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Out of the Rabble
Ending the Global Economic Crisis by Understanding the Zimbabwean Experience
By DAVID CHIWEZA
iUniverse, Inc.Copyright © 2013 David Chiweza
All rights reserved.
Concept and Methodology
Out of the Rabble is the title of this book. The thesaurus describes "rabble" as "a mob, crowd, throng, horde, swarm, gang, masses, hoi polloi, common herd, and commoners." The title therefore describes an economy that can surprise everyone by emerging out of ordinary, underrated, and deplorable circumstances. This is the example shown by the new miracle economies of China and India. Yet, in addressing this topic, I also want to convey the meaning of "rubble," as in "debris, ruins, or wreckage." That is what the emerging economies looked like just a few years ago. Indeed, their rise would not have been described as a miracle without a dramatic transformation from chaotic conditions.
Why some nations are thriving at a time that others are in crises is a matter of interest, but much more important is how a primitive-looking nation can rise to overtake those in the first world. In coming up with this understanding, I used a number of approaches.
First, as a habitual thinker, I often look for empirical evidence to support my views. Many researchers set up a hypothesis and conduct extensive research in a scientifically organised way. I do my research differently.
While I worked as a defence attaché in China from 1988 to 1992, I developed interest in Chinese economic development. I experienced, first-hand, the economic policies of China and how they affected ordinary Chinese in a negative way. At the time I did not appreciate what they were doing, but with hindsight, what I learned was a revelation. What was of particular interest was the vast difference between their policies and my country's policies. Chinese policies stabilised the economy. Although there were various social ills, they were making astonishing progress.
The skyline of Beijing looked like a forest of construction cranes. Skyscrapers were emerging from squalor. People lived in slums along pathways that only bicycles could navigate. They were so involved in productive and creative activities that they would approach you in the street with their inventions. I got into the habit of collecting interesting innovations.
However, the quality of Chinese products was evidently poor. Who in the world could buy these products except the Chinese themselves, courtesy of an autocratic government that banned foreign products from the domestic market? The pressure for reform was gathering momentum both from within and outside. It was not a surprise that the June 4, 1989 Tiananmen Square Clashes became a watershed in Chinese economic history. On that night, more than two political forces stood opposed to each other. Rather, the force for economic change was opposing China's economic programme. The latter forces triumphed, but one wonders: What would have happened had China abandoned its programme?
The year 1992 is a significant one for my thesis. The American presidential elections were playing out. In an interview with the press, President George H. W. Bush defended his record by saying that he had done a lot for America by liberating Eastern Europe and Africa, and he urged American companies to go and conquer those markets.
This was an awakening for me. A new thesis was emerging: markets were important! That same year, after listening to the American debate and armed with the Chinese experience, I returned to find Zimbabwe in the middle of a similar debate. Which economic direction should the nation take? Our people had spent more than a decade in a Chinese-style closed economy, from 1980 to 1992. Like in China, the reform movement was gathering momentum, driven by American influence. I immediately registered that economic liberalisation would not be good for us because we were not strong enough to compete. Unlike the Chinese situation, in Zimbabwe the forces of change triumphed over gradual reforms.
Therefore, my next preoccupation was in observing the future, given my hypothesis that there would be disadvantages and that the strong would benefit. True to form, my hypothesis was confirmed over the next eight years. America, basking from African and Eastern European markets, enjoyed unprecedented growth, while little Zimbabwe allowed all of the world's best products to enter its market, destroying its industrial and creative base in the process. The nation moved from a policy of "make it" to "buy it," and as unused skills die, it lost most of its skilled labour. I was convinced of what the power of markets can do. As many groped in the dark for explanations, I felt it was time to use my understanding to predict what would happen in the future; this led to my prediction of the global crisis.
In this book, I hold out the theory that markets played a significant role in the economic fortunes of the countries under the spotlight: China and Zimbabwe. Markets similarly continue to influence the fortunes of the United States and Europe. While it is clear that markets played a dominant role in the case of China–US economic fortunes, there is uncertainty over their role in Zimbabwe during the period 1980–1990, where, in spite of a captive domestic market, industry had not grown. During this period, industry leaders actually advocated that imports fill up the market gap. If the hypothesis was going to hold out, there had to be another explanation for the stagnation. For this reason, my research expanded the hypothesis to examine all the factors of production. For production to occur, the factors of production must be deployed. But since other nations like the United States appeared to be endowed with the four factors of production, an additional factor of production must have been omitted. I therefore added "market" as a fifth factor and sought to test this against different industrial and economic development periods.
