I don’t fear global warming much, but since this would be a particularly disastrous impact, the BBC’s news yesterday was a relief: Great tits cope well with warming.
Those alarmist Beeb boobs1 must feel a little deflated, though.
(Hat tip: Leon Jacobs.)
Squelching to court through a quagmire
In the heavily prescriptive television industry, one has to admire the effort the regulator, ICASA, puts into its work. It can’t be easy. But one sometimes wonders: why, why, why, oh why?
Several recent developments in the broadcasting sector are worthy of attention, even if each serves only to exposes a fundamental failing in our telecommunications law.
Three that caught my attention in the last couple of months are the ruling ANC’s call for the SABC (the public broadcaster) to be more tax-funded and less advertising-driven, the suit Black Entertainment Television (BET) is bringing against ICASA over its award of five pay-television licences (it didn’t get one), and the demand by the SABC that pay-TV operators pay it for content they are required to carry (they don’t want to).
The ANC is quite right. One of the most damaging aspects of the SABC’s historical dominance of the broadcasting space is its reliance on advertising for funding.
A public broadcaster, if such a thing is necessary in the first place, should have a specific public service mandate and should be funded by public money. TV licences are a regressive, clumsy and expensive method of generating insufficient revenue. By selling advertising, the SABC, though it is a state-owned institution, sucks a large proportion of potential revenue out of the market, which could sustain competing broadcasters. Diverting available spending to the state is an implicit threat to media freedom, media diversity, media quality and media specialisation.
So I’m right behind the ANC’s proposal, with one caveat. The knee-jerk reaction has been that this will threaten press freedom. I can’t really see how the SABC can be more beholden to the state than it already is. I mean, with extended live coverage of ruling-party birthday parties it is, frankly speaking, kissing arse. Besides, being beholden to advertisers raises the same problems. The solution is to create an inviolable layer of structural separation between editorial and owners (in this case, the state). The SABC should be answerable to an independent, disinterested editorial board appointed by Parliament, rather than being controlled by politically-appointed directors. Only then can its public service begin to be distinguished from government service or ruling party service.
BET is also quite right. Television licences (and, for that matter, any other licence) should not be limited according to some bureaucrat’s notion of what the market can bear. They have no way of knowing how big the market might be and have no motive to take the necessary risks. They can only make and implement their one guess, however educated, rather than letting many competing guesses duke it out. They’ll always underestimate market size (witness cellular licences) or over-estimate it (witness E.sat’s decision to provide content to Multichoice, rather than use its licence, citing lack of space in the market).
Markets are created when risk-taking investors spot gaps and exploit them. Competition is created when those investors can price products as they see fit. Cost-reduction happens when competitors consolidate their interests, and winners buy up losers.
Instead, we get cosy cartels, who are held to arbitrary pricing restrictions, such as that they must generate at least as much revenue from subscriptions as from advertising. What do they do in a good advertising month? Go to customers and say, “Sorry folks, but we’re making a fortune here, we’ll have to raise your rates”? For that matter, why should there be any legal distinction between how broadcasters earn their revenue? Surely that should be a strategic business decision, not a legal prescription?
Unlike the ANC and BET, the SABC is quite wrong. If pay-TV operators have to pay for their SABC content, they should have the choice whether or not to buy it. If they’re obliged by law to carry public service content, it is unjust to expect them to pay over and above the cost of distribution. This is sheer opportunism on the part of the SABC, which is one of the dangers of that curious, cancerous state-capitalist hybrid that is the profit-driven state-owned enterprise.
Solving these problems go to the root of our telecoms legislation. They require setting licence conditions, but not limiting the number in issue. They require that risk-taking investors themselves choose their business plans and pricing models, rather than having them imposed by the state. They require regulation that is purely administrative, rather than restrictive, prescriptive and protective.
Because all this complicated lawyering and regulatory rigmarole, designed to balance the interests of producers, broadcasters and the state, forgets the most important interest: that of the public.
