Feature Article of Monday, 16 July 2012
Columnist: Yeboah, Kwame
I do not lay claim to any sophisticated knowledge in economics. I am not a celebrated economist neither am I a distant relative of Karl Marx nor Adams Smith. Indeed my last contact with economics was twelve years ago in secondary school and even then I suck. I do not intend to judge and I do not expect to be judged. The motive of this article is to expose the inefficiencies in the free market system that has been bequeathed on countries like Ghana.
The most prominent legacy of the Cold War era is perhaps the spread of democracy and the free market system. In the 21st century, all politicians with little exception advertise their democratic and free market credentials. This is not restricted to prominent leaders like Obama and Cameron but also for Basher al- Alssad of Syria. Even the most obviously anti democratic parties and governments say they believe in democracy and the free market.
So what is a free market?
A free market is a market where government makes little or no intervention in regulating prices, demand and supply in the market. Rather market forces are allowed to interact to determine the level of demand, supply and prices. The virtue of the free market t is that it gives people the freedom to buy or sell what they want. People are responsible for their singular actions and the state only plays a watch-dog role. All these benefits notwithstanding, the free market system harbors a lot of ills which most casual observers have either not seen or refused to admit.
Imagine an ordinary day in the life of a Banker in a free market like Ghana. After work, she stops at a bar for a drink, goes to the market to buy some fresh vegetables for dinner, and fetches a cake she had ordered the previous day. After dinner she goes to the mall in town to take advantage of a big sales promotion that had been advertised on the radio all week. Then on her way home she passed by a fast food joint nearby to have a burger. Quite a routine for most working class Ghanaians.
The chances are pretty good that our banker friend has been cheated or exploited on a number of occasions. Chances are that the premium whisky she ordered at the bar was actually a cheap substitute, that the ‘fresh’ vegetables were days old, that the ‘sale’ prices that were written on the tickets at the mall were actually the original prices while the prices printed on the tickets were 30% higher than the store usually charges. That the cake she ordered was the same one a customer had rejected three days ago, cleaned and stored and re-sold to her. That the burger she ordered at the restaurant had been dropped on the filthy kitchen floor only to be returned to the grill, cleaned up and served to her. Don’t consider this an abstract case, people who have worked on factory floors, restaurants, shopping malls etc, will agree that these are daily events.
It is common these days for shops to remark left and right shoes whose mates have gone astray and sell them. Sales men are trained to tell customers that everyone has one foot bigger than the other. Tap water is sometimes bottled and sold to you as ‘pure’ water. In television and stereo repair shops, either you are charged for unnecessary repairs or the repairs are not done at all. Sometimes charges are determined by the customer’s willingness to pay. A repair on an expensive system may cost twice as much as the same repair on an inexpensive set. Sales persons in a boutique are instructed to tell customers “they look great” especially when the item is expensive. In some cases sales persons will drive you to buy low selling goods by killing your appetite for the one you really came to the shop to buy.
So the question is- why do businesses and sales people in Ghana indulge in such deceptive and dishonest practices? The answer lies in the competition that arises as a result of the free market.
As a business man, if other shopping malls were running ‘sales’ that weren’t really sales and the public were deceived, then your mall had three choices. Either it runs a real sale, and sacrificed on profits that its competitors didn’t sacrifice. Or it didn’t run a sale at all, and lost customers to its competitor’s fake sales. Or you did what your competitors did in order to survive the competition. Clearly the last option is what most ‘normal’ businessmen will fancy.
On top of these competitive pressures faced by the bosses, the pay structure in many businesses establishes incentives for salespeople without recourse to ethics or method. When the money a salesperson takes home consists largely of sales commissions and bonuses, then honesty can sell for a huge price. This puts salespersons in the position of having to chose between being honest and paying the rent. This situation is however good news for the boss because it encourages employees to work hard to make the company profitable and to stand any chance of surviving the competition. And it’s great news for the hard working unscrupulous sales guy whose dishonest methods will be rewarded by fat commissions.
As the free market practices make it increasingly difficult to earn an ‘honest living’ the cost of living will be substantial. Our little hope comes from government regulations and monitoring. But then again it has proven not to be the solution. The reason is that if we assume that the only reason people will stay away from dishonest business practices is the fear of being caught and punished, the job of monitoring even becomes more difficult. There are so many businesses in Ghana that have different motivations to cheat and it will take thousands of inspectors to make it work. Obviously this number of inspectors is not feasible. But even if it was, we will have another problem- considering we set out an army of inspectors into town, how can we be assured that they will also not be corrupt. We will need another set of supervisors to control these inspectors.
Obviously it is clear that as long as the free market stays around, we will forever be at the mercy of the experts- those who try to beat the competition by selling us things we do not need or at prices way above how much they are worth. This fear was clearly echoed by Prof Arnold S. Relman –An American professor of social medicine when he said “Most of us believe we are parties to a social contract. We are not vendors, and we are not merely free economic agents in a free market”.
BY: KWAME YEBOAH