I therefore held out this template of five factors–namely, land, capital, labour, entrepreneurship, and markets–to explain the economic pitfalls and fortunes that Zimbabwe found itself in throughout its history. Whilst other researchers previously set out to classify the common things pertaining to an economic environment, I actually set out to find evidence that supported the fact that the five factors were critical ingredients to a successful economic climate, and that where one or more of the factors were missing, there would be economic challenges.
My approach is very similar to other authors, including Dan Kennedy, who wrote Ten Million Dollar Marketing Secrets. It is similar to what Andrew Carnegie did in 1917, when the first US billionaire told a young writer, Napoleon Hill, that there were set principles for becoming wealthy and successful that could be catalogued, learned, and taught.
Carnegie had Hill interview everybody who was achieving great things in the United States in order to understand what the commonalities were. Hill called them Laws of Success, which was later written into the book Think and Grow Rich. Carnegie believed that the differences amongst successful individuals were unimportant. What actually mattered were the similarities of their actions and beliefs.
Tom Peters's In Search of Excellence essentially applied the "Think and Grow Rich" approach to companies instead of individuals. It looked at what great companies had in common. Peters listed eight common themes that dominated the business sector.
The relevance of these books to mine is the hypothesis and the framework that I use to explain a variety of economic crises. Using what I call the "industronometer," I subjected each of the countries to an analysis of five economic factors in order to determine limitations in productivity and economic progress. By raising the factors to critical success levels, I have been able to diagnose critical shortcomings of any economy at a particular time.
The science of critical success factor analysis is commonly practiced in management circles. When these five factors are applied, they explain why some countries suffer periods of economic malaise. The United States, for example, has arguably had all four of the traditional factors of production in abundance, yet without the fifth–markets–its whole system appears to have been thrown into confusion.
Through my lifelong experience and observations, I have picked out a consistent set of similarities in some of the BRICS countries, including the best periods of my nation's economic history, which explain their growth (or lack of it). These similarities include the following:
Each of the countries has had a market for the goods produced by its citizens regardless of their quality.
Their citizens had access to the factors of production: land, capital, and labour.
A significant majority of people were involved in productivity.
Markets were immune to foreign competition.
The original performance environment was deplorable but quickly changed to excellent.
During my four years in China, I was also responsible for Pakistan and North Korea. I took many shopping trips to Hong Kong, which was then a spot of civilisation in the middle of rubble. Of those four places, China, emerging from nearly half a century of self-imposed isolation, was worse off, followed by Pakistan. North Korea had its own character but certainly showed more order than China. The rest of the countries in the vicinity, such as Japan, Singapore, and Malaysia, were much more advanced.
I had the occasion to peep into India back in 1990, after landing at what used to be Bombay. Although India was already being tipped as a growing military power in the region, she was evidently backward. It was infamous for its slums and millions of poor. Just from television footage of India, the chaotic conditions were unmistakably rubble. Its cars and products could not have appealed to any international markets. For decades the industry had served its own people with mediocre products. How the automaker Tata could emerge from this backwardness to become a global company is evidence of the role played by the domestic markets to support the infant years.
Brazil was in serious economic difficulties from 1981 to 1993 in a crisis that is now referred to as "the lost decade." During this period Brazil suffered a record 30,000 per cent inflation, and its crisis hogged world attention. For a country that experienced so many challenges, the temptation was to write it off, as other economies were relatively stable. I had not visited Brazil before, but as I read its history, I could see that it went through a period of isolation. Isolation becomes an important condition for explaining the concept of markets.
South Africa, which until 1994 was under crippling sanctions as a result of its apartheid policies, is another dark horse that the world never really imagined could be counted among the BRICS countries. In the fifteen-year period from 1980 to 1995, South Africa registered GDP growth from USD80 Bn to USD151 Bn, an increase of USD71 Bn. However, when we compare with the fifteen years from independence in 1994 to 2010, she choked up a whopping USD212 Bn GDP increase to USD363 Bn. The economic projections for BRICS countries continue to increase, with South Africa projecting GDP of USD522 Bn in 2011. All this growth is happening in the middle of the global crisis.