Time to scrap BEE
As contrary as it runs to a fair and free economy, black empowerment was fully justified in the New South Africa. But the justification is withering, and the arguments against it are mounting.
The Sunday Times revelation a few weeks ago about the millions siphoned to the ANC as part of the BEE deal involving Saki Macozoma, Stanlib, Standard Bank and Liberty Life, is most instructive. It seems to be a case of accidental corruption. When political bribery can happen unintentionally, and there appears to be nothing illegal about it, something is deeply wrong with our country.
What happened was that the large empowerment consortium fell victim to a minor participant who dropped out and was replaced by an outfit headed by Nicholas Wolpe. You may recognise the name if you hung out at the “palace of patronage”, as Mail & Guardian editor Ferial Haffajee aptly described the “network lounge” at last year’s ANC conference in Polokwane.
Wolpe’s participation was small enough — R9 million — to attract no attention from Macozoma and his board-level colleagues, who had vetted other participants in the deal. Macozoma said the deal was not material. I’m quite willing to take his word for it that he didn’t know, at the time, about Wolpe’s connection with Chancellor House, which the ANC has admitted is a funding vehicle for the party.
Corruption House, as I prefer to call it, has been involved in two humungous Eskom contracts, from which it stands to gain several billion rand, at least some of which will end up in the ANC’s strongbox. Not bad, for political fundraising.
Macozoma rightly says that R9 million is immaterial in the context of a R1.5 billion deal, but it isn’t much less than the R11 million that was involved in the “Oilgate” scandal, during which PetroSA paid upfront money to Imvume Management, which the latter promptly sent to the ANC to fund its 2004 election campaign. PetroSA ended up having to pay again for what it was supposedly buying from Imvume, and the ANC was silent (but grateful) about its windfall.
Though these cases are all slightly different, each of them is troubling. The first looks like a case of buying political patronage. If the ANC benefits from an empowerment deal (or indeed, any other deal), it is likely to favour future tender offers from that company. The second is a case in which the ANC abused a necessary public-sector contract to create an automatic kickback to the party by awarding part of contract fee to itself, via Corruption House. The third is a more blatant case of fraud aimed at topping up empty party coffers.
In considering these cases, a couple of points need making.
First, black economic empowerment was fully justified, even if it runs counter to the principles of a free market involving a free people. It was necessary to rapidly correct at least some of the disparity in economic participation between black and white. The alternatives would be far more unpalatable, both morally and in practice.
However, several factors make this justification less convincing as the years go by. It can for obvious reasons not be fair in perpetuity. Few past injustices can be elegantly and fully undone by applying such corrective policy. A restitution policy should lay the foundation for long-term justice.
As time passes, more and more young people and young companies are caught up in paying for the supposed crimes of their fathers. Few would dispute that it is just to force Sanlam or SA Breweries into an empowerment deal, but is it equally just to demand the same from a white kid who matriculated in 1996, graduated in 1999, and founded a company in 2004 in competition with his black classmate?
Another reason empowerment’s justification is decreasing is that substantial progress has been made. Many major companies sport BEE credentials, these days. A significant black middle class is emerging. A black South African finds himself on the Forbes dollar billionaire’s list. The list of black movers and shakers is ever-growing. Nowadays, BEE seems to make the rich richer far more often than it actually empowers anyone. Macozoma himself is one of about half a dozen empowerment magnates, and about two dozen empowerment vehicles seem to be involved all major deals.
Since blacks are no longer excluded, perhaps it’s time to leave the economy to its own devices, without imposing growth-sapping contraints upon it to eke out those last few drops of restitution.
The second point is that political donations should be protected as a form of free speech. It is everyone’s individual right to fund political causes, and this right extends to company shareholders too. More importantly, a political party cannot campaign without money, so restricting its ability to accept donations curbs its ability to promote its message, which is a de facto limit on free speech.
That said, the combination of BEE and political donations makes for a dangerous environment. That there appears to be nothing illegal about Saki Macozoma’s deal must shock many observers. In many countries, such an arrangement would sink a political candidate, or lay a company open to public vilification, legal proceedings and possibly criminal prosecution.
