Retrenchments and the clash of titans

Forging a new understanding between adversaries.

We should be in the middle of a strike season but this has clearly been overwhelmed by what is rapidly becoming a lay-off crisis. While we are heading for a multi-party summit on the issue (see report here) it may be worth reminding ourselves of the inexorable forces confronting us and the need to bury old paradigms.

Involvement by government, organised labour or even employers, either through more controls, mineral license bullying, implied nationalisation, strike threats, exchange rate manipulations, incurring bigger company losses, or disguising inefficiencies through trade barriers, will ultimately have little sustainable effect, perhaps even make matters worse.

Jobs are not created or sustained by governments, companies, capital or labour but by responding to demand reflecting people’s needs and wants. And while there is a mesmerising attraction to the idea of a pure, omnipotent, trustworthy and ultimately benign force that guides transactional correctness, there is a deeper context that cannot be ignored.

A maxim I have often used says “markets are perfect; they will perfectly reflect all our imperfections.” It is dealing with those imperfections that we get stuck in a quagmire of much academic drivel, rhetoric, labels, slogans and populist babble that in itself just drags us deeper into that bog. In the end it is a matter of trust. What or who do we trust more: governments or private enterprise; laws or unfettered competition? And then to what extent?

Whatever we do, we cannot ignore the inexorable and mighty dynamism of markets – that force which gives expression to individual needs, wants, fears, hopes and dreams. It is also the arena where we can create meaning in our lives, where we can express our contribution to others and receive rewards to sustain that contribution. Things start going awry when that arena is seen as an exploitable resource exclusively for self-enrichment and minimum contribution for maximum gain – whether by plutocrats or governments. This destroys the ideal of having markets as unregimented as possible.

Time and again and throughout history we have learned at our peril that trying to ignore market forces, control or manipulate them, comes at a huge price. Demand always remains supreme and the ultimate master. When people want less oil, wells will dry up; when they want fewer commodities, mines will close; when we no longer eat beef, cattle will become displays in a few zoos. And with them will fade into oblivion those thousands of enterprises that rely on them; that serve them. And with them, thousands of jobs.

Stripped of all hypotheses, that is what is confronting our mining, steel and other industries. It makes tragically comical the political and other sideshows of militant arguments either for profit, wage or societal maximum gain. It is sad to see the constant repetition and escalation of labour militancy, falling back on 19^th century refrains at a time when faltering demand is causing massive lay-offs.

While some may baulk at the concept of a “war” between labour and capital, there is a stand-off nevertheless. Much of our economic thinking has been based on the supremacy of capital, its revered position as creator of jobs and generator of wealth and prosperity. This thinking expediently ignores the distinction between enterprise and capital, and the important precept that enterprise leads and finance follows. It is in the development of enterprise in response to demand that a partnership can and should be forged between them, moving away from a stance of mutual exploitation.

In a narrow sense of a clash between the titans of capital and labour, the former will always win. It is flexible, mobile and for most part disturbingly aloof to and often individually unaccountable for the consequences of its actions. Organised labour on the other hand is rigid, relatively immobile and enslaved to remuneration or debt. The simple reality is that in a volatile world, inflexible things are the first to break.

In a broader sense, the very battleground that these titans are engaged on are those classic market forces that can quake the earth and reduce them to ashes. When capital has succeeded in reducing labour to a minimum either through financial shenanigans, technology or centralisation of economic power, where will it get the demand from for its products and services? The 21^st century monetary aberration of exponentially creating huge amounts of wealth through investment in non-productive assets and into a blocked funnel favouring a few individuals, must also come to an end. May that bubble not burst in my time!

There may be some hope if we toss all of the economic theory that we have clung to over last few decades, especially fanatical adherence to “isms”, and carve a new path that recognises people and individuals and not simply theories and abstracts. Labour and capital have to extricate themselves from self-destructive confrontation; adopt principles of common purpose and common fate at an individual and company level, and prioritise job retention far above job creation and ahead of wage and short term profit maximisation.

Organised labour’s refrain of pointing to the good times and historic profits to support its argument for higher pay is disingenuous at best. If the argument is to have any weight, then they have to accept what is staring them in the face – fortune sharing that adjusts rewards for all to weather storms in bad times and benefit from the good times.

