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How SBC (AT&T) Pillaged South Africa's Economy
Kifoth writes "For 8 years, SBC and Telekom Malaysia controlled South Africa's only telecommunications company, Telkom. Telkom had a government granted monopoly in order for it to connect the large parts of South Africa that had been neglected under apartheid. Instead of helping, SBC abused their position and raised Telkom's prices to be among the highest in the world. The billions they made here ultimately went to fund their AT&T merger. From the article: 'SBC, described as "congenitally litigious", is said to have played a major role in the failure of South Africa's telecoms policy to develop a competitive telephone service. Under SBC's control Telkom not only failed to meet its roll-out obligations but behaved "as a tax on industry and a drag on economic growth."'"
Seriously, I didn't see this one coming.
"16MB (fuck off, MiB fascists)" - The Mighty Buzzard
How South Africa's Government Pillaged South Africa's Economy
they hate black people.
As much as I hate government interferance in business, if you're going to have a government granted monopoly you should have government set prices.
Liberal economic policies help in a lot of things, but utilities are one of the cases where it's an infrastructure investment that still is most efficiently done cooperatively, particularly since you have to deal with public rights-of-way and all that. Services on top of the infrastructure should be liberalized, of course.
We really do need to get people to think beyond left and right more these days and more on what works best for the particular situation.
A company with a "government granted" monopoly abused it. Shocking!
Incidentally, any true monopoly must be government granted. Without the government's force to keep competition away, it's merely a really effective competitor in an open market, like Wal-Mart.
A monopoly, whether government owned (e.g. the US Post Office) or government granted (e.g. AT&T and the Baby Bells in the US, before cellphones, cable company phone service, etc.), is not required to innovate and improve to retain customers, like a free-market business is. Because of this they will tend to deliver a lower quality product at a higher price.
Because this is a discussion about AT&T and South Africa. The poster used this as an example of "capitalism gone awry" which it is not. It would be closer to fascism than capitalism. A central authority made a decision for the entire country, leaving one player in place to implement a system. Nowhere does this remotely look like capitalism.
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Heh... the only problem with that is the fact that the vast majority of our people are afraid of change from the ANC to another party. I guess mostly because they are afraid of another Apartheid. However they must realise that our current government pretty much sucks in a lot of ways and maybe a change is needed to make our country stronger and healthier. Or maybe the ANC could start actually doing something for us.. Our internet here isn't great at all.. With 1Mbps - 4Mbps ADSL being the latest thing coming out just recently. And until we see another telecommunications company coming along to help us we'll be stuck with the wonderful prices from Telkom...
Pillaged is such a harsh word. I prefer the phrases "shareholder value" and "market economy".
... I have to say that Telkom is absolutely terrible. Have a look here for more info.
Telkom have consistently been a stumbling block to technological progress in the country, especially with regards to internet access. Telkom owns all the international links to the rest of the world from SA, and most of the bandwidth and international calls have to be routed through them. In fact, the price of ADSL has been so prohibitive that many individuals have pursued cellular alternatives, paying per MB, for light browsing instead.
While it's easy to criticise the private companies who have been managing it, Telkom is a parastatal, and not wholly private; roughly 39% is still owned by the South African government, so I'm fairly certain they weren't too unhappy about the affair. There has been evidence of cronyism at the company, too, most likely as a direct result of this: in 2004 a government pension fund was used "to buy telecoms shares for a group of former government officials". This was part of the government's Black Economic Empowerment (BEE) requirements that firms need to be 1/4 black owned before 2010, and falls within a pattern shown, by 2004 government surveys, that "68 percent of BEE deals went to just 6 black-owned businesses, all of which were owned by top members of the ANC party."
The whole thing stinks, and Saffas get screwed, as usual.
'If Christ had tweeted the sermon on the mount, it might have lasted until nightfall.' - John Perry Barlow
A rattlesnake will bite you because it is afraid and feeling threatened. Business will screw you over because of greed.
Please do not insult rattlesnakes by comparing them to telco execs. There is no comparison.
It's capitalism at its best. Remember, Laissez-faire Manchester type capitalism is just one flavour of capitalism. And by far not the most frequent one.
One defining characteristic of capitalism is accumulation of capital/maximizing the profit. A monopoly is a very good way to do so. (Does Microsoft ring a bell?)
This particular monopoly was a government-granted monopoly but monopolies also develop under free-market conditions. Did you never wonder why capitalism needs all this laws and regulation to protect the *free* market? I guess it's not because companies like competitors and want them to stay.
Finally, this monopoly was granted to ensure Telkom a profit for building infrastructure in remote areas. Public services are a typical problem of capitalistic economies since they tend to be unattractive for companies.
And with the monopoly granted Telkom did what a capitalistic company has to do, it maximized its profit by raising the prices.
All I can see is capitalism at its very best. Not very pretty but nothing surprising.