An audit of Corruption House is said to be underway, and criminal action may be taken should it find evidence of crime. But it probably won’t, and that’s a problem.
The ANC has said in the past — over the Oilgate scandal, for example — that it is not obliged to reveal its donors. That is a problem too.
The huge size of our government gives it inordinate power in how it awards contracts. Because it uses this power to enforce BEE, this creates grave potential for conflicts of interest. If Macozoma can be caught in such a conflict without even knowing it, that’s clearly a problem.
The problems are clear. So what’s the solution? First, pass a law that requires political parties to disclose the sources of their funding. If patronage is going to be bought and sold, citizens deserve to know who is buying favours from whom.
Second, no political party, whether in government or otherwise, should be able to influence private business transactions, nor benefit from them.
Third, the same goes for public sector contracts. I’m no expert on the mechanics of the State Tender Board and related legislation, but if a party-political funding vehicle such as Corruption House can participate, repeatedly, in multi-billion rand public sector contracts, something is broken.
To be free and prosperous, this country needs a great deal more independence, a great deal more transparency, and a great deal more culpability for conflicts of interest in approving business deals or issuing government contracts.
A good start would be to abolish black economic empowerment as a mandated procedure. Remove it from the criteria that must be met for public sector contracts. This may need to be done gradually, and safeguards against losing BEE’s substantial gains might be necessary, but 14 years into our new democracy, the benefits of a contract process that doesn’t encourage political patronage and outright bribery trumps the benefits of continued black empowerment.
Most of all, we need a country in which private business transactions don’t lead to accidental R9 million donations to a political party, ruling or otherwise.
I’ll be away most of this week, chairing some conference sessions. I have a few months’ worth of Brainstorm and Maverick columns stored up, though, so I’ll post a few of these for your reading pleasure when I get a chance.
Unfair, unreasonable and ludicrous
Those aren’t my words. Those are the words of members of the Security and Constitutional Affairs Select Committee in the National Council of Provinces.
Stupid. Imbecilic. Naïve. Batty. Those would be among the words I’d choose. Half-baked. Dim. Preposterous. Simple-minded. Goofy. Witless.
I’m talking about the recent amendment to the Regulation of Interception and Provision of Communication-Related Information Act, pushed through parliament by the Justice Department.
Let’s just call it the spy law, since that’s what it is, and many people must be familiar with the hoohah in the United States over similar “domestic wiretapping” provisions in anti-terrorism laws.
According to market researchers BMI TechKnowledge, there are somewhere north of 40 million cellular telephone users in South Africa. The majority of those are prepaid customers, who prefer, whether for creditworthiness or other reasons, to buy SIM cards and airtime as and when they need them.
This amendment requires everyone who uses a cellphone SIM card in South Africa to register their identity and residential details with their operators.
It’s loco. Pointless. Dense. Harebrained. Illogical. Bonkers.
The primary reason cited for the requirement is fighting crime. Organised crime, in particular.
Now I don’t know about you, but if I’m going to commit a crime, I’d go to some lengths not to identify myself to authorities. I’ll get an untraceable phone, or make it so. And if I can’t get a phone that’s untraceable, I’ll – I hope I’m not giving away any crime secrets here – meet my accomplices in person.
Criminals aren’t the sort of considerate people who obey the law. I’d have thought the definition of criminal would make this clear. This won’t curb any but the most petty crime, committed by the most incompetent criminals, against which I’d have thought the police don’t need all that much help.
Futile. Brainless. Ridiculous. Potty. Derisory. Lunatic.
This requirement is going to be tremendously impractical. It will create reams of data, most of it probably wrong. Many cellphone users don’t even have formal addresses, or they move regularly, or don’t have proper identity documents because Home Affairs hasn’t had its home affairs in order for years.
How are mobile operators supposed to ensure the information is accurate in the first place, and stays up to date in the second? I’ll bet that more than half of the information so gathered will be useless to law enforcement, and the other half won’t be needed.
