It’s not the economy, but our demands and decisions that makes the difference
“It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard for their own interest.” These are the oft quoted words of Adam Smith, the “father of economics,” from his classic the Wealth of Nations written in 1776. With these words Smith was attempting to abstract how simple and profound laws about the workings of free and open markets, and the elements of such markets, apply across time and space. The thing about Smith’s views is that they are not in any sense positivistic; if anything, Smith’s prepositions are more akin to that found within natural law theories. It is thus quite shocking sometimes when reading the views and demands of learned and privileged persons in local newspapers, especially given that these are usually couched in natural law language. Most of these views and demands are so out of touch with the basic laws of economics that one cannot help but question if there is perhaps something else behind these demands that the holder is not sharing.
A week ago, a young politician, who rose to prominence after he took to China Town to protest the alleged malpractices of the tax authorities, raised his voice in concert with students who were demanding that a local private university lower their registration fees. The politician claimed that the university’s fees are out of touch with the realities of what so many Namibians go through each day. The irony is that it is perhaps the protestors, in this case, whose views are out of touch with the reality of the set-up of the Namibian economy, and that perhaps they should consider revisiting the targets of their protest. The primary problem with this protest lies in the fact that none of the university’s students were ever coerced into attending it. To better illuminate unsoundness of the situation, think of it this way: I would like to drive a Ferrari, even a BMW would do, but for reasons of simple and basic logic and economics I know that it will help no one if I go stand with a microphone in the middle of Post Street Mall and demand Zimmerman Garage lower what they charge for their cars so that I can get one.
Substitution
Nothing is forcing me go acquire a BMW, and if transportation is so important to me, it might maybe be time to think about substitutes such as a ‘Dankie Botswana,’ or UNAM in the case of the students. If the particular university under consideration here ends up succumbing to the demands of the politician and students it will have to let go of some of its staff, cancel some of the other costs its incurring to provide as good an education as it can, and this will inevitably lead to a deterioration in the quality of what it provides. Not long after this, some students might even start deciding not to go to this institution due to the drop in the quality of service that it provides, and employers will become sceptical about hiring graduates from it, its best lecturers will consider their careers because they might get paid better at other institutions, which will only lead to a further exodus of students, and, in all likelihood, insolvency.
Students, however, can still be forgiven for making such simplistic demands; they are still young, trying to find their way in the world, and have much to learn. What is more concerning in Namibia is how big institutions, both public and private, have wishes that could only best be exercised in an alternate reality. But even in this alternate reality the laws of logic would not evade them, as logic is probably the only discipline one can think of that is the same no matter which universe you reside in, but perhaps those of economics could. From a public perspective a great place to start is probably the recent idea touted by the Namibia Investment Promotion and Development Board (NIPDB) of setting up a retailer that will only stock Namibian goods. Is it really in the interest of the country for a government institute to open and run retail shops similar to Spar, Usave and Woermann Brock? Does the NIPDB have the skills and capacity to run retailers better than what is already available? Will people shop at this retailer for the sole reason that it sells only Namibian goods, or will they go to the shops where they can get the most bang for their buck? There are many things that only the government can properly provide such as military services, but retail shops of the likes of OK Supermarket certainly does not fit the bill. All of this is not even to mention all the extra interests that the NIPDB will have to attempt to manage and please outside of what ordinary retailers have come to master over decades of operations - Whose matangara, condoms and facemasks will the NIPDB’s proposed shop stock?
Meatco
If one is looking for a monstrous example of a public institute that should rather have been ran privately, then one need to look no further than Meatco. Meatco has basically been running as a monopoly for its entire existence. Monopolies tend to exhibit a few things including profits and prices generally not reflective of the value of their output. Furthermore, it is usually the consumers of monopolies’ output that suffers the most as the market is devoid of competitors that can offer something better at a lower price. Metaco, however, despite being a monopoly cannot even muster a profit. Minister Schettwein’s recent pronouncement that the meat-processing and marketing entity is in ICU was perhaps too generous, though he at least did also acknowledge some of the corpses. If you were to have done a quick google search on the financial statements of Meatco over the last five years, you would probably wonder why it has not yet taken the road of Air Namibia. Between 2017 and 2021, Meatco recorded a loss year in, year out ranging between N$ 12 million and N$ 125 million, with an average of N$47 million a year. For the last three consecutive years, Meatco’s losses have only been growing. If Meatco where any normal privately ran operation it would have been closed, faced bankruptcy suits, and the market would have replaced it with something more viable. Farmers already do not want to sell to Meatco, and have already sought to establish their own meat-processing and marketing entity. A good axiom for the government to sleep on as it ponders on its meat-processing and retailer aspirations, along with all the other headless State-Owned Enterprises, is that the road to hell is paved with good attentions. Despite the earnest beliefs of those behind these operations, what they are engaged in is almost mathematically assured, in its current designed and the present economic milieu, to lead to financial ruin. The government can also take a tip out of the notebook of Mexico, a country who as part of its effort to modernize its economy, privatized 875 of 1155 state-owned enterprises in the late 80s. Along with improvement in its tax policy (targeting a board class of persons), reducing its budget deficit, cracking down on corruption and entering the North American Free Trade Agreement, Mexico was able to record years of growth with low inflation, a feat it had to been unable to achieve until then.
