It used to be that you had to buy a product because you couldn't let opportunities slip you by, or you had to be more nimble and flexible than your competitor. They even coined must-have names for it: “the agile enterprise”, or “performance management”. Who doesn't want an agile enterprise? Who doesn't want to manage their company's performance?
In the last few weeks, however, the news has changed. It's important news, and somehow everyone understands at least that, at some visceral level. The “financial crisis”, which started with the “sub-prime mortgage crisis”, is the subject of grave pronouncements by commentators, and bewildered speeches by politicians who either revel in the opportunity, or seem to think it unfair that this has happened to them, now.
Very few people really have a handle on the causes and implications of what's going on in world financial markets. They only recognise that it's serious, whatever it is. Yet already, salespeople have tuned their pitch.
Between the lines
For years we [SA] have failed to ride global economic growth, but now our exchange controls and isolationism protect us.
Ivo Vegter, freelance journalist and columnist
Now, more than ever before, it is critical that you virtualise your enterprise (read: give them money) or secure your data (read: give them money) or plan for the disruptive technologies of new media (read: give them money) or manage your performance (read: give them money).
To be fair to them, if times are indeed going to be tough, you certainly can't afford waste, and you should indeed be better prepared than your competitors to respond to what meagre pickings might be available in a depressed market.
But they're pitching this sales patter in South Africa, where the outlook isn't all that grim. (At least, not yet, or more accurately, no more than it has been all year.)
They invoke the credit crisis, and the world markets, because they know you're probably as bewildered by it all as they are. But, they don't realise this crisis has very little impact on this country, for a number of reasons.
First, let's consider the proximate cause of the crisis. Contrary to what every politician, left or right, would have you believe, it is not because politicians were too trusting of the private sector, and unregulated greed made it all go pear-shaped. Politicians say they're the solution, not the problem. Well, they would, wouldn't they?
It wasn't private capitalists who chose to issue so-called “sub-prime” loans to innocent consumers, nor was it only Wall Street that turned them into supposedly impenetrable securities. Greedy capitalists don't like going broke (though they do like bailouts, if they can get them).
The now-infamous Freddie Mac and Fannie Mae existed purely to create “secondary markets” for the very mortgage-backed securities the politicians now deride, and did so with a guarantee that if things went badly, the government would step in. Likewise, banks were forced by law to issue a certain share of its loans to customers they otherwise would consider too high-risk.
More fundamentally, we know that price controls on consumer products like bread cause either surpluses (if the price is set too high) or shortages (if the price is set too low). Is it any wonder then, that while central banks by government mandate control the price of credit, there are periodic shortages (and surpluses) in the credit market, leading to periodic busts (and booms)?
Relative security
While the politicians are dodging blame, shovelling hush-money at banks, and trying to stop the collapse of their well-intended schemes to better society by controlling the economy, the only way the problem can spread to the real economy - the one that produces goods and services for consumption - is if banks quit offering loans, even to credit-worthy companies or other banks. This is happening, sure, but how does this affect South Africa?
Answer: for the most part, it doesn't. For years we have failed to ride global economic growth, but now our exchange controls and isolationism protect us. Whether that protection during busts is worth giving up those benefits for during booms is beyond the scope of this column. But the fact is, we're not implicated in this. Our banks are largely unaffected and our growth remains sluggish but positive.
The only significant impact of the crisis on our real economy - the one that buys IT kit - is that our government and larger companies might struggle to raise credit in international markets. Far more imminent threats to our economy lie in the electricity supply, or the possibility of a more left wing, union-backed government come the 2009 elections.
But even salespeople can't tell which way that is going to break. Perhaps we won't have any parties left to vote for at all, come next year.
It is true that the financial crisis is a grave problem, that hits at the root of the global economic system. But few economists, and almost no politicians, have yet figured out the nature and significance of the problem.
So when a salesperson wafts into your office and counsels you to buy whatever it is he's selling, “especially now that the economy is turning sour”, a pinch of salt would be a wise antidote. Remember, they get paid to sell, not to have a clue.
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