This means linking more directly individual labour rewards to those supreme market forces. Differentiation can be guided by the supply and demand for skills and qualifications, but the rewards themselves have to be linked directly to value added or the wealth created, which is the measured contribution the enterprise has made to others. I have mooted this suggestion on several occasions. (See article here.)

A fundamental principle of free enterprise that will always endure is that tangible wealth can never be sustainably created out of nothing. It has to be based on service to the other.

If all role players can refocus their attention to that, there may be hope for a new economic path in South Africa. If not, it is that principle that will come back to bite us.

The faltering middle class

And the rise of the precariat class

It may be one of the more disturbing research findings in a very long time. In a report just released, the Institute of Race Relations not only questions the assumed size of the South Africa middle class, but its potential growth.

The middle class is the backbone of our economy and a faltering in its growth could see the crumbling of an important pillar of economic prospects. It has been a significant force behind the growth of many emerging markets, setting them apart from developed economies until the decline of commodity prices partly blemished these prospects for many countries.

There are many activities that rely on middle class prospects – from an increase in asset values such as shares and property, to prospects for manufacturing, retailing, agriculture and many others. Without a sustained growth in the middle class, the outlook for economic growth generally and employment in particular will be severely dimmed. It will make a complete mockery of any ambitious plans to create jobs or stimulate economic growth.

Assumptions about the size and robustness of the South African middle class are now questioned by the IRR research. There have been estimates that this class could make up some 30% of the South Africa population, but the research paper notes: “perhaps just 1 in 10 South Africans has a solid claim to a middle class standard of living.” And regarding prospects it says “of concern is that South Africa’s weak economic performance is likely to put the brakes on any significant further middle class expansion.”

There has been an increase of about 13% in the last ten years in households spending R10 000 pm or more, but the report cautions that this has not been adjusted for inflation. Even if one accepts that the spending benchmark qualifies for middle class status, and not adjusting for inflation, the size of the South African middle class cannot be more than 20%. The Institute uses a number of other measurements to conclude that this figure is probably 10% or even less. What is also relevant is that there has been a notable shift in the changing balance of income between black and white people. Black South Africans earned just under 122% of the total disposable income earned by whites in 1996. By 2013 this had grown to just under 170%.

In the last 20 years, the growth of the middle class has been strongly supported by public sector employment. More than three out of ten employed South Africans work for the public sector. Between 2006 and 2013, public sector employment rose by nearly 25%, while private sector employment was virtually unchanged. Last year alone public sector employment grew by more than 4%, while private sector employment declined by 1%.

In its comment on the 2015 budget, accounting firm Delloite noted: “one is twice as likely to be employed in the public sector today, as 40 years ago – with little perceived improvement in service delivery, law and order and administration. Our BRICS partners spend on average 25% of their total government expenditure on salaries, by contrast South Africa spends approximately 40% of its budget on salaries, or R450 billion annually. Over the next three years government will spend R4.4 trillion, and approximately R1.8 trillion representing 40%, will be spent on the Public Sector wage bill.”

It’s an orgy that simply has to end and as the IRR report notes: “Government finances are under pressure, meaning the civil service cannot be extended further as a black middle class incubator.”

There’s a far more ominous dimension to a faltering middle class. It is an essential rung in individual progress. It is largely made up of relatively skilled, experienced and educated individuals and is an important catalyst for self-improvement, nurturing aspirations and encouraging the attainment of skills and qualifications. It gives hope of a better tomorrow for the youth, for young adults wanting to start and support a family in the comfort of their own home. There’s an absolute limit to which this rung can be reached through simply demanding increased wages, especially at a time when blue collar (and red overall) work is under siege.

The middle class globally is on the decline, leaving the world with widening income disparities and a polarised society between haves and have-nots. It has given rise to what international labour economist, Guy Standing has termed the “precariat”.

He says: “it is a class in the making, approaching a consciousness of common vulnerability. It consists not just of everybody in insecure jobs – though many are temps, part-timers, in call centres or in outsourced arrangements. The precariat consists of those who feel their lives and identities are made up of disjointed bits, in which they cannot construct a desirable narrative or build a career, combining forms of work and labour, play and leisure in a sustainable way.”

