You can set the
price, but the market will decide whether to buy. Put simply, if you offer
to sell a kilogram of butter or an hour of labor, the market has the freedom to
accept your price and buy, or to reject it and not buy. The labor unions demand
a high price for what their members are able to offer, and, in the short term,
the buyers may be forced to accept that offer, simply to keep in business until
they are able to find an alternative, or to find a way to wind down that
element of their business without too much loss. The mines in South Africa have
been subjected to an unrelenting, government-supported series of wage demands
by their workers over many years. The workers’ demand were met by the
employers, which then set about finding ways to reduce the dependence on that
labor, by automating jobs, by finding more efficient ways to doing the work, or
simply closing shafts and investing their money in other countries. The result
has been that the number of workers employed in mines in South Africa have
reduced to less than a third within one decade! The lucky workers who remain
employed may be paid more now than they were before, but a large proportion of
those making demands for more wages are now sitting at home, wondering where
their source of income has gone. Those who are still employed are, generally,
earning more, and being paid more, because they have improved the value of what
they supply to their employers. The simple rule is that, if you want to be paid
more, you must offer better value for that payment. The higher the price for
the same level of value, the lower will be the demand.
The Government can
set unreasonable rules, but the market will decide whether to accept them.
Governments everywhere have an imperative to legislate on everything. They
assume that they have a monopoly on wisdom, and they believe that what they
proclaim shall be done, will be done. In reality, the parliamentarians debating
wisely and learnedly (?) on the needs of the country are not in the top 5% of
smart people in the country. They are almost certainly not in the top 50%. That
is clearly demonstrated by listening to what they say. Remember Thabo Mbeki,
the President of South Africa, stating in learned tones that “AIDS is a
syndrome, and a syndrome doesn’t cause an infection”? Or George W Bush claiming
that “the French don’t even have a word for ‘entrepreneurship’”? Or Cyril
Ramaphosa defending Jacob Zuma when he stated ““We are saying that the
integrity of the President remains intact and that this President has the
ability and know-how to lead our Government and South Africa going forward.”?
Or Neville Chamberlain claiming that his agreement with Adolph Hitler would
ensure ‘Peace in our time”? When a Parliament or Congress or Duma lays down the
law, it is a statement of what a few, self-interested and not-very-intelligent
people at the top of the Party want to happen. Business then decides whether
they can tolerate it. If not, they pull out of that business, or set up a
different structure to evade the rule. Then the citizens come into the picture.
As always, they might be taken in, for a shorter or longer time, but
eventually, they will decide whether the rule is good for them, and comply with
it, or not good for them, and take whatever action is required to avoid the
undesirable consequences. The National Party legislated a minimum wage for
domestic servants, and the result was that more than half of the domestic
servants, people doing menial work largely because they had no other skills to
offer, became unemployed. A low wage became a no wage. The ANC, faced with a
lack of medical skills because they did not pay enough to compete with the
earnings in private practice, imposed a rule that all newly-graduated doctors must
serve a lengthy period in public service, in places nominated by the Department
of Health, before they could go into private Practice, suddenly found that the
newly-graduated doctors emigrated to avoid this discriminatory rule, forcing
them to import poorly-qualified doctors from Cuba (of course, people will claim
that the Cuban doctors are well-qualified – the response from a number of
highly-qualified specialists is that they have skills no better than a senior
nurse, at best. The other aspect is that the rule was introduced in order to
permit the ANC to make good on its terrorist-era promise to pay back the Cubans
for their help in coming to power in South Africa without having to use their
own ill-gotten funds to do so). What the lawmakers should do in place of
throwing mud at each other under the guise of a ‘parliamentary debate’ is to
put all of the facts on the table, invite considered opinion from qualified
people on what really constitutes a problem and on how to solve it, and then
use the skills available in the Public Service, if there are any, to formulate
the law to be passed. The simple rule is that you can demand, but the buyer
will decide whether you will receive.
Everything is a
trade-off. Nothing comes free. TANSTAAFL (There Ain’t No Such Thing As A
Free Lunch). Whatever you want has a price. It is a wise man (or more often
woman) who recognizes that if you take this, you can’t have that. Life is a
series of alternatives. If you want to become a senior executive in a
competitive world, you have to pay the price of gain the necessary education
and experience. Unfortunately, being in possession of a black skin does not
absolve you from that rule. Unfortunately, gaining twenty years’ experience
takes twenty years. Pushing unqualified people to the top ranks of an
organization is a sure recipe for the failure of that organization, either
because they are incompetent, or because they are necessarily crooked to
pretend (even to themselves) that they have what it takes. Witness Dudu Myeni
and South African Airways, Brian Molefe and Transnet and Eskom, Hlaudi
Motsoeneng and SABC, Bathabile Dlamini and SASSA, Jacob Zuma and South Africa,
Donald Trump and the USA, Theresa May and the UK Conservative Party, Adolph
Hitler and Germany, Vladimir Ulyanov (Lenin) and Russia, and Vladimir Putin and
Russia. The failure of the management objectives of BBEEE has resulted in South
Africa declining in importance as an African economy. Unfortunately, the price
of a failure to recognize this rule is often paid by the persons who did not
make the decisions, but, ultimately, even they can be shown to have been
complicit in allowing the nonconforming decisions to be made, even if only as a
voter who failed to make the facts known to other voters. Many Americans will
be joining their South African counterparts soon, in regretting the decisions,
or non-decisions, of which they were culpable in choosing the wrong man. The
simple rule is that the ultimate price to be paid for today’s free lunch should
be carefully considered before opening that lunch pack.
The final rule for
today: Governments are not immune to the rules of economics.
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