I was back in my hometown on the weekend. I drove past the Port. There they were, stacked high and waiting. Thousands of them. Mammoth things. Ready for export. Logs. Logs with the bark on.
Not kitset houses, or high value timber furniture, or containers of wooden window frames …. but logs. Logs with the bark still on.
Many years ago I was working with Colliers, the Real Estate Company. Among other things, we were representing the interests of International Companies such as General Motors, Microsoft, and Ford managing their property interests offshore. We would find space, arrange development projects for their factories and even manage their facilities.
We had one such project in Taiwan. We were there on behalf of Nike. Nike already had two large shoe factories in Taiwan, and in seeking to maximise their economies of scale were keen to develop a third. So our team was in the Capital, Taipei, to talk with Government people about the fantastic opportunity that awaited them. Another enormous shoe factory, and thousands of new jobs for their economy.
Their response to our presentation however, was not what we had anticipated. The mid level government bureaucrat we were meeting said something along the following lines.
He said, “we really appreciate you bringing us this opportunity, but we have to decline. You see, low skilled occupations such as working in shoe factories have been very good for our people. It has enabled them to improve their quality of life and it has enabled us to build our economy. But our future generations don’t want to work in shoe factories as their parents did. They want to improve their quality of life too. We can’t lift our standard of living from third world to first if we keep making shoes. We need to move to computers and semi-conductors. We would therefore like you to bring us companies like Intel and Hewlett Packard. You should take the shoe factory opportunity to countries like Vietnam and Thailand, as they are still developing.”
I couldn’t believe what I was hearing – a coherent, long term, economic growth strategy from a mid level public servant in a third world country. I still remember my immediate reaction – “meanwhile in my country, we’re still exporting logs with the bark on” I thought.
During the last 18 months the economies of Australia and New Zealand have been buffeted by major declines in the prices being gained for core commodities; specifically Iron Ore, Coal and Dairy prices have plummeted in that period. But as long as we are exporting low value-add, commodity based product we are going to continue to risk being a pawn in the price-setter’s game. The argument is that our trading partners only want to buy the raw materials and that they can turn these materials into value added product more competitively than we can. And besides they have bigger markets of people who want to buy the finished products.
I’m not an economist but I know that it’s difficult to raise living standards without increasing the value of the products and services you generate. In both countries we are lucky that other exports – such as tourism – continue to grow at a rapid rate. It’s no co-incidence that many of the tourists are from those well-planned Asian economies and that the affordability of that travel has improved as their living standards increase.
But back here, we’ve been exporting logs with the bark on for at least 40 years. That should be enough time to build your capability and develop your own markets. If we don’t start now, another generation will be forced to watch the living standards of the countries they supply rise, while we remain relatively static.
The lesson applies to all of us who have to go out each day and generate income. Chances are, the value of our pay-packet will, over time, closely resemble the value we bring to our employers and our customers. Imagine the case above, but instead of export earnings, it’s the money that is coming into your family home. You might be the sole breadwinner in a “commodity job” and it’s tough to make ends meet. If you want to improve your standard of living you need to work out a way to bring more value to your workplace. Alternatively, your partner can go to work, and even if you are both working in low-end jobs, between you are now delivering more value than one of you can, and so your household income goes up. Let’s say you then improve your skills – maybe you do some study, or you get really interested in an area and find you are good at it – you add more value and you get paid more. Logical? Absolutely.
This doesn’t just apply to people in low paid jobs. A sales rep becomes a sales manager or a bookkeeper studies hard and becomes an accountant. A doctor becomes a surgeon. “You want a bonus? Show me the value.” In all cases, from the factory floor to the Executive suite, we will primarily get paid for the value we bring.
So a nation’s economy and the average household, and every enterprise in between have something in common. If you want to take a step up in your standard of living, think hard about the value you contribute and how you can enhance it. The lesson is there for us all to see in the Asian economies.
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