African Entrepreneurship Records 2

Chapter 1347 Crisis Awareness
This transformation attempt of the Bohemia Province was actually pushed by the East African central government. After all, the East African economy is still relatively hot, and the hot economy can cover up many urban development problems.

The reason why Ernst chose Bohemia was not only because of the imbalance of its industrial structure, but also because Bohemia itself is located in the inland area of ​​East Africa, and inland development is not as easy as coastal development.

Ernst had a premonition that after the end of the European war, the world's economic forces would face a serious crisis, especially after European countries restored economic production order.

When the war broke out in Europe and the Middle East, other parts of the world were not idle. In addition to countries such as East Africa and the United States that had accumulated terrifying industrial production capacity, the industries of Japan, the Far East Empire, Britain's colonies, and even South America had all developed greatly to a certain extent.

Among them, the development of British colonies was relatively prominent. Regions such as Canada, Australia, India, and New Zealand received a large number of industrial orders from the UK and established many enterprises.

Take Canada for example. During the war, Canada's industrial investment increased nearly twenty times compared to usual times. Britain and the United States invested in many factories in Canada to produce important materials including warships and weapons. At the same time, it exported a large amount of agricultural products, making it an important logistics base for the Allied Powers.

During World War I, the world's industrial capacity increased rapidly. This was a very dangerous signal, meaning that the world economy would inevitably face a major crisis after the war.

Ernst had a hunch that this economic crisis might even be worse than the previous world economic crisis of 1929. After all, under Ernst's influence, the behemoth of East Africa emerged, further promoting the blind expansion of the world's production capacity.

This time, the world economic crisis broke out probably after Europe completed its war reconstruction, which is about five to ten years.

……

Rhine City.

Ernst discussed his predictions with East African government officials.

"At present, the Empire's industrial capacity is seriously oversupplied. This round of rapid industrial growth is mainly due to the stimulation of the European war. Once the war in Europe ends, the number of European orders will decrease, which will inevitably have an impact on the Empire's economy."

"This impact may be delayed because investment is blind under the market economy. Today's good business environment has given investors and entrepreneurs confidence."

"But our government should not have this idea. We should know that the rapid economic development in the past few years was caused by the European war."

"Therefore, the government must have a sense of crisis, correct the 'recklessness' and 'blindness' in the economic field, guide private investment to return to rationality, and at the same time guide the high-quality development of the economy, shifting from blindly pursuing quantity to focusing on quality and innovation."

A simple thought will tell us that a large-scale industrial overcapacity crisis will definitely erupt in the future. After all, the market is so big, but countries are expanding their own industrial investments, which will inevitably cause indigestion in the world economy.

Although industrial development, to a certain extent, represents the progress of productivity, if the distribution work is not done well, the blind development of industry will inevitably lead to the collapse of the original market order of the world.

Hans Layton, Minister of Commerce of East Africa, said: "Not only that, our trade with Europe has actually shown certain risks. The five-year war has left European countries heavily in debt."

"So, we should worry about whether European countries are at risk of default after the war. Of course, Americans are more worried about this issue than we are. Today, the United States is Europe's largest creditor, but the scale of our debts and those of European countries is not small either."

To a certain extent, this is also the reason why East Africa jumped out to promote peace in Europe during this period. Europe can hardly draw much blood, and the orders from European countries are nothing more than a bunch of IOUs.

Debt can certainly affect European politics, but the prerequisite is that it is backed by military strength and countries dare not default on their debts. However, Europe happens to be the most powerful militarily region in the world.

When the debtor holds the "truth" in his hands, it is not a good thing for the creditor. What's more, the financial industry in East Africa is not as developed as that in the United States. Even if European politics can be manipulated through debt, the ultimate beneficiary will obviously not be East Africa, not to mention that European countries themselves are not good men and women.

Ernst said: "Europe's debt problem must always be kept within a reasonable range. We cannot count on the conscience of European countries, so we must further strengthen the review of Europe's debt. In trade with Europe, we need real money, or hard currency such as equipment and technology that can equip our own economy and industry."

