Thursday, January 31, 2013

The story of resource allocation at Air Namibia is an astonishing horrific tale

Can any company survive without proper financial auditing, without understanding its market dynamics and the ability to understand what prices and costs would ensure profit maximization, or would a firm survive without proper resource allocation?

Proper checks and balances prevent conflicts, save lives and conserve resources.
It is understandable that the health of any individual is the concern of his loved ones. How do you understand how to tell an ailing company to go for financial checkup, especially if it cannot pay its staff or if it has to dip into the public purse to survive while registered as a profit-making corporation? This is the story not only of Air Namibia; I had opportunity to chance upon this online article. This is the story of corporations and firms who are sick and should be filing for bankruptcy rather than be allowed to survive. Granted, sometimes the argument for patriotism and National pride does hold some water, as well as that for subsidization. Yet, there is a limit to when a corporation is sick and one has to call a halt to it all – please do go for financial checkup!

This story might be told for Air Namibia. It is also the story of so many companies which have decided that rather than search for allocative efficiency, search for the right mix between demand and supply, fight to survive in the market, they’d rather depend on subsidies and stipends from taxpayers. Many times, the story is tinted with monopoly power. That is the most astonishing aspect. Monopoly power is supposed to confer enormous advantages, especially legislated monopoly. How absolute power corrupts absolutely! Monopoly power has become the viral agent for injecting losses and increasing costs in the long-term as a company keeps operation on a model that should be hugely profitable, on a model that should be decreasing its costs on the long term. Political interference could be at the head of it all, personal financial gratification without accountability another and a warped sense of opportunity costs following the former two. It is a sad story.

I hope you do read it yourself. The formatting is not that easy on the eyes but the lessons are instructive. Millions can go hungry for a Nation to be able to invest in capital accumulation, but it is unwise for millions to go hungry for that country to invest in bankruptcy sustenance. Several African countries like Namibia in question might be afraid of opening up industries it believes should be in the public domain due to questions of sovereignty and National pride, yet how far can these two account for the fact that a fat cow that milks the nation dry makes millions poorer, encourages rapid population growth because many struggle for necessities and find solace in the instinct to survive by rapid sexual and reproductive activities, takes away resources for National development and makes everyone poorer even if some privileged class have loads of money in foreign bank accounts?

Encouraging the earning of foreign exchange and allowing imports might be beneficial, can these strategies be sustained? Are there enough foreign reserves to keep the country’s sovereignty afloat and not sell itself cheap on the world market? There are so many firms who are willing to dump wastes and pollute natural endowments when a Nation sells itself cheap. The story on the link are stories of Nations selling themselves cheap; making themselves targets for exploitation.

Would you invest in a company that was declaring bankruptcy? Why should taxpayers be asked to without due financial auditing and checks? This is not a matter of voluntary exchange; it is all about authoritarianism and masked dictatorship. This is not about economics and business but about diseconomies and exploitation.

Monday, January 28, 2013

Modeling the home as a production process.

You must have a family of your own. You must have experienced the joys and pain of raising children, earning a living, doing shopping, paying taxes and mortgages, and most especially planning for daily life. You might not need the skills of an accountant, although for some families it might come in handy, but you surely must need the skills of a business manager to successfully run your house while putting in that of a deft consumer.

Make a journal of the daily activities of you and your spouse. If you are not yet
Taking care of a room like this requires division of labor.
married, try to imagine yourself so. You will discover that a home functions and is organized like a firm and its processes can mirror the production processes of the typical firm.

The goal of a typical home is to maximize family well-being. The husband and wife will do all within their power to make sure that they perform the above home activities in such a way that the marginal costs of caring for the family’s daily needs and the marginal benefits of doing so satisfies allocative efficiency. They will both not have the tools of business managers and the record keeping abilities of accountants and marketers, but they surely understand the juggling act involved in producing products like a meal, clean homes, healthy and enviable kids, a healthy home environment along with affordable housing. They both understand division of labor.

