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THE TRUTH: Strikes in South Africa

22 January 2013, 08:06

Striking in itself is typically an effective form of negotiation, and is not inherently bad, however any agreement to provide labour is a contract of mutual benefit, for both parties. No employer is entitled to labour, that is slavery. No worker is entitled to a job, and a wage, that is communism.

In the Western Cape, the minimum wage for farmworkers is R69 a day, which is very little, although university studies have found that the average wage is actually R84 a day. The workers however, want R150 a day, and have in many cases turned their frustrations into violence.

Unfortunately however, most major strikes in South Africa don’t have pure intentions, as they are strongly politically motivated. Lots of the people doing the violent picketing are not actual farmworkers, but puppets of individuals and organisations with a deeper, darker agenda. This is not some conspiracy; this is as clear as day, and out there for everybody to see. This surely has to make us question the authenticity and the intentions of this strike. In South Africa we have political factions within political factions, within different provinces, with things getting especially complex in the DA run Western Cape.

There is a misconception by many people not familiar with the agriculture industry that wine estates and the like are run by greedy farmers who don’t feel anything for their workers. This is simply not the case for the majority of farming operations especially in the current volatile economic environment. Many, if not most medium farms are not too profitable, and labour is typically the largest component of expenditure for a typical farm.

The effect of having to double workers wages is significant for the farmer and the worker. The farmer will have to retrench people to pay the existing workers higher wages, this would require cutting down on operations, and would not be beneficial for the farmer, or the workers on a whole. Alternatively, the farmer could also charge more for his product, the bottle of wine, or tray of fruit, but this will lead to a decline in sales locally, and crucially in exports.

Firstly, there is no argument that the minimum wage of R69 a day is very little. Unfortunately there is a huge oversupply of labor, and a relative undersupply of capital and entrepreneurship in South Africa. This means that you will always be able to find someone willing to work for peanuts. There is virtually no competition among employers for this type of labor.

What would the effect be from the farmworkers point of view if he or she gets an increase? The short-term effect would probably be beneficial. But we must consider the wage that worker is now receiving vs. the economic value they actually produce (is the worker’s activity and contributions worth R150 a day?). If the wage increases, but economic output stays roughly the same, then this would only really cause inflation. For example: If the local grocer in a small farming town knows that his average customer (the farmworker or miner) is now earning R150 instead of R70 or R80, then he will undoubtedly raise his prices, diminishing the real value of the increase the worker received.

If our government, or elements within our government are directly or indirectly involved, or contributing to this strike, then we should be very concerned, because not only are these kinds of strikes causing huge irreparable financial damage to our economy, it also indicates that our government may become more ruthless and destructive in order to stay in power. We should stop tolerating this. We can’t continue to ignore the issue by telling ourselves its “OK” because we have a functioning democracy and constitution every time things start to get out of hand. We must stop making excuses, and confront the real problems. Quite frankly, if you think chucking a piece of paper in a ballot box every 5 years is your voice being heard, or you making a difference, then you are delusional. Its important to understand, that democracy, at least in a broad sense does not equal freedom, since it allows a majority to disregard the individual rights of the minority.

The imbalances of the current system is partly due to our pre democratic past, partly due to an education system which is the envy of no one, and partly due to a huge inefficient bureaucracy called government who chooses to forcefully interfere and regulate virtually every market. Now of course, most government policy and regulations are done with the best intentions, but unfortunately one of the biggest tragedies, is that government policy is judged by its intentions, rather than its results.

I sincerely believe that were it not for intrusive government, and trade unions that overextend themselves, things would be different. If we did doing things differently over the past 20 years, we could have been a real global player by now, maybe economically on a level close to Brazil, the worlds 5th largest economy, or a mini China. We must remember that countries like China and Brazil’s phenomenal growth only started in the late 80’s and early 90’s when they opened up, and allowed the free market to function. Looking back, South Africa has so much to regret.

There is a great misunderstanding amongst our population that if everyone simply had more money, it would enable them to buy more stuff. It is crucial to understand that money has no intrinsic value. It is simply paper, the value thereof as a means of exchange is based on the quantity that is in circulation, and the productivity and efficiency of the underlying economy, which issues it. The worker may now be earning R150 a day, but the economic value he produces, or the value he adds to a product is only about R70 or R80 a day.

Naturally, there are more and more calls for nationalization of certain farms and mines, with the expectation being that government would pay the expected wages, but where would government get the money? Tax revenues will plummet, and inflation would be severe as productivity declines and foreign investors flee the country, further worsening the trade deficit, and weakening the rand. This will make government bankrupt if they can’t force the reserve bank to print money. Nationalization isn’t an imminent threat however, as our government won’t succumb to threats until there are hungry & unemployed farm and mineworkers on their doorstep.

Another suggestion is that government should subsidise the difference between the minimum wage and the workers’ wage demands. The first question is: where will government get the money? By increasing taxes? By politicians fighting for the plight of the workingman and cutting back on perks? No. Such an arrangement will only paper over the cracks. Any market should be able to function without government intervention. If government involvement is required to keep the market or industry alive, it is not fundamentally sound, and the only possible benefits fall to the business/workers being subsidized. The consumers of that product are the ones who suffer, since they will probably get an overpriced product of inferior quality. The taxpayers will also be left worse off, because their tax money will be spent on an inherently inefficient market instead of services that benefit them (not that tax money currently benefit those who pay it anyway).

The reality is that there is a massive discrepancy between asset prices and wages. Real wages globally have been stagnant since the early 1970’s (but asset prices have continued to go up, artificially thanks to the actions of the global financial architects’, which run central banks and own governments. This is the cause for the growing gap between the rich and the poor, the have nots and the have yachts.  Coincidently it was also in the early 70’s that the world went off the gold standard, and the west embraced socialism and Keynesianism.

Things are only going to get worse. From a global perspective I am convinced that the US bond market may collapse at any time within the next two years due to mounting debt, reckless spending and money printing. That will cause a hyperinflationary depression, and a temporary collapse of international trade.

A fish rots from the head, and things will only continue to get worse and worse until we do something about it. Positive change can only come from the bottom up, that’s why I’m saying lets find the dignity somewhere within ourselves to stand up and demand liberty. We should reject fascism and collectivism, and let those of us who believe in freedom and prosperity bring it back!

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