Standing believes the protests spreading across the world are manifestations of the precariat taking shape.

We clearly already have a substantial precariat class in South Africa.

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Not letting go

Things we should stay outraged about.

So Nkandla is in the news again (or still!), with politicians across the board joining the longstanding chorus of outrage at the exorbitant cost involved. In an earlier indirectly linked expression of anger, South Africa’s biggest trade union, Numsa, announced plans for a one day national strike against corruption. (See report here). The call came in the same month as the country celebrated the legacy of Nelson Mandela in a widespread outpouring of goodwill and reflects the contrast we often face between active disapproval and tolerance.

There is an indescribable mystical power in the ability to let go. You witness it when you are in the presence of death; when a terminal condition in its final act extinguishes the remaining embers of conscientiousness. There is a near imperceptible moment when that person simply lets go; in an instant ending years of torture and anguish in exchange for deep peace and serenity. Those last hours are the sum total of our lives; the culmination of countless snapshots of the mind’s camera and the last decisive entry into life’s ledger. Embracing them without struggle is the final conquest.

We have been taught over millennia that the ability to let go when faced with something out of our control is strength and not weakness; wisdom, not folly. But at what point does that mean resignation? At what point does it represent premature defeat? At what point does it open the door to needless misfortune? Above all, at what point does it allow the miscreants in our lives, the malevolent actors, to continue to sow their destructive seeds in our passive field of goodwill and indifference?

We have been taught that anger and outrage are poisons that we prepare and swallow ourselves. But they are also weapons of action and resistance and could be the difference between doing something and standing idly by as predators tear our lives apart. This is not about a debilitating obsession with the past, but about confronting a persistent and deliberate repetition of improper behaviour. There are those who have either never possessed or have thrown away their moral compass; have long since learned the art of aloofness; of waiting for things to blow over; of rhino-skinned immunity to the disgust and disdain of their fellow beings, and simply wait for the “robust debate” to calm down before continuing as if nothing had happened.

Numsa’s efforts will no doubt culminate in just another disruptive display of censure, of which we have had many in this country on a wide variety of issues. The weakness lies in confronting an issue rather than the villains themselves. It is not always easy to identify them when accountability is vague and often diverted in occurrences and in large systems; unless one subscribes to conspiracy theories and exposes the hooded rascals exchanging malevolent thoughts in whispered tones and in dim-lit corners of secret and remote venues. But where the results of this iniquity are individually displayed and personified, there should be a sufficiently explicit and maintained outrage to make those involved persistently uncomfortable and ashamed – to the extent of confronting them in public toilets to “pay back the money”.

There are some things that we should be outraged about, and stay outraged until they spur us into action or call to account the perpetrators. At the very least they should not be allowed to embrace a place of comfort in passive approval. Nkandla and corruption are certainly worthy causes of anger. But there are many of them, and you are welcome to give vent to your gripes in the comments.

A pet peeve that I cannot let go of falls under the large umbrella of inequality. Whatever else Nkandla represents, the most profound is iniquitous inequality perpetrated by those who themselves have acknowledged it as one of the critical issues of our time. Inequality is a symptom of many underlying ills, including corruption, maladministration, nepotism, unbridled greed, a broken and abused monetary and economic system and above all repugnant social values. It is always difficult to counter the knee jerk response of detractors that it is simply about envy and resentment.

To be clear, this is not a detraction from classic market logic, or refuting income differentiation as a reward system that at least in part plays a significant role in supporting individual aspirations, progress and prosperity beyond those directly rewarded. It is not that principle that should be attacked, but rather the excessively wide wealth gap resulting from broken markets that no longer reflect real and tangible value that has been created for society as a whole, or systemic loopholes that allow the avarice to accumulate obscene levels of riches.

A perfect display of appropriate outrage was the lambasting by American Senator Bernie Sanders last year of 80 CEO’s who dared preach to the government about deficit reduction. We should have more of that at home. I have on various occasions challenged the rock-star myth behind executive pay in this country. The problem is that the media quickly tires of these things and only occasionally do they make the headlines when spotlighted by a “news-maker”, such as billionaire Johan Rupert’s recent confession of what kept him awake at night. Rupert’s wealth can hardly be defined as “ill-gotten”. By my definition he is one of those business builders that should inspire aspirations and not malicious envy; unlike many of the professional managers heading corporates here and abroad.

