the modern world economy, high-labour-cost low-labour-productivity economies must expect a declining level of employment or, at best, a stagnant rate of employment.  Economic growth in these countries will take place, when it happens, with only a minimal growth in the number of people employed.

The lesson to be learned is equally simple.  A high level of employment, in the absence of an increasing level of labour productivity, is a target that cannot be achieved without a means of holding the labour bill at the same level.  That means that the total cost of employment, including the wages, the cost of safety and welfare measures, the cost of administration related to employment in its widest sense, the cost of hiring and firing of people in response to changes in market conditions, must, in total, be reduced if the number of people to be employed is to increase.  An automated machine is an expensive investment in terms of capital, but, once it is installed, it does not require more than a minimal cost of maintenance.  It does not require annual wage negotiations with, often, above-inflation demands supported by strikes, it does not require a pension fund or a medical aid contribution, it does not require a lengthy negotiation or large compensation payment if it is put out of service for a month or a year.  It stands in its allocated position and produces on demand to its full capacity, without long tea breaks or annual leave, without strikes in support of other ‘machine unions’ making demands that cannot be met by employers who must earn a sufficient net profit to remain in business.  It is, in short, an ideal employee!

Governments may make statements about the ‘obligation’ of businesses to support Government policies, to provide employment for this class or that, to make investments that will create jobs, to provide in some way for people who have not earned that provision.  These demands may be effective in the short term.  Coercion does work, in the short term.  However, in the long run, the market will determine where businesses are established and where they will continue to operate.  It will determine where jobs are created, and where they are destroyed.  It will determine how much, in total, is paid for a particular job, and whether that job will be done by a human employee or by a machine.  A business is not a factory or a labour force.  It is a human who sees a potential, and who will go to wherever that potential can best be realised, and set up the organisation that will achieve that potential in the way that is most beneficial to the businessman.

The market is able to be manipulated in the short term, but it will prevail in the long term.  It is very large and very powerful.  Britain once spent huge amounts of its reserves to prop up its currency against a speculation that it would fall.  Britain, one of the major economies, failed to win that competition.  The market won. 

In the current world situation, only one industrial economy has consistently continued to maintain strength, facing the same conditions as all the other economies.  Germany learned the lessons of the 1989 recession, and came out of that trial stronger and more efficient.  The industries became hyper-efficient and the workers upskilled to become one of the best-educated and most highly productive workforces in the world.  The other economies of the world must now learn the same lesson.  They must choose to be labour-based or to go the route of technology.  They cannot afford to sit on the fence.  They cannot afford to believe that mediocre education is sufficient.  They cannot afford to be influenced by the Trade Union movements, whose motivations are based on higher wages and lower output by more members.  Those motivations are internally inconsistent.  You can have higher wages for fewer employees, or lower wages for more employees, given a consistent productivity.  You cannot have more expensive benefits paid by the employer without a sacrifice in terms of a lower wage paid to the employee.  In the end, a higher total cost of labour must be at least balanced by an equally higher production by the labour force and, if the labour force is to remain at the same level, the increase in production must exceed the increase that would be brought about by increased employment of machines.  The businessman is coldly rational, driven by the imperative to produce a profit each year sufficient to warrant the investment made in the business.  Ultimately, the world is not very far from totally automated factories, and the drive of the trades unions to increase the net benefits to their members is acting as a powerful driver towards that state.  If you doubt this, look at the work now being done to automate mining and agriculture, two of the seemingly most impregnable bastions of the large labour force.  These developments are disguised under the banner of safety, but, ultimately, it is the total cost of labour that is driving them.

If the Governments of the world wish to increase employment or, better still, to increase economic activity, or to postpone the time when almost no labour will be employed, they must act now, not to prevent businesses from driving towards a reduction of labour, but to make the employment of labour a more favourable option.  The carrot is the only way.  The stick, a favoured method of many Governments, will only serve to drive the businessmen to jurisdictions which are smart enough to learn the lessons that the Germans did two decades ago.  The world is a large place, and globalisation dictates that the market will prevail.

My eBooks and the Nicole Stuart Author Blog

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Alive!

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Hijack 

Justis 

Meteor Impact

Charles Taylor – the Message that should be learned

The conviction of Charles Taylor for crimes against humanity, and the imposition of a fifty year prison sentence by the International Criminal Court is a welcome development.  It has now been made clear that some top politicians at least may be held responsible for their actions.  In the case of Taylor, those actions were particularly reprehensible, but the principle is a good one.  Too many dictators have been able to buy themselves a comfortable retirement in a friendly country, using the funds they have stolen and defrauded from their citizens.  One of the many outstanding examples was Idi Amin, who retired to Saudi Arabia after years of brutality, in many cases even bestiality, as ruler of Uganda.  The results of his reign of incompetence and terror are still to be seen in that country, which he took from a position of hope to a state of destitution.