Every family have their unique way of production. Some were taught by their parents, in-laws or grandparents. Others might utilize a skill that is uniquely theirs, which confers them with power of monopoly. Whichever way, I wish them success.

The inputs to the process

On a typical day, at the rising of the sun, a couple who share the same bed have one goal in mind. They share the same goal as billions of couples all over the world. At sunset, when night approaches, whether they have succeeded is anyone’s guess. That goal is to make sure the home runs smoothly and is a haven of love, peace and joy. Secondary to it, is to give the kids an environment where they can develop their abilities to continue from where their parents left off.

To make this successful, some couples have different factors of production in their favor. They could be living in their own home, whether bought outright from real estate agents or by mortgage and are still paying the mortgage, they have innate abilities and skills which have as foundation what their parents taught them years ago, they derive joy from doing both market work in the home if they work –from-home or nonmarket work in the kitchen, garden and bedrooms, whichever, using savings from income and inherited wealth. Not to be forgotten is the fact that they both strive whether with few, much or enough resources to make the effort that is necessary and sufficient to make the home what they wanted it to be; to attain a quality of life which they envy and would want others to envy.

A family is a little factory that has constantly churned out in mass numbers kids, love and joy, and contributed enormously to the well-being of its members for generations and centuries and will continue to do so. Even in the face of an apocalypse, the family factory is the only industry that might survive.

The production process modeled

Imagine a family of four: husband, wife and two kids. The mother stays at home while the husband works, whether fulltime or part-time. Daily, this couple juggle the act of combining the exigencies of the marketplace, the workplace, the home and the need to efficiently and effectively use the resources they have, bearing in mind the opportunity costs of doing so, so that at the end of the month they could have savings as a store of reserve for the rainy day. Some run into debt and borrow to survive, although borrowing to survive could be a decision enhancing their ability to make savings for their future consumption needs.

Due to customs and tradition, we would expect the wife to do the cooking. It will not be out of place for the husband to help her out, especially during the weekends. It would be a joy if they both carry out the shopping, although decisions as to what to buy and store in the kitchen will be the province of the wife. As for organizing the house and the activities that makes the home run smoothly, it is the responsibility of both of them which any rational and reasonable person would expect the wife to take a greater share of the production at this stage because she stays at home.

Women love catching up with the Joneses. Men do also. From experience, I have found that the wives are prone to fix appointments like what wedding invitation they can attend and should not attend come Saturdays, what family to invite over for the holidays and whether their kids can go over to grandpa and grandmas during school break. The wife takes care of helping the kids do their homework and expects the husband, no matter how tight his schedule, even if he runs a corporation, to help her out. Mothers usually are wont to talk to the kids about sex, but fathers should take the pain to explain sex and sexual matters to their kids before it is too late. That responsibility should not be left to the mother.

Broaching that vexing issue: finances. Generally, where there is a man, he usually takes care of financial matters like mortgages, taxes, loans and allotment for the family car. They should both plan their consumption together, especially as it relates to credit cards, while the wife is probably more efficient and effective when it involves utilities and kitchen appliances.

As for taking care of the garden, the husband can initiate cutting grass with the wife with the kids looking on and maybe gathering the rubbish for the trash bin. If she is desirous, planting flowers that are in season will bring joy to the home.

Finally, the spiritual needs of the home, attending church services and bible readings, requires the support and input of every member of the family.

The essence is to make the home a haven of love, joy and peace

The above model is simplistic but is what I believe you can find in any family desirous of love, joy and peacefulness. A home where happiness reigns is a home where wealth can settle in, where incomes make meaningful impact and the children live up to their potential. No two families will earn the same income, but every family should make it an ambition to have an equal opportunity to be able to produce and provide what they sought out the day the husband and wife said: “I do.”

Sunday, January 27, 2013

Grecians have turned to the Tem as barter currency in lieu of the Euro to stave off hunger.

