As predicted, South African industry is showing signs of being hit hard by the electricity crisis that came to a head early this year. Gold Fields has issued results including a warning that despite a soaring gold price, which normally would make marginal mines profitable, it might have to close those mines because of the 10% electricity cuts it is being forced to make. It operates some of the deepest mines in the world, where life isn’t all that pleasant at the best of times, and is downright deadly without air and water being pumped into and out of the shafts.

It’s worth pulling this story from a major international newspaper, because that makes a point in itself.

Production, the fourth-largest gold producer in the world predicts, will be 20% to 25% down on the previous quarter, and will remain 15% to 20% down for the foreseeable future. Not surprisingly, this brings into jeopardy almost 10 000 jobs — some 18% of the workforce. And Gold Fields isn’t alone in this predicament.

Yet Alec Erwin, the communist unionist in charge of public enterprises — which includes the rather un-enterprising electricity monopoly — told us, not long ago, that despite the power cuts and rationing, “The growth of South Africa’s economy at the current healthy levels can continue.”

What a relief. Presumably, Erwin will put in some extra time to make up for those lost rands of Gross Domestic Production. Perhaps he can also make available, say, 9 700 gardening jobs, paying enough to support a family or so each. He’ll pull through. I have every confidence in his leadership, since his boss clearly does.

PS. Because of other obligations, I’m rather infrequently connected just at the moment. There’s plenty to rant about, but this week will probably be quiet around here. Never fear, though. I’ll catch up.

In the rather lengthy comment thread on my child labour post, one point that was made went as follows:

If all you see worldwide is an improved quality of life, then you might be looking at surveys funded by investment banks, businesses and governments. Reports about severe violations of human and environmental interests are repeatedly leaking to the public, although the government is doing everything to avoid such reports, abolishing freedom of information and opinion, punishing citizens for giving information to journalists, imprisoning critics.

Not only does it make me fear for my own safety, but also for the safety of Hans Rosling, of whose TED lecture Jonathan Davis over at Limbic Nutrition reminded me.

If you haven’t seen it, you really should. Even if you’re not at all interested in the data, the data visualisation is spectacular.

Neil Blakey-Milner asked the following, in response to my previous post on fear of trade with China and protectionism. It’s a good question, worthy of a detailed response.

What should a country do about imports from countries that are known to be or highly suspected of using child labour or other forms of “slave” labour or other techniques that are banned by that country?

First, let’s stipulate that only a small fraction of the trade that ends up being restricted by tariffs or other forms of protectionism is, by this standard, objectionable, and that this fraction represents an extreme-case scenario. I’ll focus mostly on child labour in my response, but similar arguments go for other forms of labour policy on which prosperous nations frown.

Let me first try to be somewhat specific: Africa, not Asia, has the highest child labour force participation rate in the world. According to UNICEF, almost one in three African children work, while the corresponding figure for Asia is one in five. That Asian statistic is not much worse than that in Latin America or the Middle East. Why China should be singled out for censure is unclear to me.

Moreover, child labour below the age of 16 is illegal in China. The International Labour Organisation recommends a minimum working age of 15, and China has ratified the relevant convention. So the problem is not one of legal labour standards either.

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The fear of Chinese trade is really puzzling. It reminds me of the fear of all things Japanese in the 1980s. I suspect it’s a strong case of xenophobia, disguised by a weak understanding of basic economics.

Cherryflava makes a good point (albeit unwittingly) about China:

With everything from pyjamas to Barbie dolls suddenly subject to spontaneous combustion scares - it must be asked: “Why are local manufacturers not kicking the giant dragon in the head..and the nuts…while it’s down?”

Finally - a reason to charge more and sell locally made stuff.

Yes…. this t-shirt is made in Epping, costs R20 more and will not blow up and entire neighbourhood block when you combine it with domestic washing powder.

Personally, we’ve got a feeling that all this anti-China news flooding every paper, smacks of major conspiracy theory. But that being said - now is the time to promote that whole Proudly South African thing. Perceptions around cheap Chinese imports are being tested…GO.

The point to note is that any voluntary trade is based on the subjective perception of value of the traders. Both parties benefit from the trade, or they wouldn’t engage in it.

If our people buy cheap Chinese clothes, they will effectively be richer, retaining more income to spend on housing, education, investment or Gucci bags. If our industries buy cheap Chinese imports, this means their input costs are lower, and they can earn more job-creating profit, or out-compete others more aggressively. The local industries that cannot compete with Chinese imports should go out of business, or differentiate themselves, or find something they’re better at, because that way, the greatest number of South Africans benefit.

It has nothing to do with patriotism. Buying local isn’t better for the country, it is worse. It means we’re propping up unproductive industries. By artificially propping up unproductive jobs, we’re prolonging the pain of structural unemployment elsewhere in the economy. For each unproductive job lost, more than one productive job can be created.

Now if consumers make a judgement that says Chinese goods are not of sufficient quality and will no longer do, they will voluntarily choose alternatives. This decision means that China has lost the competitive advantage that implied trade with them is better for South Africa than local production.

Whether or not to buy Chinese should be a free, subjective value decision on the part of consumers. It should not depend on government programmes like tariffs and subsidies, on protectionist cartels like Proudly South African, or on xenophobic fears that believe trade is some sort of foreign ripoff or play for dominance.

Trade does benefit both parties, but only if the decision whether to engage in the trade or abstain from it is voluntary. Only if that decision is not based on coercion or false information. Those are known as extortion and fraud.

A selection of quotations noted at yesterday’s conference on intellectual property rights in Johannesburg, hosted by the Free Market Foundation and the International Policy Network. Some are verbatim from notes, but a few have been completed from memory. I’ve tried to be as true to the original, or failing that it’s intended meaning, as possible. Read on for my top 12 quotations:

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If I was quiet recently, it’s not because I really was. I’ve been chairman at a conference on eGovernment, at that grand cultural icon of South Africa, Emperor’s Palace. If you haven’t been there, think Orlando, Florida, but without the sophisticated style and elegance.

Here’s a thought that struck me, about the love for unions among government employees. One speaker, on the use of artificial intelligence in decision support, suggested that if a machine can be coaxed to do something, it can do it better than humans. “Woah,” responded the audience. Not because of some Gödel, Escher, Bach inspired philosophical disagreement about the nature of intelligence and consciousness, but because this sounded far too much like that evil capitalist anti-employment plot, automation. Another presenter spoke of the value of self-service technology. Not only would it improve, he said, the citizen’s experience of government service delivery by giving them a choice of channels, or improve the efficiency and cost-effectiveness of service bureaucracies especially at local government level. It would also benefit those who don’t have access to the requisite technology for alternative channels (such as internet access or even a mobile phone), because pressure is taken off the call centres and walk-in government service offices.  Again: but what about jobs?

I wrote a column for Maverick magazine on the similarity between ANC economic policy and that of the Apartheid government. This is another symptom.

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