This is Part 2 in a series of fictional articles that I started last month in this newspaper. In Part 1, called “The hand-stitched nation” (Issue 1590, Sept 1), the 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, as Prime Director, negotiated a trade agreement to produce hand-stitched basketballs for the far wealthier Southern nations, based on the principle of leveraging Ekonomi’s comparative advantages, specifically its abundance of natural resources and low labour costs.
Over the next few years, the export of basketballs brought in some foreign exchange, but not as much as Amadeus would have liked. Further, the structure of the economy remained stubbornly low cost. Ludwig, as Economic Security Director, stewed as he watched children stitch up balls by torchlight late into the night. And so, he began plotting what he would do if he became Prime Director.
The Mirage of Stitches and Smokestacks Alike
“Is this why you’re here? To gloat in my face now that you’ve won? I thought you a better man than that,” said Amadeus, with a wry smile, as he looked out from his jail cell towards his old friend.
Ludwig felt an unmistakable chill reverberating up his spine, a complex cocktail of pride, regret, anger but also guilt. He paused to choose his words before saying, “I had no choice. We’ve had four years of you and our people’s lives haven’t changed. Not one bit. If anything, the basketballs made their lives worse.”
Amadeus took a sigh, “No choice. That’s what they all say. That’s what we said, you’ll remember, when we launched our revolution all those years ago. When you were still my friend.”
“Don’t you dare talk to me about the revolution. You’ve betrayed it. And that’s why I had to get you out,” said Ludwig, his voice rising as he recalled all the children hand stitching basketballs late into the night. Amadeus chuckled as he said, “By that, we’re all traitors, even you. I have heard your new plan and you just don’t see it yet. You’ll see. In a few years, maybe we will be neighbours again in this prison.”
Ludwig stayed silent, turned around, swept across the holding cell compound and left. And that was that.
The next morning, he addressed Ekonomi for the first time as Prime Director. “For too long, we have laboured under this oppressive philosophy of comparative advantage — believing that our only strengths come from our natural resources and our low wages. Amadeus has misled us all. In his pride, in his folly, he saw what he thought was rising export numbers. But what he failed to see was the bandages and wounds in all your hands as you stitched basketballs for people who don’t care, would never care about you. He failed to see that you have just as little to eat as you did under our colonial oppressors. Those days are over. Just like we broke the wheel of colonialism, we will now break the wheel of comparative advantage. A nation develops not because it sticks to its existing advantages; it develops because it creates new advantages. And if you will all work with me, that is exactly what we are going to do.”
The thousands who attended his inauguration cheered and cheered, but in a more muted manner than Ludwig would have liked. They felt the promise of a new dawn, but then again, they have had so many of those before.
Ludwig’s first policy was to stop the renewal of the Scalding basketball contract, thereafter shutting down the stitch shops across the country. Instead, he began courting chemical manufacturers from the South, believing that only via manufacturing could a country begin building the skills and tacit know-how to compete internationally.
But of course, Ludwig couldn’t escape the competitive tensions of international foreign investments. Bringing manufacturers into Ekonomi required providing these firms with corporate tax holidays and double depreciation rebates, among others. But, as he said to his directors in the National Investment Committee meeting, “We will have to accept this trade-off as these factories will bring jobs to our people. It will train our people, and it will get us out of those vile stitch shops.” Yet, even as he said those words, he couldn’t help feeling a tinge of irony — that very pragmatism was what led him to challenge Amadeus in the first place. But as leaders are wont to do, Ludwig believed that the ends justified his means.
Within months, the chemical factories opened to great fanfare. As the same cameras that had flashed at the signing ceremony with Scalding Basketballs flashed at the opening of the factories, Ludwig thought, “If only Amadeus could see this. We have reclaimed our dignity in industry, not just in revolution and not just in commodity production. We have truly broken our shackles. We are no longer a nation of stitches.”
Or so he thought.
