This is Part 3, the final part in a series of fictional articles that I started two months ago in this newspaper. In Part 1 (Issue 1590, Sept 1), two leaders of an independence revolution for the nation of Ekonomi, Amadeus and Ludwig, attempt to build a fledgling economy following centuries of colonial chokeholds. Amadeus’ efforts to drive the economy based on comparative advantage failed as Ekonomi remained stuck in a low-wage cycle.
In Part 2 (Issue 1596, Oct 13), Ludwig, after having overthrown Amadeus, believed in breaking the wheel of comparative advantage and so brought chemicals manufacturing into Ekonomi, on the basis of Ekonomi’s cheaper labour costs. But that, too, eventually failed as the foreign manufacturers uprooted themselves to more low-cost destinations. Following this failure, Ludwig and Amadeus decided to collaborate once more, and to pivot their economic strategy towards local firms, whose roots were bound to Ekonomi.
The bargain of Ekonomi
The basement lounge of the Baron Hotel felt more stuffy than usual. Cramped around a mid-sized marble conference table were a dozen of Ekonomi’s tycoons — men and women who had amassed sizeable amounts of wealth from building their businesses in Ekonomi, one of whom owned the Baron Hotel itself — and the reunited Ekonomi leadership duo of Amadeus and Ludwig.
The atmosphere was tense. Ludwig would never forget the thickness of the silence on that day. “The deep breath before the plunge,” was how he would always recall it. Amadeus took a sip of his coffee and began, “My old friends. Thank you for meeting with us here. Thank you, as well, to Mr Pointpeer for letting us use his hotel. We have much to discuss.”
Ludwig continued, “As you no doubt know, the foreign manufacturers have left Ekonomi. Their factories have closed. And now, thousands of our people find themselves without their livelihoods. Our food assistance programme can run for maybe another two months or so, but after that …”, his voice cracking, “… we may be forced to face some desperate times.”
The signs of shock on the faces of the tycoons were plain to see, but Ludwig felt his temper rising to the surface. He thought to himself, “As if the bunch of you haven’t figured out your escape hatches to the South, deserting us here.” But he knew he held very little bargaining power. The truth was, he needed the tycoons far more than the tycoons needed him.
Amadeus then said, “And so, my friends, we need you. We need your businesses to expand and to grow. Real Ekonomi businesses. Not these foreign menaces who abandon us the moment the tides turn. We need you now, more than ever, in the same fire and spirit of when we reclaimed our nation from the colonial devils, to help us build our economy the way you have built your own businesses since our independence.”
The tycoons stared at the politicians. Like Ludwig, they too knew that they held the vast majority of the bargaining chips. Finally, Ms Berry, whose company held the licence to extract minerals from Ekonomi’s mines, spoke, “Amadeus, Ludwig, what would you have us do? You know we’ve been employing our local citizens all this while, and invested in growing our businesses here in Ekonomi. What more do you want?”
Mr LeSea, whose company Central Railroads held the concessions for railroads, chimed in, “Central Railroads is operating as efficiently as it possibly can. If you want us to absorb these unemployed workers, we’re going to start losing money.”
Mr Stonefellow, whose company controlled the importing of coffee into Ekonomi, added, “I’ve invested as much as I can already into the economy. We tried exporting last year. Our buyers rejected the quality; our margins evaporated. We simply don’t have the technology.”
Ludwig could not help himself. He spat, “You’ve all made so much money since Amadeus and I took control. And how did you do it? All you did was use the licences that Amadeus …”
As the tycoons rose in protest, Amadeus interrupted, “That’s enough. We’re all on the same side. Yes, each person here got some licence or another. Whether it’s banks, railroads, mines, commodity imports, hotels, ports, whatever. They still had to build it. It demonstrates the power of Ekonomi’s own private sector. Now, Ms Berry, Mr Stonefellow, Mr LeSea, to your points, our answer is, yes. We want you all to hire more workers, and invest more capital expenditure here. Grow like you always have. Mr Pointpeer, you have kept silent. What do you say?”
The room settled in a hush. Of all the tycoons in Ekonomi, Mr Pointpeer was arguably the most powerful as his bank, MJ Pointpeer, essentially dominated all of finance in Ekonomi. Standing up, in his deep baritone voice, he said, “Amadeus, Ludwig speaks plainly. Let’s call it what it is. You gave us licences. We have all profited considerably off those licences. But, don’t you see? Even if we could hire more, invest more, we could not grow more.”
Amadeus replied, “I don’t see …” To which Ludwig interrupted, “All your licences serve our domestic market, protected but stagnant. Their ceiling for growth is whatever our size of population is and what they can afford. Without new capabilities, expansion is impossible. They can’t grow.”
Ludwig continued, “I’m glad, Pointpeer, that you speak plainly. You have all profited considerably off the rents that Amadeus let you take. Yes, all of you are in the private sector, but you are all monopolists. You never bothered to expand our capabilities, barely a productive investment. All you do is exploit.”
The tycoons erupted into a cacophony of noise, suffocating the room even further. “If not for us, you would be doomed.”
“How dare you? We built all the infrastructure!”
“Tell that to the thousands that we employ!”
“Break us, and we break you. The people will blame you.”
Amadeus retorted, “We’ll extend your licences, make your concessions better. Whatever it takes. For God’s sake, just say you’ll help!”
Mr Peerpoint said, “You have nothing on us, Amadeus. Without us, Ekonomi starves, and you know it.”
Amadeus was stunned, but Ludwig replied, “We could just liberalise your rents and concessions, kill your golden geese.”
Mr Peerpoint said, “You can try. But we have all the market power, we’ll crush anyone who dares to come in. You have nothing on us. Nothing.”
Amadeus’ face creased with anger. Ludwig’s hands shook beneath the table. He once swore never to rule by fear, but those damn foreigners and these local monopolists backed him into a corner. He remembered his drive to the Baron Hotel this morning, passing by a shuttered factory, where he saw an elderly woman with a sign, “WILL WORK FOR BREAD.” He couldn’t meet her eyes.
With that image in mind, he took a deep breath and said, “It’s cute that you think that Peerpoint. You think your money and your wealth gives you power. You think we’re the ones who are desperate. You’re forgetting something.”
A shiver went through the room as Ludwig continued, “I control regulators, lands, licences. More than that, I control the People’s Army. I locked up the foreigners. All I have to do is give the word and the same could happen to you. I’ll nationalise all your companies — you may be the private sector, but a monopoly, regardless of parentage, private or state-owned, remains a monopoly.”
Amadeus stuttered, “Ludwig, this isn’t strength. We cannot build by consuming ourselves. We need them, let’s just have rules that force them to upgrade. Please.”
Ludwig said, “You were always too soft, my old friend. Outside, my guards are waiting. You decide how you want to be escorted out.”
Two days after the meeting at the Baron Hotel, Ludwig announced to the public, “My fellow Ekonomistas, today is a new dawn. We sought to free ourselves from the shackles of colonialism and now we finally have. No longer will we be dependent on the flights of fancy of foreigners.”
He gestured to the business leaders who now dutifully lined up on either side of him, “Our esteemed business leaders have agreed to invest even more in Ekonomi. We will build a new economy anchored by our domestic champions in new sectors, where we will build, slowly but surely, towards the capture of international markets. We are done begging.”