Our political leaders can hardly justify standing next to the bishop on income disparities and attacking private sector rewards. There simply is no justification for those leaders to be amongst the highest paid in the world. That’s apart from a bloated political executive and the billions squandered on self-gain acts at all levels of government. That’s what makes Nkandla so significant. Here you have more than R¼bn spent on the comfort and security of one man within sight of abject poverty in a surrounding area. In addition it was funded at least in part by those very people through taxes and VAT, even if only through the latter or through less being spent on their own development.

Yes, we should constantly confront those deserving of it with our outrage. But at the same time, we should also not let go of our demonstration of goodwill, our support for the many laudable NGO’s, NPO’s and activist groups, and the benevolence we are generally capable of.

Beyond Greece

Questions around the parasitic nature of financial markets and debt.

It’s not just about Greece. At one time or another the focus will have to include serious reflection on financial markets, austerity and debt. There are already signs of a significant change in global response to what is the most critical financial issue of our time.

It was fascinating to follow the media and the hysterical zeal in trying to cover and dissect the latest Greek events while offering all kinds of interpretations, views and even advice. It gave birth to a number of new financial opinionistas, especially on social media. This is a good thing in spreading the debate about financial concerns to a much wider participation, even though most followed the partly justifiable yet oversimplified euro refrain of blaming the Greeks for chronic overspending and indolence, not fully acknowledging the fact that there was an explosion of sovereign debt globally, including Europe since the 2008 crisis. Not even the podium occupying and now seemingly victorious neo-coloniser Germany was immune, far exceeding the accepted guidelines of 60% of GDP.

In all the discussion, there has been a failure to recognise fully the shift after the 2008 crisis, of private debt to sovereign debt in the form of banking bail-outs. A substantial part of government debt has not been because of citizens “living beyond their means”, but simply loading on tax-payers the fruits of reckless lending by those institutions deemed “too big to fail”.

Creditors adopt an audaciously sanctimonious posture when they face a debtor in default, forgetting their eagerness to harvest as many IOU’s as they could, and their responsibility to fully assess the risk in the first place. We know the story all too well in South Africa with the African Bank debacle and the cavalier behaviour of some micro-lenders.

The article related to the above chart underscores the self-evident folly of imposing a one-size-fits-all currency system on nations with divergent economies. Outspoken economist Stephen Keen at Kingston University calls it “an insanely badly designed currency system”. An exchange rate is a country’s ultimate “international price” and removing its cushioning and balancing role completely eliminates the capacity for smooth adjustments to circumstances.

But by far the more ominous message of Greece is one that is confronting the globe. It’s a moot point how many other advanced economies are heading that way. According to Keen: “It is ignorance about money creation that has led to this catastrophe.” (For a video series on money creation follow this link)

It is this ignorance too that seriously questions austerity where economies can simply no longer grow out of debt through creating tangible value, trade and production; where faltering growth strangles the incomes of debt ridden ordinary folk; where money gets increasingly diverted into non-productive capital assets profiting a select few; and where huge injections of debt are neutered by decelerating money velocity or broad mobility.

With this in mind, it is perhaps not all that surprising that one of the biggest global lenders, the International Monetary Fund, has broken ranks with the Europeans in the “troika” in condemning the austerity proposals and demanding that at least part of the Greek debt must be written off. With all of its extensive and often bad experience with austerity programmes over decades, the IMF stance represents a significant shift in authoritative global institutional thinking on current levels of sovereign debt. It certainly goes much deeper than the geo-political reasons conspiracy theorists are now offering. There clearly is a point at which austerity simply becomes devastatingly counter-productive.

The failure of increasing debt levels to encourage economic growth, indeed perhaps even stifle it, has led to French Economist, Thomas Piketty calling for a global conference on debt. In a Moneyweb article earlier this year, I noted (on the strength of a McKinsey Analysis) that a 40% or $57-trillion increase in global debt to $200 trillion had largely failed to significantly revive economic growth since 2008. Total global debt (government and private) is approaching 300% of global GDP.