For a while, the benefits from the foreign Southern factories that had opened in Ekonomi went beyond Ludwig’s wildest dreams. Workers who once stitched basketball panels now wore hard hats and green overalls. Incomes rose and commerce grew. One evening, as Ludwig stopped by a night market for some street snacks, the vendor thanked him, in tears, “Thank you, sir. My daughter’s in school now. First in my family.” Ludwig hugged the man. The revolution had reached the dinner tables.
Ludwig doubled down. Ekonomi used its new foreign exchange to build further physical infrastructure to support those factories. Yes, the chemicals products that these factories produced were relatively low in value, outsourced away from the South for financial reasons, but they had built Ekonomi a reputation as a global chemicals processing hub. And with that reputation, even more foreign chemical factories decided to invest in Ekonomi.
The presence of those factories spilled over into the rest of the economy. Other businesses on the periphery of the chemicals industry sprouted like mushrooms alongside the foreign factories. These businesses supplied goods and services into the foreign factories. Moreover, some of them began to be specialised in their own right, if not in product intellectual property, but at least in processes.
But there were cracks. Headlines read, “Wages Climb Twelve Per Cent” and “Logistics Costs Doubled”. The factories, whose lights typically shone late into the night, were only half lit. The Industrial Director reported to Ludwig, “They are scaling back shifts. They want more tax breaks.”
“But they already have them,” said Ludwig.
“Yes, sir, but they’re saying the new nations of Politika and Terraformia are giving them more,” replied the Industrial Director.
Over time, a sense of inevitability grew. And so, the Association of Foreign Factories in Ekonomi (AFFE) met Ludwig for an emergency meeting. Ludwig’s heart sank to his knees as the AFFE told him, “Ludwig, we’re going to have to relocate our factories. We simply cannot afford the costs in your country.” Ludwig, fists clenched under the table, said, “We built this together. We built your roads. We provided you with our people.”
The AFFE then replied, “There’s no easy way to say this. What your country can do, we can find in another country that offers us even cheaper cost structures. We’re sorry. We know you’ve invested a lot, but if we don’t go, we will die as businesses. Loyalty does not pay dividends.” In a fit of rage, Ludwig reverted to his revolutionary self and jailed the AFFE (which didn’t help Ekonomi’s international reputation), but what’s done was done. The factories had moved elsewhere as Ekonomi lost its edge in cost competitiveness.
As the riots took hold and the factories were literally up in flames, Ludwig visited Amadeus. “I see now why you called me a traitor like you,” said Ludwig, his voice cracking, “I thought that manufacturing was the answer. And yes, maybe manufacturing was better than pure commodities, but low-cost is low-cost. We were just pawns.”
Amadeus said, “This isn’t news. Your new plan was the same as my plan, just in a different sector. Instead of stitches, you had smokestacks.”
Ludwig snarled as he said, “The hell with that. We built skills. Roads. Infrastructure. We mattered.”
“For a moment,” said Amadeus, “Their loyalty was as cheap as our labour.”
Ludwig sighed, “And maybe I should join you in those cells. Amadeus and Ludwig, founders of and traitors to the revolution.”
Amadeus said, “I’ll drink to that. But you know, all is not lost. I’ve had a lot of time in here to reflect as well. And we both made the same mistake. We depended on foreign support to grow Ekonomi. What we need are strong local firms instead, whose roots are dedicated to Ekonomi, whose blood is that of Ekonomi. We still have the private business owners operating here. What if you worked with them instead?”
Ludwig said, “Those pirates? Those parasites?”, before softening, “Even if I trusted them, I sidelined them. They will never listen to me. But maybe, you gave them licences, maybe they’ll listen to you. I’ll step down, make you Prime Director again. Just do what it takes to get us back on track.”
To which Amadeus replied, “No, my old friend. Your ways had merit, and I was wrong. We both screwed up. But now, let’s fix this together. Both of us. Together.”
Ludwig studied him, wary. Then, very slowly, he nodded. Not quite forgiveness. Not quite relief. Just desperation with a tinge of exhaustion.