The painful beauty of the free market is that, what doesn’t
work is discarded to make way for that, that works.
Actually this the basic mechanism that drives evolution in
the natural world. So capitalism does not hold the patent to creative
destruction.
As in the natural world as in business when we try to oppose
this natural selection process we do it at great cost to the general system
before eventually failing or at least falling back to earth. Think price
controls, centralised planning and jet airplanes.
Companies which fail go bankrupt – fail to meet their
obligations and are liquidated – their assets are sold off to pay the
creditors. What causes problems often isn’t that the company does not hold
valuable assets, after all what would the liquidators be selling off, but that they
run out of cash.
Thanks to creative accounting and other dodges a company can
keep up the illusion of wellbeing before it is exposed and comes crashing down.
Last week UK supermarket chain Tesco’s had to admit that
their profits were over stated by at least £250m (about one trillion shillings)
leading to a collapse of its share price and not before the scandal had
accounted for its chairman.
It’s a whole debate about why otherwise upright and
competent workers indulge in this kind of fraud. I tend to lean towards the
side that argues that, the incentive structure for top executives has been
skewed towards delivering a profit and away from providing service to the
customers and clients.
So managers understate expenses or defer them to a later
period or scrounge on capital investments so their profit-pegged bonuses can
continue to balloon. Our banks are not averse to such practices.
So what about a country? When our politicians clearly don’t
have our best interests at heart, the technocrats are pigging out on our taxes
with no corresponding benefit to ourselves and generally making us wonder
whether we don’t deserve better the country has stopped working.
If a country doesn’t work, we can’t liquidate it in the way
we would a company. But maybe we can
lease it out to a serious firm for a fixed period of time, with definite
expectations framed by pre-negotiated targets.
What would Uganda look like on the market.
An advert for the job would probably describe the country as
small economy -- $20b GDP, poor infrastructure, a functionally illiterate
population, and little internally generated revenues but nevertheless with
potentially, commercially viable deposits of all sorts of natural resources,
huge energy sources and millions of acres of unexploited land.
"The country’s potential will have to be weighed against the huge investments in infrastructure – social and physical that will have to be made to unlock the aforementioned potential to come to a fair concession fee. It might turn out that we will have to pay the investor to take us off our own hands! ....
Top of the new manager’s to-do list would be to cut expenses
and increase revenues. Unbundling the huge public administration sector would
have to be a priority, knocking off two birds with one stone – cutting the wage
bill and making more savings on the reduced “eating”.
Next he would want to pour the billions of dollars required
in power generation, road and railway construction in the short term, education,
health, law and order over the long term. Interestingly we may get these
services free because with increasing economic activity and reduced theft it
will be more possible than it is now.
But it will also be in his own interest to have a locally
productive workforce as these would be cheaper than employing the expat-set
with their insistence on living in Kololo, chauffer driven four wheel drives
and private club memberships.
To ensure that he works for our benefit we have his
incentives pegged to improvements in the quality of life of the people,
measured in terms of social indicators like access to quality education, health
services and opportunities for economic advancement rather than the misguided
parameter of lifting people above the dollar-a-day poverty line.
We will have the manager reporting to us through an annual general
meeting, a national video conference even. His contract will be renewable every
five years.
One can expect that there will be a lot of disruption in the
beginning as the manager tries to regularise our daily lives -- shutting out
boda boda from the center of town, ensuring everyone liable for tax pays and
evicting rogue investors from our wetlands.
But once the basics are in place they would serve as an
effective springboard to the Promised Land.
The key to success is to extract our politicians from the
process. Once they are out of the way with their parochial world view, progress
can be made.
Of course the danger is that once the manager becomes
entrenched in his position he may turn to dictatorship or worse into a monarchy
and we might have nothing to say about it. I guess we will cross that bridge
when we get there.
