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Advice on planning the economy strategically Advice on planning the economy strategically
by Joseph Gatt
2021-01-10 12:02:04
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Some bits of advice on planning the economy strategically if you have the following problems.

Shortage of raw materials: you want a strong industrial base, to avoid dependence of industrial goods. But you don't have raw materials and need to import those.

This means that you're going to have to carefully monitor industrial production and distribution, to make sure it performs optimally.

econom00001_400Your industrial strategy should be as follows: focus on quality and quantity of production. And be able to distribute the product in local and international markets. You will need to export a lot of the industrial goods to be able to afford the raw materials.

There are other scenarios that play out. Maybe you have some raw materials and not others. Maybe you have coal but no oil. Maybe you have iron but no water. So you could trade one for the other.

Or there's the scenario where you have a strong agricultural base, and good tourism potential, and your export agricultural products and bring in tourists in exchange for importing raw materials. And those raw materials are going to help your agricultural and industrial base.

The main danger of course is when private individuals have the monopoly on raw material imports, because they can make or break farmers and industrial entrepreneurs. That usually means they dish out the raw materials in exchange for hefty bribes.

Shortage of agricultural products: This means you need a knowledge economy. You either need to focus on a strong industrial sector, or a strong service sector like tourism or tech services.

An economy lacking agricultural products is a little bit complicated to operate. If you have raw materials, you will need to educate your people so they use the raw materials to create an industrial base, and then you export the industrial goods in exchange for agricultural goods.

If you don't have raw materials, and you don't have agricultural goods, this means you will have to import both raw materials and agricultural goods. This means your economy will need a few thousand Einsteins to operate a very solid industrial base and tourism and technology services base, as that money will help you purchase the raw materials and agricultural goods.

It's either educating your people so you can export industrial goods in exchange for raw materials and agricultural goods.

Or you sell your land to Qatar or China and they'll figure out what to do with it.

Shortage of industrial products: If you have raw materials and/or agricultural goods but that you don't have the knowledge or funds or motivation it takes to transform those into manufactured products.

You can either educate your people or create a class of industrial entrepreneurs.

BUT, when you educate your people, what most people do is they sent their people to Harvard or to the Sorbonne and their people stay day in and day out on campus surfing Facebook and Instagram. Or the trainees get their degree from Harvard or the Sorbonne, they marry a good old American or French wife, and they stay in the US or France.

So here's my advice: ditch the university training. Don't send your people to Harvard or the Sorbonne.

Send your people to factories like Renault or GM or Coca Cola or Nestle or Proctor and Gamble, and have the do internships there. Make sure they spend a year or two observing what goes on in those factories. Have them ask questions, have them observe the production cycles, have them learn as much as they can. And be honest to Renault or Nestle about your intentions. Tell them you're sending people so they can start local factories.

Of course Renault and Nestle are not going to be happy that you're sending your people to steal their ideas and then compete with them.

So, we get to the “or” part. Or, you invite Renault and Coca Cola to set up factories. You send some of your people to get trained to work there. Eventually, once your people have worked for 5, 10, 15 years, they'll figure out how factories are supposed to work, and they'll start their own factories.

Shortage of services: Some economies live off raw material production and completely neglect the service sector. Others focus on agriculture and neglect the service sector.

Truth is, there is no real backbone of the economy. But the service sector is just as important as any finger would be to one hand. You don't want a finger to be missing.

What happens when there's a shortage of services? It means nothing gets fixed. It means no one has fun. It means people have nowhere to go for a meal or for a chat.

So a lot of people who visit countries with a weak service sector complain that there's nothing to do in the country.

How to you create a healthy service sector?

A lot of countries with weak service sectors have 50% or more unemployment rates among the 15-30 year old range.

So you want to train these 15-30 year olds to some trade in the service sector. Could be in the restaurant business. Could be in transportation. Could be repair and plumbing. Could be in installation and electricity. Could be in retail shops or services. Could be in entertainment or sports. Could be in information and writing.  

The problem when you put the 15-30 year olds on the bench and prevent them from working in the service sector, you're really creating a class of frustrated kids who lose their social skills completely.

When people spend their entire young adult life unemployed, they either grow up to be too shy to say or do anything. Or they are very aggressive and eager to show that they know how to perform tasks (and often times, they don't know how to perform those tasks).

The mistake I see a lot of countries do in training people for the service sector is giving low-interest loans to those youngsters so they can start businesses. Problem is: those youngsters don't have work experience, in most cases have zero work experience.

So I would say, instead of dishing out low-interest loans. I would say have those 15-30 year olds work very low paid internships, the kind of internships where they just observe what goes on and learn. Have them intern for a year, for two years, even for three or four years.

The internship could be a four day a week affair, so they can have a three day weekend to reflect on what they learned. If they do that for four years, or for one year, soon enough they'll figure out how to get the work and tasks done.

So if you have a 20 year old spent a couple of years with veteran plumbers, soon enough they'll learn all the secrets of plumbing. If you have an 18 year old intern for a year at a super market, soon enough he or she will know how to behave at the supermarket.

So much more I could say. But I'll leave other thoughts for the future.

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