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.

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