Protection
This economic lacunae in decision making are not only lost on young university students and government-owned enterprises, but also on some big privately owned entities. Think Namibian Dairies, and their dairy trade protection in the guise of supposed infant-industry protection (IIP). The thrust behind IIP is that latent industries with potential comparative advantage, typically outside the developed world, should be armoured against foreign competition. Being in their infancy, these industries have yet to reach the point of maturity that would give them the muscle to withstand the threats of multinationals, and that once they have reached such maturity the cost at which they were protected would be repaid in the form of revenue these companies would be able to gain from exports, as well as the persons they employ. And while there is perhaps a case for IIP when it takes the form of direct subsidies, what has transpired within the Namibian dairy industry has not resulted in any of the desired effects. One of the key problems with IIP hinges on the question of which industries deserve protection, and how long should the protection last once an industry has been selected for it. Some of the key economic criticism of IIP is that such industries end up losing the drive to actually become competitive, other countries will resort to retaliatory actions, and once its established it becomes politically undesirable to amputate the measures due to all vested interests that has grown out of it. In the end the biggest losers are the consumers as the cost of utilising cheaper goods are foregone. Despite Namibia Dairies having been a beneficiary of IIP protection for the best part of the last 20 years, it still recently asked the government to extend its assistance as the industry was supposedly, once again, on the brink of collapse.
Capitalism
What has been asserted here should not be taken as a blank cheque on the wonders of capitalism. Thought most of what has been advanced here is nothing but simple economics, the problem is that such policy stances inevitably lead to the creative undoing of archaic power structures, which invariably also negatively impacts a lot of good, hardworking, and well-meaning people, many of whom lie on the margins of the power and wealth of a country. Thus, any intention of implementing such policies should not be undertaken without thoroughly considering what safety-nets, be it in the form of new jobs, training, and as to credit, can be set-up to ease the burden that will be placed on persons that will bear the brunt of the stick. Incorporating such measures within policy is encouraged as it does not seek to curb creative destruction but rather to help those that have been knocked over to get up as swiftly as possible.
There is not much wrong with the economic system were currently have, but there is abundance of fault within the choices we have made, and continue to make, within it. As a nation we do not have to subject our society to a market economy; international law does not require that of us. However, whether there is a better system out there that we should adopt is an ideologically question that needs to be answered by our leaders, the persons best placed to gauge the pulse of the people, and develop policies most representative of our collective interest, not one that economics can answer. But as long as we are in this ship of open markets, we will remain subject to the currents and fronts of basic economics and logic, and it will best serve our interest to better understand and follow the laws they are composed off.
A week ago, a young politician, who rose to prominence after he took to China Town to protest the alleged malpractices of the tax authorities, raised his voice in concert with students who were demanding that a local private university lower their registration fees. The politician claimed that the university’s fees are out of touch with the realities of what so many Namibians go through each day. The irony is that it is perhaps the protestors, in this case, whose views are out of touch with the reality of the set-up of the Namibian economy, and that perhaps they should consider revisiting the targets of their protest. The primary problem with this protest lies in the fact that none of the university’s students were ever coerced into attending it. To better illuminate unsoundness of the situation, think of it this way: I would like to drive a Ferrari, even a BMW would do, but for reasons of simple and basic logic and economics I know that it will help no one if I go stand with a microphone in the middle of Post Street Mall and demand Zimmerman Garage lower what they charge for their cars so that I can get one.
Substitution
Nothing is forcing me go acquire a BMW, and if transportation is so important to me, it might maybe be time to think about substitutes such as a ‘Dankie Botswana,’ or UNAM in the case of the students. If the particular university under consideration here ends up succumbing to the demands of the politician and students it will have to let go of some of its staff, cancel some of the other costs its incurring to provide as good an education as it can, and this will inevitably lead to a deterioration in the quality of what it provides. Not long after this, some students might even start deciding not to go to this institution due to the drop in the quality of service that it provides, and employers will become sceptical about hiring graduates from it, its best lecturers will consider their careers because they might get paid better at other institutions, which will only lead to a further exodus of students, and, in all likelihood, insolvency.
Students, however, can still be forgiven for making such simplistic demands; they are still young, trying to find their way in the world, and have much to learn. What is more concerning in Namibia is how big institutions, both public and private, have wishes that could only best be exercised in an alternate reality. But even in this alternate reality the laws of logic would not evade them, as logic is probably the only discipline one can think of that is the same no matter which universe you reside in, but perhaps those of economics could. From a public perspective a great place to start is probably the recent idea touted by the Namibia Investment Promotion and Development Board (NIPDB) of setting up a retailer that will only stock Namibian goods. Is it really in the interest of the country for a government institute to open and run retail shops similar to Spar, Usave and Woermann Brock? Does the NIPDB have the skills and capacity to run retailers better than what is already available? Will people shop at this retailer for the sole reason that it sells only Namibian goods, or will they go to the shops where they can get the most bang for their buck? There are many things that only the government can properly provide such as military services, but retail shops of the likes of OK Supermarket certainly does not fit the bill. All of this is not even to mention all the extra interests that the NIPDB will have to attempt to manage and please outside of what ordinary retailers have come to master over decades of operations - Whose matangara, condoms and facemasks will the NIPDB’s proposed shop stock?