A discussion on the state of global finances cannot be complete without an examination of the financial services industry itself. Have we not created a huge parasitic monster? It is no longer “fringe” or outrageous to question not only whether the sector adds value, but whether it may indeed be destroying it.

Adding value has three dimensions: transforming something or a situation; the measurable difference in value before and after transformation and, above all, the underlying behaviour or contribution to society as a whole. We too often forget the latter. If it had no significance, drug pushers or extortionists could argue that they add value. (Britain not so long ago added proceeds from drug deals and prostitution to their GDP figure, boosting it by 0.7 %.)

Most of us readily accept the value of the financial sector on the conventional understanding that it mobilises savings, promotes greater information sharing, improves resource allocation, facilitates diversification and management of risk, and promotes financial stability. But a recent International Monetary fund staff paper has questioned whether this is always so. They point out that “there are costs as well, particularly at high levels of financial development. In fact, there can be instances where there is ‘too much finance’, that is, instances where the costs outweigh the benefits.”

The authors have distinguished between a broadening of financial services and a deepening of it. The former relates to expanding services to a growing market, innovation, technology and improved efficiencies of those factors mentioned. The latter, however refers to the growth of complex trading instruments and (my addition) debt expansion.

On the strength of this they have developed a Financial Development index which shows a tipping point at which financial services no longer contribute to economic growth, but can start being counter-productive. This largely corresponds with the state of the economy itself, where the trends are negative in advanced economies but mostly positive in emerging economies. This may be a source of comfort for countries like South Africa, which by and large has a well-regulated and still “broadening” financial sector. But the sheer size and impact of financial services on a global scale make no-one immune to its destructive effects.

The nature of the industry and technology means that it is not a large source of employment, especially in its deepening. Yet it forms a significant share of GDP (20% globally). Financial trading itself can add to a country’s measured Gross Domestic product, but it clearly has very little impact on employment, production and a multiplier effect.

It’s long been an accepted hypothesis that “where enterprise leads, finance follows”.

Much like the real driver of sustainable business is (or should be) customers’ needs and not profit, financial services and debt should be facilitators of economic development, not the driver; the slave and not the master.

The last three or so decades have seen a significant shift in this position. We may look back in time and recognise its devastatingly parasitic nature.

Entrepreneurship as a silver bullet

Is it about being or doing?

If someone gave you a business card that said simply “Joe Blogs: Entrepreneur”, you would most likely either be impressed or a bit skeptical – a bit like a card that read “Joe Blogs: Leader”.

Like leadership, entrepreneurship has many contexts and is subject to a wide variety of different and personal interpretations. To many it implies status, power and wealth – an unreachable star for the masses and achievable by, or the privilege of, only the 1%. Even the definition of entrepreneurship makes of it something special. Investopedia says: “An individual who, rather than working as an employee, runs a small business and assumes all the risk and reward of a given business venture, idea, or good or service offered for sale. The entrepreneur is commonly seen as a business leader and innovator of new ideas and business processes”.

A recent World Economic Forum paper defined it more broadly as “the pursuit of opportunities beyond the resources you currently control.” This fits in with my own understanding of an entrepreneur being one who has the ability to look beyond impediments and immediate guaranteed or even assured self-gain. That is what risk is about.

Clearly, as long as we have a narrow status definition, we will confine entrepreneurship to only a few. It also becomes unlikely that we can recruit large numbers to those highly intimidating positions. At the same time we broadly create a concept of a small number of “givers” (risk-takers and innovators) versus a large number of “takers” (wage earners and social grant recipients).

In the light of recent Moneyweb articles on the issue (see here) it may be of value to rethink our conventional understanding of entrepreneurship. The development of entrepreneurs can undoubtedly play a huge role in our economic well-being although one cannot ignore the systemic and structural impediments to such a project. But the impediments are still not the real issue. On the one hand entrepreneurship won’t necessarily be fostered by their removal, while on the other hand an appropriate psyche will not simply knuckle down to them.

