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The solution to poverty

07 December 2011, 15:57

Now that it's practically around the corner, I have a time to do a bit of thinking about the Bigger Picture(tm), and the most relevant topic here will always be the solution to poverty.

This article turned into something way longer than I'd anticipated, but hey... maybe there's somebody out there like me with some time to waste and some fresh suggestions.

I'm going to concentrate on the solution to South African poverty, but what I'm suggesting here isn't necessarily unique to the country.

First, a re-cap of the South African economic problems as we all know them:
1: A lack of formal training (from basic schooling right up)
2: Too few available jobs
3: Insufficient markets for new jobs and services (linked to point 2)
4: Reinforced social and political problems resulting from Apartheid.

I'm sure we've all realised that the solution to poverty isn't to be found in capitalism. Even if we could invest billions of dollars into factories and training, there are no new markets for the products - we can't assume that all the newly-employed workers will go out with their first paychecks and perfectly feed the system - and exporting internationally is problematic because
A: it relies on exploting cheap mass labour in order to remain competitive
B: it links profitability to the volatile exchange rate, and that's no recipe for long-term stability
C: there are limits on the international market as well, and relying on global pressures means we out-source our economic well-being.

My personal dislike of capitalism revolves around the in-bred inequality and the lie of the middle-class dream. We've all studied the economic pyramid, and can clearly see that there's not enough space near the top of the pyramid for all the workers. Even if there was some way to pay every unskilled worker a middle-class salary (Cosatu's dream, no doubt), those people would still be sweeping the streets and cleaning the sewers - not commanding their own companies.

So all of the above is just the context. A perfect economic system in my opinion is one which:
1: Is stable and controllable - no more economic melt-downs, thanks
2: Offers all workers a realistic chance to become entrepreneurs or something bigger than an entry-level grunt
3: Enables access to all the benefits of modern society: healthcare, modern conveniences etc.

I'm realistic, ok? If it wasn't for point 3 above, it'd be only too easy to recommend we all move out to the farms, form small  self-sufficient clusters and rely on a basic agricultural barter system for additional benefit.

I don't know about you, but I'm not ready to give up the Internet, my cellphone, my car, my television and everything else which makes my life "normal". Also, I somehow doubt we could pull off a mass urban-to-rural shift like that simultaneously, and nobody would do it unless they could see everybody else doing it first. Oh, and there's the little problem of where the land's going to come from, but don't ask Malema!

Soooo... where does that leave us? The solution needs to be internal to South Africa, be implemented by Government (following a public vote of course) - and don't get side-tracked by whether or not the current Government is capable of it - and be able to achieve radical change without sacrificing a semblance of normal life.

Not too much to ask for, haha.

Let me confess at this point that I didn't start writing this article with a solution in mind ... just a few ideas I've been throwing around every time I am approached by another beggar at the traffic lights.

The problem really is that we've been trying to use the resources of the minority to empower the majority - through informal community development projects - but that approach is immediately defeated by sheer scale.

We need to find a way to empower the poor, not by redistributing wealth but by creating it afresh. Or rather, tapping into what's always existed but never had the opportunity to materialise.

The maximum wealth of the country must be derived by utilising all of its manpower and skills, and the products and services created by that proces should belong to the country.

I immediately hear the complaint of 'Where's the motivation for self-improvement?' I'll get to that.

First, we want everybody working, and for that we need new businesses to not be restricted by market forces. So the answer is simple: remove the markets!

Or rather, unify the markets: all goods produced belong to South Africa. What this means is that all goods produced by all companies are sent to warehouses which belong to the State. From here, all retail outlets are stocked as needed.

Training? Training is free to students. The trainers will be repaid just like all companies and workers: from the Central Bank. What is this? It's another State-run institution, which simply acts like a giant calculator.

The value of all goods supplied by companies to the Central Repositories is credited to their accounts in the Central Bank, which they transfer out to their employees' accounts. A system will be derived for service providers to be credited for their services rendered at the point-of-sale, with those accounts again resting with the Central Bank.

If you're with me so far, my proposal is simple: the problem with capitalism is a lack of money, so remove that lack. Not by printing more money, but rather by linking the financial supply directly to the supply capacity.

I'd say 'do away with money altogether' if it wasn't for the need to reward people who work harder and are more skilled. I believe that salaries should be linked directly to skill level and work-hours spent, but that's a side-topic to this debate.

The two stumbling blocks to the above system are:
1: How to handle imports
2: Needless inflation

Goods from the Central Repositories could exported, with goods received valued on a one-to-one basis and those imported goods being distributed by the Central Repository.

Inflation would need to be curbed by a State-controlled Registry of Prices: all products supplied by the Central Repository would have unchangeable prices attached to them - a fixed mark-up over their cost price.

To ensure that businesses are incentivised towards developing their staff's skills, the Central Repository could establish limits on the quantities of a specific item of goods it would accept - so the whole economy doesn't just revolve around producing matchsticks by unskilled manual labour. Trading licences wouldn't be issued to companies not manufacturing towards a specific need by the population.

So anyway, I'm sure there are a lot of problems to the above system. The obvious one is the initial stage at which the consumer demand - every employed person with a salary to blow - exceeds the existing stock levels.

That's really just an operations management problem. It's a question of breaking the country into clusters and limiting spending: focusing new production on the basic 'must-have' items and expanding production lines as soon as the core demand is met.

Please don't kill me for the above: it's just conjecture. All I know is that we're not utilising all of South Africa's human potential while we have unemployment, and it seems unnecessary if we just throw away some ingrained concepts from capitalism.

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