It’s feebleminded. Doltish. Mindless. Dumb. Flaky. Absurd.
The cost of recording and maintaining all this data will be borne by whom? Mobile operators? You have to be kidding me. It will be passed on to consumers. Instead of reducing the cost of telecommunications, as the president mandated in a state of the nation speech some years ago now, this domestic spy law will significantly raise it.
Wacky. Foolish. Moronic. Dippy. Nonsensical. Dopy. Nuts.
It will undermine the spectacular success of low-cost prepaid telephony in South Africa. If cutting off half the people who’ve gained access to telephony thanks to prepaid is the government’s intention, the spy law is great.
Insane. Kooky. Irresponsible. Laughable. Half-witted. Ludicrous. (Oh, scratch that; the NCOP has that covered.) Retarded.
A government that has easy access to reams of private data is sure to abuse it. Even assuming that we trust the government in general, can we extend this trust to the bad apples within government? Can we trust private organisations that have no inherent need for the data, because they’re not, for example, providing us with credit? This extends the circle of organisations whose intent and competence we need to trust with private data even further. It’s a fundamental infringement on privacy and individual liberty. It’s how a police state operates.
Ill-advised. Nutty. Fruity. Fruity-and-nutty. Obtuse. Short-sighted. Barmy.
This law also requires all foreigners to register their cellphones when they’re in South Africa. Never mind the annoying impracticality of that, or that it doesn’t exactly say, “Welcome to the free South Africa”. If even one refuses, the measure is unenforceable, unless all international roaming is blocked. And if we do that, South Africans won’t be able to use their own phones internationally either. We’ll cut ourselves off from the global village. It’s that simple.
Rash. Mindless. Idiotic. Unthinking. Cockeyed. Thick. Irrational. Senseless. Ludicrous. Loony. Daft.
I’ve run out of words. Oh wait, no, I haven’t. There’s still cretinous. But I’ll save that word for a future column on the subject.
No synonyms were harmed in the production of this column.
Every entrepreneur that’s in the business of making something new or better would love to get government subsidies to help them “reach economies of scale”, or “pay for the social benefit of being green”, or some such thing. Of course they would. Government intervention can reduce the risk of innovation, and can even force customers to buy your product whether they like it or not. Such subsidies are fundamentally unjust, however, because in effect, taxpayers end up paying for the research and carrying the risk, without being able to share in the entrepreneur’s profits should he succeed. I’d also like to do business on those terms. After all, the only cost of such a subsidy is a pledged vote. It would put a floor below my losses, and boost my potential profits, all at some other sucker’s expense. Nice. And that sucker can’t even argue, because tax is the sole remaining debt for which people still get thrown in prison.
This Cato Institute paper from 2005 explains the problem neatly:
The current debate about U.S. oil policy is equally enlightened. It is dominated by a special-interest lobby whose primary interest is to enrich automakers and alternative-fuel producers, and by journalists whose enthusiasm for the green agenda has clouded their understanding of basic economics.
My question is, when a private organisation raises a prize purse, and the contenders look like this, who needs government subsidies anyway?
(Click on any of the images for the relevant Popular Mechanics page.)
I haven’t looked into the economics of each car, because that’s not my problem. The Tesla Roadster, for one, has already proven perfectly competitive and very, very desirable. All that’s required is an investor with his own money to stake on the notion that a market might exist. Governments are not only singularly unsuited to determine the latter, but have no right to gamble taxpayer money on it.
So welcome back to the glory days of the industrial revolution, when ingenuity, risk and free market capitalism built the modern world. And thanks to the X-Prize Foundation for demonstrating that the economics of human action and progress is alive and kicking.
PS: Prescient typo, perhaps, on www.tesla.com? “The associated domain name has been reserved by a GANDI’s customer and parked as unsued.”
Last night, I found a neatly printed-out and stapled copy of Beware the Alchemists, by Ludwig von Mises. Detritus of good intentions some time past.
