Rambling thoughts on Malawi economy

One day, a reporter called to seek my reaction on complaints by businesspeople that the floating or flexible exchange rate is not good for businesses. They argued that they would rather go back to the old fixed exchange rate system.

The flexible exchange rate was imposed in compliance with International Monetary Fund (IMF) conditionalities which they believe is a better barometer for the country’s economy.

The flexible system exchange rate introduces into business transactions an element of uncertainty and instability.

Both the fixed and floating rates are matters of degree. When we were on the fixed rate system, there were also some fluctuations, but they were so small that in calculations businesspeople would easily ignore them.

Those who adopt the flexible exchange rate do not resign to laissez faire. Instead they let the exchange rate float between given points. If the currency goes too high, the central bank intervenes to reduce the value. If the currency depreciates, the central bank intervenes to strengthen it.

Only businesspeople who handle currencies in quantum can give in figures the advantages and disadvantages the flexibility gives. Let us give the system a time to prove its benefits, if any. If it does not fare well enough, then we should enter into fresh dialogue with our development partners.

Labour

Labour is one of the three factors of production. The other two are land and capital. Labour is the most important because it is made of human beings with rights and duties which inanimate factors land and capital do not have. You can sell land and capital, but you cannot do the same with human beings.

For labour to make optimum contributions, it must be trained for the job. It must also be well fed and healthy.

This means workers must be paid enough wages to enable them to purchase the necessities of life. Adequate payment must be rewarded for adequate performance for duties given. Extra pay must follow not precede improvement in productivity. This view which seems logical enough proves difficult to accept on the part of workers who see their earnings being reduced dramatically because of inflations.

One advantage of self-employment is that people can easily see that their earnings depend on output or how much you have worked that day.

Two things attract foreign direct investment when it comes to labour. A country where literacy is widely spread and workers are skilled reduces the initial problem of an investor. The investor does not have to engage in much training of the workforce. Most of what he is required to do is to adopt the workers’ skills to the needs of the company.

An investor is also attracted to a country where labour is disciplined and where it is not prone to wildcat strikes. A country where workers frequently stage strikes is likely to lose the international competition for business.

This is what Britain suffered before Dame Margaret Thatcher took over as prime minister.

In most, countries which underwent industrialisation after Britain they managed to have trade unions which were public spirited enough to know when not to engage in strikes.

I do not know whether the minister of labour keeps a record of how many workers stoppage take place both among white and blue collar jobs annually. This would tell how much productivity suffers. Where production is not continuous, growth too cannot be continuous.

When Thatcher took office, the first thing she did was to end irresponsible conduct among trade unions which seemed to enjoy putting their employers at ransom.

She got a law passed that trade union leaders wanting to stage a strike should first subject the proposal to a secret ballot vote. In other words, a strike should not take place just because the leaders want it, but because most members of the trade union see its need. I think in Malawi this law should also be enacted.

Those leaders who picket for strikes which have not been authorised by the membership should go and explain their behaviour in court.

Something that has been known as logical for ages is that he who refuses to work does not deserve free food. Hence, when workers go on strike they release the employer from paying them wages and salaries for the days they are on strike.

In Malawi, strikes are too frequent because some employers still pay those who are on strike. Those who are on strike should be supported by a trade fund that is accumulated through subscriptions. Where there is no discipline, law and order, there can be no progress.