"Hannibal's plans never work right. They just work." Amy/A-Team
did what a capitalistic company has to do, it maximized its profit by raising the prices
thinking like that is one of the big problem I see that allows shit like this to happen. This thing called "company" you speak of does not "do" anything. it is something virtual, the point of which is to maximize profit, but no, not by raising prices. it is to charge the maximum it can for the demand. for services such as in this case, demand is close to inelastic, and competition, in an "actual" capitalistic market, would prevent this service from being actualized till supply is much cheaper. Once the government steps in and takes the competition away, hence creating an artificial supply curve, it is the government's job to dictate the prices, as we are no longer talking about capitalism. The government needs to set the supply curve if they chose to take away what brings supply lower - hence taking away the capitalism.
This is not at all capitalism. it is a capitalistic company allowed to roam free in a non-capitalist scenario. The people working for this company allowed to roam free are under contract to not steal from it's customers. It is the government's job to monitor this, if they take away competition, a vital part of capitalism. Those people broke the contract in an enron kind of way. It is the job of the government to take these people, who committed a criminal breach of contract. Forcibly the money back from from the "company" that stole it, refunding the people who were victims of criminal theft. Then prosecute the actual people that made the breach of contract decisions, and prosecute them for theft of billions of dollars. Prosecute them the same way as if they were to go into a bank and steal that amount. And revoke the company's license to exist as a company (within that country's jurisdiction).
They're doing exactly what's expected of them, and you're a fool if you think they are supposed to care more about you than their shareholders, and maybe employees.
You're a fool if you think unethical behaviour is somehow okay simply because they make money from it. I and many others expect them to act ethically.
They are "supposed" to do (whatever that means) whatever is in my and everybody else's best interests. Personally I want to live in a ethical society and will do everything in my power to penalize and control unethical companies. Most people think likewise.
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Monopolies = Industrial feudalism
Actually, since you mention Adam Smith, the funny thing is that this is a case where he wouldn't have advised laissez-faire capitalism in the first place. In fact, the only change there to make it fully Adam Smith compliant would have been to make it a public institution, or I suppose regulate it to the point of being effectively one.
The funny thing about Adam Smith is that he may well be the most mis-understood and mis-quoted author. People seem to assume him to be the shining beacon of laissez-faire market-solves-all-by-itself proponent, especially when they themselves subscribe to that kind of a view.
He actually proposed a _lot_ of government involvement in infrastructure. Ok, so what he said is public works and institutions (remember the institutions part too), with emphasis on public works that would facilitate commerce in general. He sees it as the government's duty to provide and maintain good road, bridges, navigable canals, harbours, etc, in other words: infrastructure.
That's actually a lot of taxation and public spending to maintain that, with Britain's economy at the time when Adam Smith wrote that.
(It's funny how so many of those discussing why the industrial revolution in Britain miss the factor that their canal network was a precursor to railroads that served the same purpose: getting raw materials from here to there in large quantities and cheaply.)
At any rate, blimey, telephone is infrastructure.
If I'm allowed to go into an OT detour into his public institutions views too, he also was for public schooling (above and beyond what any country does nowadays, as it would involve a school in every parish), public health (to "prevent leprosy or any other loathsome and offensive disease"), and generally wasn't too much for a lean and cheap government the way I see it, since he has nothing against expense for "supporting the Dignity of the Sovereign". He also didn't seem too bothered by government co-ownership in some (heavily-regulated) corporations, either.
So basically, it's funny to see him quoted as some beacon of ol' school conservative laissez-faire, either by the proponents or detractors of it, when really that's not what he proposed at all.
To get back to his invisible hand, basically all he says there is what we nowadays call supply and demand. If there's a demand for product X and a profit to be made in fulfilling that demand, someone will start making more of it. You don't need the crown to tell someone to start producing X, someone will start it anyway, "led by an invisible hand." He's not horribly wrong, either: as long as the market has a certain structure, we already know that it works.
The only problem is that the ideal(istic) capitalist free market is not the perversion it tends to become when left unregulated. The assumption that the free market solves everything is based on a structure where there are many producers for each good, the different brands of goods are perfectly interchangeable (e.g., you could drop an AMD CPU into your Intel mobo if you don't like Intel any more, or could switch between Windows and BSD or Solaris without noticing any difference in what you can do with that computer), the buyers are perfectly informed, etc.
That was the only kind of market you could possibly get in the 18'th century, but nowadays it's possible to subvert it massively. And the incentive is there too. That ideal market is a commodity market, and there's not much money to be gained in it. As they say, the only way to make a small fortune in the commodity market is to start with a big fortune. The big money is in making your product non-interchangeable (e.g., by making other stuff work with only your brand of it, see: Microsoft), keeping the number of competitors low (e.g., by raising artificial trade barriers), and keeping the public as uninformed or even mis-informed as possible (e.g., marketing, PR and FUD.) So that's what the perverted direction the market tends to take by itself: if it's more profitable to do that, the succ
A polar bear is a cartesian bear after a coordinate transform.