There are, however, some common characteristics that set apart those nations that have now surged ahead of others even in the crisis.
1) Firstly, the isolation of domestic markets appears to have been common. China, India, South Africa, and Brazil have a history of domestic market isolation. With this isolation came market monopoly and all the growth payoffs that accrued to the people. Except for South Africa, the rest deliberately self-isolated themselves by shutting out foreign imports.
2) Secondly, because of self-reliance, they had a high proportion of citizens involved in making things. Attendant to that policy was the very absence of international production standards. The products, the housing programmes, the factories, and anything they did represented a poor local standard.
Hence, it gave that appearance of chaos, yet beneath these activities was the development and experience of a local knowledge base. This knowledge and basic skills development would become the fuel for a miracle economy. It could be said that knowledge without skills is redundant and knowledge with skills becomes explosive. This is important, as we will see that the first stage of isolation was often ignored, as people gave more value to the rapid development that became visible only at the time the economy was opened to international technological exchanges. However, if economic openness was the driving factor, it would have been logical for the United States and Europe to stay ahead of others that way.
A look at the background of the United States and Japan, as they rose to become world economic powers, reveals a familiar path: a period of rabble, in-house isolation in which domestic markets are protected, and a period of outsider disdain, followed by mouth-gaping economic progress. What then is the secret in the rabble, something that we often want to ignore as we, instead, look at and imitate the glitter of modernised economies?
The secret is a climate where ordinary people can be involved in creating products and be rewarded enough to reinvest in continuous improvement. This is why markets assume the most dominant position in creating these conditions. It is to be observed that these countries' economic conditions allowed Tata to grow into a global auto giant. While Proton, Malaysia's domestic car, has greater access to technology than Tata had then, it is postulated that its growth has suffered from imports that gave Malaysian domestic markets better world brands.
Countries in technology leadership positions are able to achieve a continuous improvement status for as long as they are making a profit. An examination of emerging economies of the BRICS countries reveals similarities in a pre-emergent inward-looking profile (either imposed or self-imposed), a greater degree of self-reliance, and people making their own things without too much concern about what other nations were doing. Ordinary people get involved in creative and economic activity on a wide scale. Product quality is low and the standards are mostly set by local best practice. The government seems overly tolerant and patient with the poor quality and adopts the position "good or bad, it doesn't matter," so long as they are making products in the country.
The transformation from poor quality to state of the art follows a process that was aptly described by Singaporean Researchers, who coined the five stages of development (coined the "Five Is") when they observed the path to Japanese industrial triumph.
The process follows these stages:
Imitation is a period of copying other nations' products. This is the period where products are of poor and deplorable quality. They would not find markets anywhere except at home. In the process of imitation, vital learning and knowledge takes place.
This leads naturally to a stage of improvement, where each successive sale leads to a profit that is reinvested into improvement.
The third stage is improvisation, a situation where societal challenges and problems are resolved through a combination of multiple technologies that lead to useful products. For example, a wheelbarrow combines a wheel, tube extrusion, and pan-forging technologies.
The process leads to innovation, a period of improving mastery of doing things marked by notable quality improvements, localisation of identity, and originality to existing products.
Finally, the development process rises to the invention stage, where knowledge has been so fully mastered that the creative genius of the people begins to make its own discoveries.
In an environment where there is mass participation by people, the rate of development begins to take on a multiplier factor that cannot be quantified. Where the reputation of the nation's products abroad used to be deplorable, a decade or so later, the miracle begins and beautiful products start being exported from these once backward economies. Their image changes so much that we forget that they used to be in the rabble. Interestingly, in 2006, I visited the Canton Fair; it was the first time I had been to China since 1992. There I was offered several distributorships of Chinese auto companies. I did not take them because they looked just too amateurish to be bought by anyone in my country. Now, just six years down the line, I am kicking myself because there are no less than five brands that have made inroads into the South African and Zimbabwean markets, with acceptance levels growing rapidly.
Excerpted from Out of the Rabble by DAVID CHIWEZA. Copyright © 2013 David Chiweza. Excerpted by permission of iUniverse, Inc..
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