Otabil is 101% Right - Part IV

Mon, 28 Mar 2016 Source: Baidoo, Philip Kobina

We have had state involvement in industries, farms, transportation, aviation besides whatever your mind can think of, and they have all gone down the drain. The story of Ghana Airways is even heart breaking, because Ghanaians are currently travelling back and forth in record numbers. If state involvement has a stellar record, the question that we should ask is where are the state farms, and the endless catalogue of the GIHOC companies that Nkrumah established? Private firms collapse, but they don’t collapse and leave a vacuum they get supplanted. Uninterestingly, they will counter that their failure was due to the overthrow of Nkrumah. Sadly for them, it’s a straw man’s argument. The fact is the painful stories of GIHOC are replicated across the African continent. A case study is Nyerere of Tanzania. Fortunately, he survived long enough to witness the unmitigated foolishness of his socialist policies. In the end, he admitted ruefully to his failure that, at least, he did not allow multinational companies to carry away the wealth of Tanzania. What a tragedy; keeping millions in destitution needlessly, because of what a multinational capitalist will appropriate. These people look at economic transactions with multinational corporations as a zero sum instead of mutual benefit. And here is my take; any system that its survival or success depends on the right person managing it is a bad system if not outright dangerous.

Who will be smart enough to tell me that a private entrepreneur will allow such a valuable asset like Tema Oil Refinery to be in the mess it finds itself? Even if a private owner does not find it profitable to continue operation he will not allow it to gather dust so often. The assets will be stripped and sold off to minimise the losses. Nonetheless, this invaluable petrol chemical plant in our industrial arsenal, which used to be in private hands, was nationalised by the bleeding heart socialist, General Acheampong, with the idea that such an important factory should not be left in the hands of the private sector to be used as a cash cow. It’s only people who don’t understand economics who will argue so childishly. There is no way, the then, Ghaip would have been able to fleece Ghanaians if there is free enterprise that allows entrepreneurs to import petroleum products from outside the country, in the event where they unduly raise their prices. The current economic mess, which led to the rationing of foreign currencies a couple of years back, can be partly laid at the doorstep of TOR. And who manages TOR? I don’t think I have to answer.

The micromanagement of our economy by the state is the bane of our economic woes. Yet, very intelligent people seem to find a benign pronouncement by Pastor Otabil offensive. Now, coming back to the outlandish statements wrought in Mr Kofi Ata’s piece. What did he mean by drug cartels running the country? In that case, what will be the legitimate responsibility of the government? The raison d'être of any government is to provide law and order; in addition to providing military protection from foreign invasion. Drug cartels can only run a country when the state is corrupt. They can also flourish when the state enact unenforceable laws. Cartels are criminal gangs, and it is a ridiculous cheap jibe to equate such scams to legitimate entrepreneurs who create jobs, pay their taxes and abide by the rules of society? No genuine capitalist will sanction anarchy; it is the terrain for criminals, and it is shameful for Mr Ata to spew out such things in his crusade against Otabils’ statement.

I have written about this issue before, however, I think since the falsehood is still being peddled around I am obliged to continue debunking the lies. Mr Kofi Ata blamed the 2007 global economic crash on private enterprise, and this is what has been the mantra of the socialists and the progressives since the crash of 1929. We all know that the best defence is a good offence. After all, the Nazi chief propagandist, who hated capitalism with all his soul, stated that the bigger the lie the more people will believe it. Historians of all hue, from Harvard trained to some backwater American universities, blame capitalism for the 1929 crash. Notable among them was Harvard educated Arthur M. Schlessinger Jr. This is a man who admitted in his own autobiography that he was not interested in economics, nevertheless, had the incredible temerity to pontificate on the history of an era, which its dynamics was shaped by economics. What can you authentically learn from this historian concerning the 1929 economic meltdown if he did not understand economics? However, these are the people the progressives and the socialist quote when they attack capitalism for the 1929 crash. I wouldn’t use his history book for a toilet paper.

To understand the problems of the banking industry you will have to grasp the epistemology of praxeology. Without the understanding of human action, you can never come to terms with economics and you will be dancing around with the notion of political economy – a useless branch of economics in my opinion – and mess your life, filled with bitterness, together with others if you are in control of the state. I am going to outline this one in simple English devoid of technicalities. For the purpose of our discussion, if you are a banker who offers loans to ordinary people to buy houses, which they will have to repay in 25 years you will always follow the acceptable best practices of the industry. Firstly, would you not find out whether they have jobs? Secondly, if they are capable of servicing the amount they are requesting with their declared income. And thirdly, and most importantly, if they are credit worthy. A banker will check these basic requirements together with many other criteria to ascertain whether his capital will be safe.