A worrying development in this regard is that the view is now being propagated that the International Criminal Court is an instrument used by the ‘West” against Africa.  There is some credibility in this view, in that the processes that bring the top criminals to the Court are controlled by those nations with a veto in the United Nations Security Council.  It appears highly unlikely that George W Bush and Tony Blair would be convicted of crimes against humanity, as the spokespersons of this view demand, but it would certainly be a beneficial development if the possibility of such a charge were to be possible.  It would certainly act as an inducement to honesty and decency in government if the top people knew that they will be held responsible, by a body with real teeth, for their actions, while they are in power, and after their retirement from that position.

The example now needs to be converted into law.  Every one of the leaders in Africa and the rest of the world claims that they are acting ‘for the people’, that their actions, in the best interests of their citizens, are being misinterpreted by ‘the Western Press’ to discredit their noble works.  Witness Robert Mugabe, the man who singlehandedly brought Zimbabwe, a previously prosperous country, to its knees, using Nazi tactics, brutality, theft and corruption to sustain his rule while the Zimbabwe nation suffered.  Witness Hendrick Verwoerd, the ‘architect of Apartheid, who initiated a rule of laws that ensured that South Africa created a vast population of deprived people, a population that even now, eighteen years after that system was brought to an end, continues to suffer and to grow.  The Truth and Reconciliation process that was intended to bring the nation together failed to achieve that objective.  It left the vast majority of the population, Black as well as White, dissatisfied, uncomfortable that serious crimes against all the people of the nation remained unpunished.  A man who bombs a church, a man who throws a prisoner from a helicopter to his death, has no place in a civilized society.

If the politicians are so sure that their actions are good and pure, that they enjoy the support of the people, let them put their money where their mouths are.  Let them pass a law committing themselves to the judgement of an impartial International Criminal Court, at the instance of an International Commission for the Dispensation of Justice.  In this way, the politicians will be held responsible for what they do to their people.  The people will have the hope that their rights under their Constitutions will be upheld, that the rulers will not be able to use the money they stole from the people to buy protection from the people.  Let us at last remove the hypocrisy that the ‘rulers’ of the nation are elevated above the laws that govern the common herd.  Let there be equality under law.  If the ‘rulers’ fail to do this, let the populace understand at last that the politicians are protecting themselves against the consequences that their acts would otherwise bring.

Correcting the Errors of the Past

Imagine a large corporation, employing thousands of people.  The corporation is headed by a Managing Director, who is assisted by several Divisional Managers, and so on, down the organisation structure.  There are millions of Shareholders, who attend a Shareholders General Meeting regularly, listen to the report of the Managing Director on the state of the company, then go off to discuss what they have heard with the media.

The individual Shareholders have a minimal input into the operation of the corporation, and are subjected to the heavy propaganda put out by the Public Relations organisation of the corporation, which has many years of experience in manipulating the opinion of the Shareholders and the public, and a long history of being the ‘only game in town’ in respect of its product range.

Over the years, the corporation, which was never really efficient or effective in its operations, but which had ridden on the wave of its PR, became less efficient and less profitable (or more expensive, depending on how you look at it!).   The Shareholders became restive, demanding that their interests be better protected, and the customers started looking to other suppliers.  The Managing Director and the Divisional Managers denied any wrongdoing, repeating over and over that the problems had been caused by the previous management, which had been ousted nearly twenty years earlier.  They instituted new rules, preventing the workers in the company from talking to the Press, and the PR Department went into high gear, calling on the names of heroes from the company’s past, and providing a clear identification between them and the current management.  Still, the incompetence and the corruption of the present management grew, becoming more visible as Divisional Managers were found by the Press to have stolen from the company, or to have managed their whole divisions so badly that they were in danger of collapsing and brining the entire edifice down with them.  Eventually, the Shareholders General Meeting took place again, and, this time, the Shareholders felt that their interests had been so badly mismanaged that they rolled up en masse to vote in a new Managing Director and Board of Directors.  These people took their offices seriously, realising that they had no right to the positions other than the rights given them by the Shareholders, and they set to work, replacing the dishonest, the ineffective and the corrupt members of the company.  It required many years of dedicated work to undo the errors of the past, to institute a training program that enabled the new workers to become effective employees, to build the capital of the company back to the point where it was no longer the ‘basket case’ of its industry, to re-establish the trust of the lenders and the joint venture partners in the honesty and integrity of the company and its top management.

Does this story ring any bells?

The African National Congress was established with honourable intentions.  It made a number of mistakes in its progress to maturity, including allying itself with the Communists, which told a seductive story with the purpose of gaining control of a potentially valuable piece of real estate.  It came to power, not in a bloody revolution, as it now increasingly claims, but in a controlled handover by a White majority that no longer had a fear of domination by the Russian Communists, a government that had committed acts of terror against its own citizens on a scale that made the tyranny of Hitler seem almost insignificant.  It took power in an atmosphere of confidence, the people believing that the opportunity had now come to correct the many errors made in the past.