The title “entrepreneur” can be very misleading and is often applied to a number of people who may not deserve it – from the overpaid corporate executive to the beneficiary of inherited wealth. Even the term “risk” is misleading. Risk is always relative and many so-called risk takers can either afford to lose what they risk without denting their personal wealth, or have so hedged, spread or leveraged their positions that in the end someone else pays for their folly. We have seen this particularly in the financial industry where the costs of cavalier behaviour have been paid for by bail-outs and ultimately taxpayers.

I have argued on many occasions that we all have within us the potential for adopting a key entrepreneurial behaviour – the ability to look beyond immediate and assured self-gain and focus on making a meaningful difference to other’s lives. This is the behaviour that should be encouraged, nurtured, recognised and rewarded.

It can be done in the workplace by involving employees more in the decision making process – especially in those areas that directly affect them or where they can make a difference to productive processes. A Cape Town study on early childhood development has shown that advancement is strongly promoted when children are given more autonomy and are involved in decision making.

The nurturing and promotion of this kind of behaviour can form the bedrock of enterprise and entrepreneurship. It will expand the pool of potential entrepreneurs that can progress to bigger things and with greater fortitude tackle the many impediments that undoubtedly are there. But above all, it will automatically underpin prosperity on the self-evident equation that when people by and large are giving more than they are taking they create surpluses and prosperity. When people by and large are taking more than they are giving, they create deficits and poverty.

A broader understanding of entrepreneurial behaviour is the basis from which markets get identified and explored. From there the hurdle of conversion to commercial viability is considerably reduced. In this regard, I believe the profit motive can be an impediment rather than a catalyst. Because a key trait of the entrepreneur is the identification of opportunities, it is better driven by a service motive, which means identifying the needs and wants of others and is the first step from which other considerations can follow.

At the risk of sounding unbearably clichéd again, the ideal initial target is the value-added or wealth created measurement, rather than profit. It is the only one that reconciles accurately contribution to others with wealth generated for oneself or the company. As long as value is being created one is already assured of basic viability, from which one can examine other requirements of sensible wealth distribution such wages and profits. The initial value-added measurement and the requirements to meet expectations in wealth distribution will inform the kind of venture needed – from a full commercial venture to an NGO, NPO or social enterprise. Conversion to commercial viability is the desired ultimate outcome because only then is full recognition given to legitimate transaction and allocation of resources through supply, demand and price.

A psyche that constantly explores making a meaningful difference to other’s lives is a natural stepping stone to developing enterprises that give concrete expression to individual aspirations. Without it, entrepreneurship will always be confined to the exceptional, the fortunate and those with a golden spoon. Others will vainly try to discover it in a plethora of books, biographies and motivational paraphernalia.

Even where it fails to create an Elon Musk or Richard Branson, the shift in behaviour alone will make a huge difference to society as a whole. Then indeed it can be a silver bullet that changes the country for the better.

With apologies to JFK, it means simply: “ask not what you can expect out of life, ask rather what life can expect out of you.”

Empowerment: a misguided obsession

The effects of not fully understanding this central theme of policy.

If you are going to have an obsession, make sure that you fully understand its true nature. Centre stage of much of what we are doing in South Africa is empowerment of the broad masses.

It is constantly on the lips of populist politicians and has become a major driving force in economic policy with billions being spent on empowerment projects from national, provincial and local budgets. It features in much of our legislation with laws prescribing who, what and where people can be employed and who qualifies for tenders. In turn it has fundamentally shifted organisational activities in the private sector.

Yet it is a moot point whether all of these highly costly, restrictive and disruptive efforts over more than twenty years have achieved their undeniably laudable goals. On the contrary, one could argue that in its key remits of economic growth, employment and reducing income disparities it has failed miserably. One could write an academic thesis on its main fractures, but this is beyond the scope of this article.

I believe that at the root of it all is a simple yet powerful force: a flawed understanding of what true empowerment is. True empowerment is having an ability to take charge of your own destiny and make a meaningful contribution to your social and economic environment. It is not simply about owning, but about doing. Yet, we have seen the primary thrust of our empowerment approach focus on ownership. We see it in the large allocation of wealth through BEE to a favoured few; the facile approach to land transformation by simply changing ownership titles and the appalling state of real developmental efforts such as education and training -- the basis of empowerment.