This is the time to remind you again that all government institutions are incompetent. If a government backed company like Fannie Mae and Freddie Mac buys off the mortgage you offer to your clients; that is, 25 years of monthly repayment in an instant. And this allows you to make more transactions to profit from. Ask yourself an honest question, would you check the requirements I have outlined above as rigorously as you would if it’s not your money at stake? On a brighter side, there are some who will be honest, but mind you there are some who will also act as if there is no tomorrow. Because the mortgages the bankers were offering did not sit in their books they did not care who they gave loans to. As a result of this unholy alliance, recklessness took hold of the American financial industry prior to 2007. These two hybrid companies, which the American government shouldn’t have allowed them to operate in the first place, bundled those mortgages and sold them off to Wall Street. Wall Street also further sold them to investors around the globe including a bank like Northern Rock, which should have been allowed to fail. Demand for houses shot up due to the carelessness and a bubble was created causing American home owners to draw on equity that never existed. And, of course, it was bound to crash. It crashed. And this is what happens when government meddle in business. Instead of the government to take the blame for the debacle they went on the offence and started spreading falsehood and blaming the bankers for what happened. Unfortunately, a person like Mr Kofi Ata picks it up and start running with it; further muddying the waters with clueless misinformation. These thoughtless socialists and progressives cannot understand that when you subsidise bad behaviour you have more of it.

I believe he knows about the British government scheme called ‘help to buy’ for first time buyers. This scheme is a recipe for the next crash in Britain. This scheme which has already created a bubble was expanded not too long ago. Instead of them to enact laws that will make easier for developers to build they rather up the ante to increase demand while the supply side is struggling. There is a shortage of houses in mainly acceptable areas in England. There are a lot of areas that house prices are in distress because of crime. What does the government do when they apprehend these criminals? They just give them a slap on the wrist and they just continue to terrorise neighbourhoods that will even cause jobs to flee because of such criminality. House prices continue to rocket, because of generous government subsidies for unproductive families to occupy huge housing space, which feeds the bubble without commensurate productivity. How can a government provide housing for a refugee family costing £12,000 a month? What will happen is that the landlord of that property will quickly buy another house with the idea that it could easily be rented for that much putting further strain on supply.

Any franchise with a government is a form of a cash cow for some private businessmen to milk. Mr Kofi Ata mentioned the privatised British rail, which receives subsidies from the government each year. What kind of franchise was he talking about? If McDonald’s enters in a franchise agreement with a franchisee does it subsidise the operation? When the franchise business was taken to the stratosphere by McDonald's, there were a lot of failures from the beginning, because they did not have the right criteria of selection so most of the business people who came in earlier were the wrong type of people and they failed. When they failed they did not go back to McDonald's for subsidies. Yet, when they perfected their selection criteria those franchisees who came in later became millionaires. The British rail is a franchise. British Airways which is completely private don't go to the government for subsidies.

They throw words around like state capitalism to scare the gullible. There is no such thing as state capitalism. Capitalism is private ownership of means of production; any other is an economic system, but not capitalism. They talk about trickledown economics or trickledown theory depending on what suits them. There has never been such theory advanced by any of the world renowned economists like Joseph Schumpeter or Lionel Robbins except those economists living in insane asylum.

Mr Kofi Ata took a swipe at Google UK for not paying their due tax. Nobody likes paying taxes. If readers will remember it is due to problems with taxation that led the first original 13 American colonies to battle out with the British for their independence. When you tax people and corporation to the hill they will evade. Because they have taken upon themselves non-governmental responsibilities they have to milk the taxpaying public dry. Besides, what sort of full taxes he asserts that the SMEs pay. He puts them on a pedestal as if they do any different. These so called SMEs work the system just as Google to pay the minimum tax as possible. For example, they even charge the running of their private cars, groceries for family consumption to their business. When their children don’t even work for the business they pay them to avoid the threshold of paying their rightful taxes and Mr Kofi Ata calls them holy.

Please, if you do not have a clue on how to provide what Dr Mensa Otabil was suggesting, I am sorry; don’t spout on things you do not understand.

Philip Kobina Baidoo Jnr



Columnist: Baidoo, Philip Kobina