Money. Everyone wants lots of money. Some say money makes the world go round. We sometimes wonder if there will be something better than money for exchanging goods and services. Before money there was barter, the direct exchange of one good for another without the use of money. Barter works well when your economy is simplistic, without much specialization and has few goods to trade in. Therefore, when a modern country decides it wants to go back to barter, there is something wrong.

The economy can function with a little less money.
True for Greece. She has been struggling with its worst economic crisis in modern times. It is reported that her citizens have lost up to 40% of their disposable incomes in order to qualify for international aid. Grecians are turning to barter as an alternative currency. In cities like Athens and the suburbs, the barter economy is gaining ground. One such currency is known as the Tem, a novel barter exchange system that was begun in the town of Volos, as a way for Grecians to deal with intense austerity.

It is all about the need to survive. The euro has become scarce commodity, available only for the privileged few. People do not bother carrying money at all ; they’d rather exchange second-hand clothes, electrical equipment and homemade jams through the barter system. To that spirit of exchange, one can add the drive to stand together, to go through the hard times and survive together.

The Tem is not the only alternative that exists; it is just the brainchild. Others can be found in other towns. It is a story of a country whose infrastructures are collapsing. It is not a rejection of the Euro, but for the fight to survive due to acute Euro shortages. The people have very few or no options. They have to live their lives and hope for the best. Although the barter system might be ineffective, what is more important to the people is the ability to exchange on less. Panos Skotiniotis, the mayor of Volos, is in favor of the Tem. “We are all supporting alternatives that help alleviate the crisis’ economic and social consequences,” he was reported to have said to the Guardian. The Tem won’t replace the Euro ever, but at least, for those who are financially weak and the aged, it is a viable alternative.

Greece has given up the fight.

Unemployment rate is high. It recently hit an European record of 26%, surpassing even Spain. The people are impoverished. Lost jobs translate to lost income. Insecurity, both economic and political, is uppermost in people’s mind. Disillusion reigns everywhere. The financial system has failed. Greece has surrendered to its economic crisis and has given up the will to fight back. Else, why would the people be driven to barter? The message is clear. The system has failed the people.

Even with the use of barter currencies like the Tem, it is doubtful if people will be able to dodge taxes. The informal bartering economy needs platforms in order for wants to meet need, or to satisfy double coincidence of wants. The need for a barter network requires bookkeeping and record keeping . There is also the need for a common measure of value. One Tem is reported to be equal to one Euro.

The Tem is the story of the town of Volos, a suburb 200 miles north of Athens, reputed for its tobacco. The town of Volos used to be a trading route that connected Greece to the Middle East before Syria’s ascent into Civil War. This is the story of the failure of government when it cannot fulfill its obligations and how necessity has become the platform for innovation and creativity. No matter what happens, when currencies fail and the system collapses, man has always found a way to survive, even if it means going back to the past.

About the blog, Income Ready.

If you were subscribed to my feeds on Networkedblogs, you must have received a blog article with the title, “Fake title”. If you had, please, be patient with me. I was trying out my new blog, IncomeReady, on that platform. I conceived Incomeready, when I noticed the deficiencies of my first blog, SolvingIt. I realized that I was not covering enough of economics, business and finance.

Like a maturing child, this blog grows.

I tried to create a space on SolvingIt where a case study approach to problem solving could be approached but discovered that it was pushing the blog too far. When I do have the money to hire a website designer to remodel the site, my demands might be pushing him too far.

The blogs I write are not only for you, my loyal readers. I also write for myself. I think that people connect with a message when they find a practical value in their lives, especially when they can connect to the shared experiences. SolvingIt was not supposed to dwell enormously on shared experiences, but to be an article site for solved problems. I had done some little of sharing experiences on SolvingIt; I was happy with the response.

Incomeready, the blog, is not different from SolvingIt. They are maintained by the same writer and share the same blogger account. Incomeready just takes SolvingIt to another level of engagement – using practical experiences that readers can relate with, using a case study approach.

I hope you will appreciate and value the first post on Incomeready, Grecians have turned to barter currencies in lieu of the Euro to stave off hunger.