It explains Trade and Industry Minister, Rob Davies misgivings about Employee Share Ownership Programmes. This was further brought home to me in a response to my article on the issue where a clearly informed reader emphasised that these schemes were about “financial empowerment” and not about employee involvement in the destiny of the company. I stand corrected. I clearly fell for the ESOP spin that argued that it was the prime aim of these schemes.

In a world obsessed with possession it may sound counter-intuitive to argue that possession on its own does not represent power. Ownership that exists purely for self-gain and self-gratification becomes barren as an economic factor, especially so when they are productive assets. Responsible major shareholders know this. And private owners of small and medium enterprises even more so.

The ownership-equals-power assumption rests on a shallow understanding of power itself. Authentic and legitimate power is earned by its contribution to others. When it does not do that it is simply control, which relies either on seduction or coercion.

There are a number of reasons why ownership and possession have become paramount in empowerment thinking.

Ideological:

The right to private ownership is a key tenet of free market philosophy. While private ownership has proved its value in economic history, in the past number of decades there has been a marked shift to ownership becoming an end in itself, existing more for self-gratification and the benefit of owners than for the contribution it can make to others. This is a very seductive message for those seeking instant empowerment, and ironically the anti-capitalist argument has adopted this perversion by championing a transfer of assets either directly to private hands among the broad populace or to government. The problems with the latter are well known, particularly when it is inefficient, inward looking and not customer focussed.

Asset inflation

Massive levels of global debt and monetary stimulation may not have led to consumer price inflation, but they have led to asset inflation. This has deviated money from consumer demand and expansion of productive capacity. It has become far easier to make money passively through speculative investment than to work for it or becoming involved in productive enterprises, in turn impeding the empowerment of many through employment.

Technology

It is becoming all too clear that far from encouraging employment, technology is starting to replace many jobs (see article here) and even threatening middle class jobs, an essential rung in economic advancement (see Moneyweb article here). Where technology encourages employment, entry levels require much higher skills and have raised the barrier for empowering large numbers of unemployed.

Socio-economic theory

There has been a popular interpretation among human resource practitioners of Maslow’s hierarchy of needs that assumes that each step from the physiological to self-actualisation have to be met before advancing to the other. It’s a convenient assumption for governments in expanding control and discouraging individuals from empowering themselves. The assumption that one cannot be or even feel empowered in poor circumstances is contradicted by psychology doyen, Viktor Frankl’s work Man’s Search for Meaning.

Commoditisation of labour

The essence of empowerment is in having a sense of purpose beyond simply “earning a living”. We have largely lost that in the workplace, a vacuum that most try to fill by wanting more either in pay or possessions. It is a key to understanding why most ESOP’s fail to harness support for a common externally focussed purpose and encouraging involvement.

Our approach to empowerment is missing a critical point. Empowerment is for the most part a self-defined, self-help and self-developed state which clearly will be encouraged by education, employment and entrepreneurship, and creating the appropriate circumstances and opportunities. Empowerment comes from having something meaningful to do which in turn comes from individual aspirations.

Far from encouraging this spirit, current efforts are most likely doing the opposite. For empowerment will never come from simply transferring assets and ownership, nor from handouts and dependence on others.

It is the old story of being given a fish or learning how to fish. Of course, then there is access to fishing waters and having a rod. But above all, there is the need for wanting to fish.

South Africa’s real fault lines

Assessing the imbalance between expectations, aspirations and reality.

It’s been said that one of the most effective tools in understanding the basic principles of economics is to follow the logic of your own transactional behaviour. At its core, this overwhelmingly important environment is simply what the original Greek word implies: “good housekeeping”.

The same principles in keeping your personal business affairs in order, apply equally to a nation. You should not, for example:

· Spend more than you earn (budget deficits and national debt)

· Buy more than you sell (trade deficits)

· Build a mansion in a squatter camp (income disparities)

· Create wealth by printing bank-notes (debt based money creation)

· Recoup a loan at less than the original amount lent (negative interest rates)

Sound familiar? We are doing all of the above globally – and more -- and some nationally. If you did those things as an individual, calamity would surely overtake you. It is pure folly to believe the same will not confront nations. But here are some more: You should not:

· Simply accept the way things are and surrender to events that confront you

· Expect your neighbour to support you as an able-bodied person

· Expect reward without some contribution

These are captured in the triangular prism I wrote about earlier (see article here) of expectations, aspirations and reality. To recap:

· Your Reality is an interpretation of your circumstances

· Expectations are those things that you believe society or others owe you

· Aspirations inspire effort and self-help.

