30 January 2013

Day 182: Will we be Feeding the Fat Cats in Equal Money Capitalism?

Eskom, the South African electricity provider, has been saddling its customers with massive price increases and more to come:

"One of the reasons Eskom is applying for an electricity hike is because the average annual salary of one of its employees is expected to be R820,000 in 2017 and 2018, according to a report on Saturday.

Beeld newspaper reported that Eskom’s total salaries for about 45,600 employees at that time would be about R37 billion.

These figures are one of the reasons Eskom gave to the National Energy Regulatory of SA (Nersa) as part of its request to increase electricity tariffs from April 1, with 16% for the next five years.

Beeld reported that the information was part of Eskom’s submissions handed in to Nersa.

In the documents Eskom claimed that in the current book year, the average salary per worker is R633,000 annually.

According to the documents, the reason for the high salaries was because new power stations needed more employees, and there was need to get more skilled workers and to keep them.

However, the National Union of Metalworkers of SA’s Karl Cloete told Beeld that their members at Eskom do not get salaries like that.

“We want to see who gets paid so much that the average is so high.

“We do know that Eskom’s top-managers have been getting big bonuses and increases in the past decade,” Cloete said.

Investment Solutions economist Chris Hart told the newspaper that no company in the private sector could afford to pay salaries like that.

Eskom’s spokeswoman Hillary Joffe did not deny the proposed salary increase. 

Nersa is expected to announce Eskom’s tariff increase on February 28

Source: http://www.sowetanlive.co.za/news/business/2013/01/28/eskom-price-hike-to-pay-for-salary-increases

The Problem

Obviously, here we have a classic case of Greed Capitalism, where the greed of a minority is being paid for by the majority. Electricity is something everyone needs and most will pay for it even if the price is insanely high - if people can't pay for it, they'll steal it - which is very common in South Africa. Obviously, most workers at Eskom don't earn over half a million Rand in a year - but some earn much more than that. These high salaries have to be paid for by the consumers.

And this situation is played by the book of Capitalism - you're allowed to make a profit and you're supposed to make as high a profit as you can. If your demand is high at really high prices, then - by all means - make your prices high - even if you can't always meet the demand in terms of supply.

With commodities like Electricity, which has become a basic necessity in our society, the demand will not change much in relation to price changes - and therefore, this point is easily taken advantage of.

The Solution

Each one who contributes to the provision of a particular good or a particular service in a company should receive an equal wage - because each one is a necessary participant within the process. It's not because one is doing physical labor while another is handling management that the one should earn more or less than the other. If you don't have people doing the physical labor, you can't provide the good/service - and, in the same way, if you don't have people managing all the operations, the provision of goods and services will be impossible, or at least highly inefficient.

When each one receives an equal income - prices can be calculated in such a way that each participant/each worker in the company receives an equal share of the profit and that, with this income, each one is able to live a successful and fulfilling life.

The Reward

In correcting this one point of how prices are determined in Equal Money Capitalism, you'll find that no matter what good or service, you'll never be able to take advantage of the fact that a good or service is in high demand by charging ridiculous prices. Isn't the whole point of companies and businesses to make life easier and to manage resources in an effective way? This correction/solution will make sure that this is what businesses and companies are really about.

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