"The general direction of the empire's economy is to digest the fruits of the war, stabilize the steady and healthy development of the national economy, promote industrial restructuring, and rebuild the moat of the domestic economy."

The economy of East Africa can be described by the word "free", which has made the economic, industrial and urban development of East Africa expand and expand rapidly like taking a tonic.

However, this radical liberal economic development model has huge hidden dangers. After all, East Africa has not established a supporting and stable economic system to accommodate and digest this kind of forced economic results.

If this contradiction is not properly handled before the next economic cycle arrives, the economic indigestion will have a huge impact on East African society and greatly weaken the vitality and potential of economic development.

As Ernst finished his words, it also means that at the current stage, East Africa's economic development will shift back from liberalism to conservatism.

Why is it new? Because in the past, the economy of East Africa itself has been in a "conservative" state for a long time. However, this conservative state is also a process of continuous relaxation over time.

For example, in the last century, the East African economy could be completely described as closed. Not only did it reject investment from other countries, but also, like North Korea in its previous life, it rarely communicated with other countries, especially developed countries such as Europe and the United States, in other areas.

Later, as East Africa had a certain degree of self-defense capability, it began to open up its coastal areas. After the South African War, it began to absorb a large amount of foreign investment. Finally, until before World War I, it completely lifted the economic ban and encouraged the development of the private economy and world trade exchanges.

However, the wind has changed again. Of course, this does not mean that the East African economy will return to the planned economy era, but that it will return to conservatism to a certain extent.

This is what Ernst calls building an economic moat in East Africa. To put it simply and directly, it means re-establishing tariff barriers to cope with the impact of a possible global economic crisis on East African companies and industries.

According to Ernst, this process cannot be completed in one go, but must be done step by step. Many of them may even be just contingency plans that will be deployed immediately after the economic crisis arrives.

Ernst said: "Today, the East African economy is deeply tied to the world market and the global economy is closely related. If an economic crisis breaks out in Europe and the United States, it will inevitably spread to East Africa. If we do not adjust our economic policies, the economic crisis may even break out first in East Africa."

"Therefore, we must adjust our economic development as much as possible, especially reshape our post-war industrial structure, so as to adapt to new changes in the international market." "We must ensure that the crisis does not break out first in East Africa. If a global economic crisis occurs, the government must have a reliable plan to minimize the losses. It is best to achieve a positive cycle in the domestic economy, while ensuring the stability of foreign trade through technological innovation."

"Of course, the economic crisis will not happen immediately. According to my expectations, it is more likely to happen after 1925."

“So our country’s economic development should be relatively stable, and may even continue to prosper.”

"The government's job is to take advantage of this prosperous period to build supporting facilities and policies, accelerate industrial upgrading and transformation, eliminate backward enterprises, support high-quality innovative and technology-based enterprises, eliminate backward industries, and develop emerging industries."

According to Ernst, the economic crisis is like the flu, and only those with strong immunity will not be seriously hurt and will recover first.

The so-called immunity for East Africa means a high-quality industrial structure, a fair market environment, dynamic enterprises with core technologies, etc.

“Take the steel industry, for example. During the World War, our steel production climbed to nearly 40 million tons,” Ernst said.

"But a lot of it was stimulated by external markets, orders from Europe or demand from lagging regions like the Far East."

"Rather than being produced because of the needs of domestic economic development, if the external market collapses and we fail to make corresponding adjustments, the domestic market may have nearly millions of tons of excess capacity for nothing, and we may also face dumping competition from international steel, further expanding the losses caused by excess capacity."

East Africa's annual steel production once reached 40 million tons, 6 to 7 million tons more than the world's second largest steel producer, the United States.

A large part of it was mainly supplied to Europe or other markets. At its peak, this market consumed nearly 10 million tons of production capacity. That is to say, at the peak of East African steel exports, the export of steel and related products was almost equal to the UK's annual steel production.

However, after 1917, East Africa's exports of steel and related products fell back to millions of tons.

Millions of tons is not a very high proportion compared to East Africa's nearly 40 million tons of steel production capacity, but this is mainly because East Africa itself is a major steel consumer.