Meatco
If one is looking for a monstrous example of a public institute that should rather have been ran privately, then one need to look no further than Meatco. Meatco has basically been running as a monopoly for its entire existence. Monopolies tend to exhibit a few things including profits and prices generally not reflective of the value of their output. Furthermore, it is usually the consumers of monopolies’ output that suffers the most as the market is devoid of competitors that can offer something better at a lower price. Metaco, however, despite being a monopoly cannot even muster a profit. Minister Schettwein’s recent pronouncement that the meat-processing and marketing entity is in ICU was perhaps too generous, though he at least did also acknowledge some of the corpses. If you were to have done a quick google search on the financial statements of Meatco over the last five years, you would probably wonder why it has not yet taken the road of Air Namibia. Between 2017 and 2021, Meatco recorded a loss year in, year out ranging between N$ 12 million and N$ 125 million, with an average of N$47 million a year. For the last three consecutive years, Meatco’s losses have only been growing. If Meatco where any normal privately ran operation it would have been closed, faced bankruptcy suits, and the market would have replaced it with something more viable. Farmers already do not want to sell to Meatco, and have already sought to establish their own meat-processing and marketing entity. A good axiom for the government to sleep on as it ponders on its meat-processing and retailer aspirations, along with all the other headless State-Owned Enterprises, is that the road to hell is paved with good attentions. Despite the earnest beliefs of those behind these operations, what they are engaged in is almost mathematically assured, in its current designed and the present economic milieu, to lead to financial ruin. The government can also take a tip out of the notebook of Mexico, a country who as part of its effort to modernize its economy, privatized 875 of 1155 state-owned enterprises in the late 80s. Along with improvement in its tax policy (targeting a board class of persons), reducing its budget deficit, cracking down on corruption and entering the North American Free Trade Agreement, Mexico was able to record years of growth with low inflation, a feat it had to been unable to achieve until then.
Protection
This economic lacunae in decision making are not only lost on young university students and government-owned enterprises, but also on some big privately owned entities. Think Namibian Dairies, and their dairy trade protection in the guise of supposed infant-industry protection (IIP). The thrust behind IIP is that latent industries with potential comparative advantage, typically outside the developed world, should be armoured against foreign competition. Being in their infancy, these industries have yet to reach the point of maturity that would give them the muscle to withstand the threats of multinationals, and that once they have reached such maturity the cost at which they were protected would be repaid in the form of revenue these companies would be able to gain from exports, as well as the persons they employ. And while there is perhaps a case for IIP when it takes the form of direct subsidies, what has transpired within the Namibian dairy industry has not resulted in any of the desired effects. One of the key problems with IIP hinges on the question of which industries deserve protection, and how long should the protection last once an industry has been selected for it. Some of the key economic criticism of IIP is that such industries end up losing the drive to actually become competitive, other countries will resort to retaliatory actions, and once its established it becomes politically undesirable to amputate the measures due to all vested interests that has grown out of it. In the end the biggest losers are the consumers as the cost of utilising cheaper goods are foregone. Despite Namibia Dairies having been a beneficiary of IIP protection for the best part of the last 20 years, it still recently asked the government to extend its assistance as the industry was supposedly, once again, on the brink of collapse.
Capitalism
What has been asserted here should not be taken as a blank cheque on the wonders of capitalism. Thought most of what has been advanced here is nothing but simple economics, the problem is that such policy stances inevitably lead to the creative undoing of archaic power structures, which invariably also negatively impacts a lot of good, hardworking, and well-meaning people, many of whom lie on the margins of the power and wealth of a country. Thus, any intention of implementing such policies should not be undertaken without thoroughly considering what safety-nets, be it in the form of new jobs, training, and as to credit, can be set-up to ease the burden that will be placed on persons that will bear the brunt of the stick. Incorporating such measures within policy is encouraged as it does not seek to curb creative destruction but rather to help those that have been knocked over to get up as swiftly as possible.
There is not much wrong with the economic system were currently have, but there is abundance of fault within the choices we have made, and continue to make, within it. As a nation we do not have to subject our society to a market economy; international law does not require that of us. However, whether there is a better system out there that we should adopt is an ideologically question that needs to be answered by our leaders, the persons best placed to gauge the pulse of the people, and develop policies most representative of our collective interest, not one that economics can answer. But as long as we are in this ship of open markets, we will remain subject to the currents and fronts of basic economics and logic, and it will best serve our interest to better understand and follow the laws they are composed off.
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