Reflecting on my own life, I cannot think of a more powerful self-developing life skill than doing a personal audit of these three and constantly adjusting or adapting them. Lowering expectations and increasing aspirations is not only the key to contentment but the ultimate driver of achievement.

A factor that most theorists dismiss too lightly is that you cannot separate national behaviour from individual behaviour. Adjusting the latter in averting the dangerous imbalance which I alluded to previously cannot only depend on policies, regulations and decree but rests largely on individual willingness. The promotion of willingness, together with providing means and abilities, is critical and should be the focus of all policies before simply giving in to popular pressure.

Reality

A fundamental shift in economics has seen a massive erosion of opportunities for self-improvement. This lies at the heart of what most are experiencing. Technology and the inordinate role of financial instruments in economic growth have seen labour participation rates and the share of labour in Global GDP decline.

This has lifted beyond the reach of millions the first rung of the ladder of success – simply entering the productive environment to obtain skills and experience. The next rung – the middle class -- is being stifled across the globe. Only in pockets such as South Africa, are prospects upbeat for this class, mostly in government service or a corporate ladder.

This overwhelming certainty leaves little room for failure in improving the circumstances of people in this country. In view of the volumes of theoretical and practical suggestions that have occupied columns such as this (see Max Du Preez article here) and the podiums of every “thought leader” from academics to pastors and politicians, I’ll restrict comment to two main thoughts:

The first is to hold government fully accountable to do what it has been empowered to do; what we are paying a President ten times more than the leader of the world’s biggest nation to do; what we are paying one of the world’s largest cabinets to do; what we are paying a civil service more than most others to do; what we are paying 60% of the budget on social services to do; what local authorities gather rates and a large chunk of national revenue to do; and what state owned enterprises have been assigned to do.

The second is a powerful life skill – changing perceptions of reality. Philosophers have for centuries been challenging the very concept of reality, concluding for the most part that there is no such thing – only a perception of it. It’s a tantalising idea that I will frustratingly leave with the simple question: are we not creating reality from perceptions of doom? There’s an old saying that our worst fears become our reality.

Expectations

Because expectations are unrealistic, they are not necessarily illegitimate. All societies are based on a social contract, either by implication or entrenched in constitutions and law. Thereon rests the legitimacy of government, indeed of every transaction. If expectations are unrealistic then for the largest part they have been made so by the vendor, in this case power hungry politicians who peddle their snake oil under all banners, colours, uniforms and berets. One of the flaws of democracy is that it allows this kind of reckless overselling. But democracy also provides for calling the vendors to account. That’s a responsibility we all have as individuals. There simply is no room for passive consumerism in politics at any level, especially not at the polls.

At an individual level, reducing expectations does not mean not having them. They will always be implied in every transaction or interaction, even those that we believe are unconditional. It simply means not fully relying on your expectations being met and abandoning self-help in the process.

Aspirations

These are by far the most important in uplifting our national spirit. It’s also the only self-empowering tool we have as individuals. Allowing them to be smothered by unfulfilled expectations, or dependence on another is surrendering our own destiny. We oldies glibly tell youngsters of the struggles we had “in our day”, but frankly I do not envy today’s youth, given the diminishing opportunities I mentioned earlier.

Part of the solution lies with labour. South Africa cannot escape the waning role of labour globally and the preservation of its power can no longer rest mostly on confrontation. Job expansion and retention is an essential force in money velocity (rate of circulation) to ensure continued demand for products and services and ultimately economic growth and profits. It will require new and innovative relationships between labour and capital, based on principles of common purpose and common fate.

Promoting national and individual aspirations is fundamental to our future and may require a completely new approach to small and medium enterprises, the decisive incubator of individual aspirations. Simply getting out of their way is a good place to start.

No assessment of South Africa can be complete without taking into account the determined spirit of many in this country. It is the one attribute that fosters optimism and hope for our future. (See BDlive article here)

We simply don’t recognise, applaud and nurture it enough.