East Africa has a population of 160 million and a huge industrial scale. Its economy is developing rapidly, and its cities and infrastructure are being built quickly, so its own demand for steel is bound to be inevitable.

But millions of tons is already a very astonishing figure. You should know that in most countries in the world, the annual steel production does not reach one million tons. A country that can exceed one million tons can be called an industrial power, such as Belgium before the war.

So Ernst said: "The problem of overcapacity must be gradually resolved so that it returns to a reasonable range."

"Take steel production as an example. Some steel mills with low technology content or serious waste should be shut down for rectification or even eliminated, while some companies with technological innovation should be encouraged."

"In this way, the elimination of backward enterprises can free up the market for cultivating enterprises with strong competitiveness and technology. Such enterprises with core competitiveness will be more capable of competing with foreign enterprises."

"Especially in terms of tax policies, we should make certain adjustments to encourage the development of technologically innovative and high-quality enterprises. For example, we should encourage the development of emerging industries such as electronic technology, electric power industry, alloy research and development, chemical industry, and new material research and development."

"In the financial sector, rectification and correction are also needed. my country's financial sector has achieved initial development, but the problems exposed are also very serious. The experience of previous economic crises in Europe and the United States tells us that inadequate and overly relaxed supervision of the financial sector is also an important cause of the economic crisis."

After all, the first investment of many entrepreneurs comes from banks and other financial institutions. If these funds are not used properly, it is easy to lead to bad debts and then bankruptcy. The last economic crisis started in Vienna's financial industry.

"Finally, there is the private sector. East Africa has now entered the era of market economy, and the proportion of private investment and private enterprises has exceeded that of state-owned capital. However, the government cannot really let things run wild just because they are private enterprises."

"We must also crack down on those who break the market rules and rectify the market atmosphere, while supporting high-quality companies and improving the market's ability to resist risks."

Enterprises are related to employment issues. If too many enterprises go bankrupt during an economic crisis, it will easily lead to serious social problems. However, the East African government certainly does not have the ability to be the parent of all enterprises.

Moreover, compared with East African state-owned enterprises, private enterprises are more pure and do not have corresponding social responsibilities and political tasks.

However, even in this situation, many companies are still profit-driven and do not create actual social value. Instead, they undermine the market environment and atmosphere.

To give a typical example, during the frenzy of railway construction in the United States in the last century, there were many shell railway companies that made money out of nothing. These companies may not have built an inch of railway, but they made a fortune by creating momentum through public opinion and driving up stock prices.

Their existence not only caused the last shareholders to lose everything they had, but also brought about a bad social atmosphere. After all, many railway companies built railways sincerely, but ended up not only failing to make money, but also suffering losses, while shell companies that used railways as a cover to speculate in stocks made huge profits. Who can accept this kind of psychological gap?

The end result was that more and more railroad companies chose to take "shortcuts," which triggered the economic crisis in the United States in the 1970s.

In order to stimulate the development of the private economy, the East African governments have been relatively lax in management, so this kind of situation is bound to happen. What the East African governments have to do now is to "set things right" and restore market order to normal.

Only when market order returns to normal can we rebuild the confidence of enterprises and consumers and allow truly responsible and hard-working enterprises to continue to develop.

Of course, due to the booming economic development in East Africa in recent years, although there are many economic problems, they have not caused too much impact. After all, when the economy is good, there are more opportunities and ordinary people have a high tolerance rate, so they will not be desperate.

However, if we pretend not to see it just because it has not caused any impact for the time being, it will only bring bigger problems when it breaks out in the future. The East African governments will definitely go through a period of pain in order to rectify the market environment, but compared to waiting until the economic crisis and suffering huge losses, the so-called pain period is simply insignificant.

This means that the East African economy will certainly not be as impressive as before, and may even enter a state of relatively slow economic growth. This is the first time in East African history. Before the 19th century, due to territorial expansion and other reasons, the East African economy had been in a period of rapid growth. In the first twenty years of the 20th century, the East African economy developed at an even faster pace. So this may be the first time that the East African government has to deal with economic headwinds.

(End of this chapter)