African Entrepreneurship Record

Chapter 1383: Chapter 369: Crisis Awareness (2)

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

With Ernst’s words, this also means that at the current stage, East Africa’s economic development will shift back from liberalism to conservatism.

Why ”back”? Because in the past, East Africa’s economy itself was long in a ”conservative” state, but this conservative state was a process of continual relaxation over time.

For example, in the last century, East Africa’s economy could be described as completely closed, not only rejecting investment from other countries but also rarely engaging with other countries, especially developed countries like those in Europe and America.

Later, as East Africa gained a certain capacity for self-preservation, it began to open up coastal areas. After the South African War, it began to absorb large amounts of foreign investment, and finally, before World War I, it completely liberalized the economy, encouraging private economic development and trade exchanges with the world.

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

This is what Ernst refers to as building an economic moat for East Africa. Simply put, it means re-establishing tariff barriers to address the potential impact of a global economic crisis on East African enterprises and industries.

According to Ernst’s idea, this process cannot be achieved in one step, it must be done gradually, and many measures may only be contingency plans that will be implemented as soon as an economic crisis arrives.

Therefore, Ernst said, ”Nowadays, East Africa’s economy is already deeply intertwined with the world market, and the global economy is closely linked. If an economic crisis breaks out in Europe and America, it will inevitably be transmitted to East Africa. If we don’t adjust our economic policies, it’s possible that the economic crisis could first break out in East Africa.”

”So we must adjust the domestic economic development stance as much as possible, especially reshaping the domestic industrial structure after the war to adapt to changes in the new international market.”

”Ensure that the crisis does not first break out in East Africa. If a global economic crisis occurs, the government must also have reliable plans to minimize losses, and ideally achieve a positive domestic economic cycle, while ensuring stable foreign trade through technological innovation.”

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

”Therefore, our country’s economic development should be relatively stable, and perhaps even continue to prosper.”

”The government’s job during this period of prosperity is to improve supporting infrastructure 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, an economic crisis is like a flu, and only those with strong immunity will not suffer significant harm and recover first.

And for East Africa, this so-called immunity means a high-quality industrial structure, a fair market environment, and enterprises with vitality and core technologies.

Ernst said, ”Take the steel industry for example, during the world war, our steel production rose to nearly 40 million tons.”

”However, a large part of it was stimulated by the external market, coming from orders from Europe or demands from less developed regions like the Far East.”

”Instead of being produced for the needs of domestic economic development. If the external market collapses and we have not made the corresponding adjustments, then the domestic market may suddenly have nearly millions of tons of surplus capacity, and we may also face the international steel dumping competition, further expanding the losses caused by surplus capacity.”

At one point, East Africa’s annual steel production reached 40 million tons, which was six to seven million tons more than the world’s second-largest steel producer—the United States.

A large part of this production was mainly supplied to Europe or other markets. At its peak, this part of the market consumed nearly 10 million tons of capacity, which means during the peak of East African steel exports, the export of steel and related products was almost equal to the United Kingdom’s entire annual steel production.

However, after 1917, East Africa’s export volume of steel and related products dropped back to the level of a few million tons.

A few million tons relative to East Africa’s nearly 40 million-ton steel capacity is not actually a very high proportion, but this is mainly because East Africa itself is a major steel consumer.

With a population as high as 160 million, a large industrial scale, rapid economic growth, and fast urban and infrastructure construction, there is certainly no shortage of domestic steel demand in East Africa.

But a few million tons is still a staggering figure. It must be noted that in the vast majority of countries in the world, annual steel production does not even reach one million tons, and countries that exceed one million tons can be completely regarded as industrial powerhouses, such as pre-war Belgium.

So Ernst said, ”The issue of overcapacity must be gradually resolved and return to a reasonable range.”

”Take the steel production enterprises as an example. Some steel plants with low technical content or serious waste need to be closed for rectification or even eliminated, while enterprises with technological innovation should be encouraged.”

”By doing this, eliminating backward enterprises can free up the market for cultivating competitive and technologically strong enterprises. Such enterprises with core competitiveness are better positioned to compete and fight with foreign enterprises.”