It did not take long for the new Government to realise that it had been handed a cornucopia of personal wealth.  The top people set to work with a will, to appropriate to themselves as much of the wealth of the country as they could.  This attitude spread rapidly down the ranks, as numerous cadres were rewarded for their membership of the ANC, the South African Communist Party and Cosatu by the means of cadre deployment.  The institutions that had enabled the National Party, representing a very small proportion of the citizens of the nation, to build a strong economy even in the face of world disapproval, were dismantled or allowed to fall into disrepair under the management of incompetent and dishonest people.  The economy started to crumble, first in less obvious, longer-term ways, such as the health care system, where once-proud hospitals were stripped of their capabilities to become ghosts of what they had once been and the training of nurses was almost abandoned, the educational system, where an untried and untested new system was introduced with disastrous results and where the experienced teachers were retrenched to bring in new cadres who had little understanding of education or management of an educational system, the Atomic Energy Corporation, a world-class nuclear research establishment, where the scientists were dismissed to go to Iran, North Korea and other potential danger areas) and the assets were stripped and sold at give-away prices in order to realise the commissions to cadres, Eskom, where the failure to understand the necessity of maintenance and continued investment brought about a near-collapse of the economy which is now in the process of correction with massive price hikes that are resulting in the country losing its previous standing as a favoured industrial investment location, in Spoornet, where the sale of thousands of wagons as scrap steel (again to realise a commission to a cadre) brought about a massive decline in the capability of the mining, forestry and other industries to be competitive on an international scale, in the Police Service, where crooked Commissioners were appointed in order to protect the top politicians from investigation and the Crime Intelligence Service was turned onto the political enemies of the elite, in the labour system, where the demands of Cosatu have been allowed to run rampant, bringing practically all sectors of the productive economy into a state of uncompetitiveness and forcing unemployment to levels that exist only in declining Third World economies, in the Department of Public Works, where the disease of corruption has become endemic while the capability to perform the necessary works has dropped to an all-time low, in the South African Revenue Services, where the morality now appears to permit a system of demand, enforce and collect, even where the demand has no basis in law, in the Department of Defence, where the military capability of the country had declined to the point where it is only marginally capable of undertaking a peace-keeping role in a foreign country, to the Courts, where the case load has grown, in some cases, to over two years while under-qualified and under-managed Judges sometimes fail to deliver their judgements for many months, to the universities where law graduates are unable to write, even to read, effectively.  The list goes on and on.  Even within the Party, allegations abound of purges of ‘elements opposed to the Leadership’, and joint Press conferences of the top leadership are held to give the impression that the Party enjoys internal unity!  The same allegations are made of the South African Communist Party, where branches are disbanded without clear and credible reasons being given.

It is safe to say that South Africa, under the ruling Tri-Partite Alliance, is heading down the same road of corruption, mismanagement and incompetence that led to the ruin of so many other African countries.  The only question is whether the ‘Shareholders’ of the country, the voters, will see past the smoke and mirrors that the ruling Party is putting up, and decide to elect a new group of people to run  the country in the businesslike way it deserves.  In the same way as the Managing Director who fails to manage his company must resign, so should the President, in the same way as the Directors fail to perform their duties to protect the interests of the Shareholders resign, so too should the Ministers resign.

If the ANC is to have any honour in the future, the Party must now accept that it has failed to perform its duties over the past eighteen years.  It must accept that lame excuses are no substitute for performance.  It must accept that it has moved away from being the Party of hope to being the Party of division, between the races, and between the classes.

Finally, it must accept that it does not have the qualities that are needed to manage a sophisticated modern economy in a dynamic, non-racial world.

The ANC and Unemployment

The ANC Policy Congress made great play of its concern about the very high rate of unemployment, particularly among the youth.  Of course, we all know that this was motivated mainly by a need to grab the votes of the unemployed, who will believe that all the fine words are true.  When did a politician lie!

The facts speak clearly to the contrary.

A colleague, in discussing a job development project with the MEC for Economic Development and the Premier of the Eastern Cape Province, pointed out that the Eastern Cape suffered a very high rate of unemployment, and that the numbers of unemployed would increase considerably when the mines started cutting back due to a declining economy.  The response from the MEC warrants recording in the annals of ANC achievements.  “But the rate of unemployment is not so high!  It is only 69%!”  One could be forgiven for wondering at the attitude of the Party as expressed by a senior political official.  “Only 69%!”

The same colleague wrote a proposal to the Premier of another Province, proposing that a similar project be conducted in that Province, with the objective of creating 350 000 sustainable jobs within three years.  He was contacted within a week by the Personal Adviser to the Premier, who asked for a meeting to discuss the project.  The man’s words equally merit recording.  “This is a very interesting project, but we need to discuss the commission.”  “Commission?” queried my colleague, surprised.  “Yes, we normally ask 15% equal to R1 800 000 at that time), but you don’t need to be concerned.  That amount includes the Premier and the MEC for Economic Development!”  Needless to say, my colleague did not agree to that proposal.

When my colleague wrote to the Premier of the Eastern Cape a couple of years ago to propose that the project, which was succeeding to a level well beyond what the Government has achieved in the years since then, the Premier responded after nearly two months that she would respond fully in the near future.  Needless to say, there has been no further response since then, even though my colleague has written several further letters requesting a response.  Perhaps the problem lies not with the project, but with the failure of my colleague to offer an acceptable ‘commission’!

Now the ANC has decided that any form of corruption will be punished by the Party!  Now the ANC expresses its concern for youth unemployment!

The Association for Nepotism and Corruption rules!