Transcribed by Bettina Bien Greaves from notes taken during a lecture tour in the 1960, the style is somewhat clunky, somewhat simplistic, somewhat imprecise, and somewhat repetitive. But though she says Mises didn’t like being quoted for that reason, I found his informal style a strength, not a weakness. Mises was the 20th century intellectual giant of the Austrian School of economics. He wrote his first major work as early as 1912, and died in 1973. Reading this, however, brings the old man alive again. You can picture speaking in somewhat clumsy English, patiently explaining the blindingly obvious, throwing up his hands with an exasperated sigh or sardonic grin as he points out the economic blunders of one government after another.
Beware the Alchemists is surprisingly accessible. It takes what appears to be a complex topic, encrusted with 100 years of Keynesian pollution and toxic government waste, and turns it into something simple and intuitive. I wish I had learned what I understand today about interest rates, monetary policy and inflation from this text. I wish I had been around in the 1960s to attend these New York lectures, so that I could have spent the four decades since going, “See? He told ya so.”
Today’s food price crisis? The oil price? The credit crisis? The weak dollar? St Alan “this was an accident waiting to happen” Greenspan? Mises explained all of these many years ago. And Greenspan, for all his claims to understand why Keynes was wrong (as a proponent of Hayek and Friedman’s Chicago School), not only waited for it to happen, but drove the bus to the scene of the accident.
Some quotations to pique your interest, perhaps:
The market is precisely the freedom of people to produce, to consume, to determine what has to be produced, in whatever quantity, in whatever quality, and to whomever these products are to go. Such a free system without a market is impossible; such a free system is the market.
We have the idea that the institutions of men are either (1) the market, exchange between individuals, or (2) the government, an institution which, in the minds of the many people, is something superior to the market and could exist in the absence of the market. The truth is that the government — that is the recourse to violence, necessarily the recourse to violence — cannot produce anything. Everything that is produced is produced by the activities of individuals and is used on the market in order to receive something in exchange for it.
It is important to remember that everything that is done, everything that man has done, everything that society does, is the result of such voluntary cooperation and agreements. Social cooperation among men — and this means the market — is what brings about civilization and it is what has brought about all the improvements in human conditions we are enjoying today.
Money is a market phenomenon. What does that mean? It means that money developed on the market, and that its development and its functioning have nothing to do with the government, the state, or with the violence exercised by governments.
The problem [that human action seeks to solve] is not to increase the quantity of money. The problem is to increase the quantity of those things which can be bought with money. And if you are increasing the quantity of money, and you are not increasing the quantity of things which can be bought with money, you are only increasing the prices which are paid for them. And in time, if the increase in money continues, the whole system becomes a system without any meaning… Prices are going up because there is an additional quantity of money, asking, searching for a not-increased quantity of commodities. And the newspapers or the theorists call the higher prices, “inflation.” But the inflation is not the higher prices; the inflation is the new money pumped into the market. It is this new money that then inflates the prices. And the government asks, “What happened? How should one man know? …” The government is very innocent. … And the governments try to find somebody who is responsible — but not the government. They consider the man who asks for higher prices responsible. But he must ask for higher prices because there are now more people wanting to buy his produce, you know. … Now we have the inflation.
Everything that is done by a government against the purchasing power of the monetary unit is, under present conditions, done against the middle classes and the working classes of the population. Only these people don’t know it. And this is the tragedy. The tragedy is that the unions and all these people are supporting a policy that makes all their savings valueless. And this is the great danger of the whole situation.
The book isn’t long. It’s an evening’s read. It’s an excellent way to spend the May Day holiday weekend, and is a lot easier than reading Mises’s magnum opus, Human Action (though the latter also comes highly recommended, for the philosophical grounding it gives economics).
An accessible introduction to elementary economics, as Mises offers in Beware the Alchemists, should be required reading for anyone hoping to serve in, vote for, or write about government. Sadly, those are the three occupations for which no qualification or experience is required at all.
