Coping with the global economy

Since the 1990s, globalisation has become the economic buzzword.

To define globalisation has not been easy. Someone said while he could not define what an elephant was, he could recognise it when he saw it. Similarly, by seeing what is happening, we can recognise what globalisation is.

Communications both surface and serial have become more integrated. At the end of the World War II, a person travelling from Malawi to United Kingdom had to be on the route for at least a month and a half. He took the journey by bus to the railway station, where the train took him to Beira and there he boarded a ship that spent two or three weeks at sea. These days, if you wish, you may within 24 hours travel from Malawi to New York via London.

Electronics have made it easier to communicate with someone living in the Antipodes than with someone in the same city, if there is no network with the person in the latter place.

Globalisation has bred multi-national corporative that dominated markets of many countries. The markets are integrated. No national market can be shielded from world markets without stifling national development and prosperity.

There are mixed views about the advent of globalisation. Some people welcome it as world markets enable small countries to participate in international trade. Countries such as Mauritius, Singapore, Taiwan and South Korea as well as Switzerland have become prosperous because globalisation has provided them with markets many times larger than national markets.

Due to globalisation, small countries can manufacture products of the type which cannot be successfully sold in the national market. Small countries have launched automobile and ship building industries knowing that there are bigger markets out there.

However, some people have also seen globalisation as a threat to their livelihood. Long industrialised countries of the west have often raged against imports from countries which they claim use cheap labour as well as child labour. When imports from these countries arrive, they destroy local industries which pay their workers considerably higher wages.

This situation is a threat, not only to the livelihood of developed countries, but also to those of developing countries which are trying to diversify their economies by starting secondary industries.

Products so cheap come to Africa that African manufacturers find it very difficult to compete with. We understand they are so cheap because, the manufacturers pay their employees what we would call starvation wages.

What should be the reaction of countries such as Malawi to these so called “junks” that are found in our flea markets? Should we ban them or put up prohibitive tariffs? This would be in the interest of local manufacturers, but not of local consumers.

What we learn from Asia is that, to be able to introduce its products into world markets already being served by other countries, a developing country must adopt what in the theory of marketing is called penetration.

You must charge prices low enough to entice even buyers who are tied to brand loyalties. A very low price at a glance suggests low quality. However, some people will purchase such products feeling that they have very little to lose anyway. Sometimes, they discover that the product is actually much better than what they thought! They inform other people, who then purchase the same product to check the truth of what they have been told. Eventually, the product overcomes prejudice against it and begins to sell like blazes. This is how the Far Eastern countries eventually conquered markets of the industrial west.

Malawi’s products will not make headway in world markets unless they can achieve both high quality and price competitiveness. It will not be easy to pay lowly wages in Malawi because trade unions have adopted the adversarial stand, typical of western trade unions. Some civil servants recently stopped working at Capital Hill saying that government has done nothing to improve their conditions while they see some people becoming richer and growing fatter.

When Lee Kuan Yew, first Prime Minister of Singapore started his administration, he invited trade union leaders to initially adopt a cooperative rather than adversarial spirit. “Let us create wealth first and then we can talk of improving pay and conditions of work later,” he told them.

Trade union leaders listened. There were no strikes. Now Singaporean workers enjoy standards of living higher than workers of older industrialised countries.

The problem is how to convince workers in Malawi and elsewhere in Africa to accept modest wages while we are trying to attract foreign direct investment.

Sincerity on the part of political leaders and policy makers is a must. Do not ask others to bear the sacrifices from which you shield yourself.