The past few weeks with the National civil servants strike have been revealing in many ways. One of the most intriguing, curious and perhaps even disturbing revelations has been the confirmation [to this reader/listener/viewer] of our status as being among the worlds poorest exponents of mathematical fluency.
For our new offshore reader's base, we, the Southern Azanian/South African information consumers are routinely advised that our children and hence schooling system are consistently placed in the “dunce” category on global league tables regarding mathematical fluency.
Is there hope, of course there is hope. I who write this following observation and comment am no mathematical guru. I scored 11% for mathematics in my Matric Trials [1963] and only passed ultimately with an E after learning every geometry theorem off by heart over the few months before the finals. I have also avoided excessive involvement in Mathematics over these years since.... excepting the formulas i have to deal with daily.
Nonetheless I don’t think of this bizarre revelation this past few weeks as being representative of mathematics but rather of an old fashioned thing that may be popping up in a new guise as Maths Literacy, and in a more abbreviated form was called Arithmetic.
Okay. Enough. What was the revelation and why was it so problematic. Conspiracy proponents may tell us it's done on purpose. The effect of this core error in arithmetical thin-
king is disingenuous and it does help to mask one area of delusion in our magic mirror game called “the Global Economy”.
Okay; here’s a piece from Business Day [June 27, 2007: Page 14. Second/sub editorial:
'Mixed message".] Quote: referring to civil service workers: “And they want a pay increase of 8% -10%. So that’s just 2.5% more than the government started out with….”
What is so wrong with this statement that it even managed to reach the tiny percentage of understanding that I have of mathematics?
This was not the only example of this. On a range of occasions the filed interviewer reports on SAFM made the same observation. A young sounding female voice chirped brightly one morning this week about how she didn’t really see what the fuss was about: it was only two percent more she said, with all the charm of an ingénue.
More disturbingly one of the the negotiating team made a similar point in his summing up of the outcome at the stage where all bar the teachers were calling off the strike. Viva Teachers.
So when the government moves from 5.25% to 7.5% over a period of ten months or so from original offer to closing deal the negotiator talks of the government having only moved up just “more than two percent”.
Right now most people reading this blog are convinced that we just had a month long strike over 1 and a half percent! outrageous right.
Wrong. We just had a month long strike where the difference between the opening offer and the closing deal was 25%. Along the way the bites became less as each percentage point or cluster of basis points was negotiated. The difference between the offer and the demand [6% and 12%] was not 6% as many commentators suggested but actually ONE HUNDRED PERCENT.
There is clearly a huge difference between 6% and 100%. Logically the difference can be described in two ways. Either the difference between offer and demand was SIX PERCENTAGE POINTS or it was ONE HUNDRED PERCENT.
One is called POINTS or in smaller quantities than one whole number, BASIS POINTS; and the other is called PERCENTAGES. They are completely different in the way that the
measuring points on a tape measure are different to that which is being measured.
So the workers got a twenty five percent increase [above that which they were offered when the strike started] and before you get all agitated at how huge this settlement was, consider that when the CPIX [consumer inflation rate] went from 3%,only a few years ago to the currently stated 6.1% it didn’t go up by three point one percent, as is routinely [disingenuously?] suggested, but rather by more than one hundred percent. The workers are still worse off now than they were a few years back, eespecially when you cost in loss of pay for many for a month. In fact at our current rate of inflation we’ll be offering our visitors to the 2010 event a rather more expensive tour than they would have had when we planned the event originally, and that could be problematic.
An apocryphal tale, that may or may not have been told by John Kenneth Galbraith, holds it that the legendary JP Morgan pre-empted massive [personal] losses in what came to be called “The great crash”[1929] after overhearing a share market discussion between his driver and his housekeeper, while the former was ushering him into New York. He said something to the effect that when the chattering classes engage in economics it is time to sell.
When innumerate people are reporting on economic matters this little confusion between points and percents could be setting us up for a global credit meltdown.
A short while ago Japanese interest rates rose from low positions, [they were even negative for a while] by some fifty basis points to around three quarters of one percent. Talk on CNBC was how it affected the so-called carry trade: an activity whereby one borrows in
Japan [for instance] at a quarter percent and lends in another country, say SA at 7%.The profit is on the interest rate differentials and the difference is enormous.
This Japanese rates increase occurred during the time that a private equity takeover of the country’s biggest Retail group was occurring, just before the final shareholder decision. Not one commentator nor participant in that takeover, not even the generally outspoken Public Investment Corporation seemed to consider that Japanese lending rates had not just risen by fifty basis points the holding cost of Japanese money had just raised by some one hundred and fifty percent. The impact on a flexible lower rate crashing up against a higher fixed rate was more than significant it was a potential deal breaker.
The Bain company who bought Edcon gave the impression that they were using borrowed money to finance the deal. Although never stated the deal could well have been financed via the so-called “carry trade” from Japan, which at the beginning of the deal was the cheapest place to borrow a few billion dollars. Edcon is currently touting bond issues of considerable margins just to pay back the cost of being bought [a curious idea isn’t it]. It does not take much prescience to foresee some serious woes in the Edcon camp over the next two years.
When Mr Mboweni pushes up the Repo rate again in the next month or two by fifty basis points he wont be pushing up the cost of borrowing by half a percent he’ll be pushing it up by the best part of ten percent [after having already pushed it up by about forty percent] and there will be a huge difference in the amount of cash you have on hand after paying ten percent more interest on everything you own on credit. Our low level arithmetical faculty may cost us dearly, or will it?
On a lighter note I met a man recently who had been at school with my brother, left the place at grade eleven, his father was killed by a hit and run driver, he was married at 19 with a baby on the way and no job prospects at all. He and his new bride began a business which they built up over time and today he is a mega-wealthy man with a home on every continent, still married to his bride. Asked about the secret of his success he said to me: “I bought stuff for four cents and sold it for twelve cents; and it’s amazing how all those eight percents added up.”
The Blogospherian.
Viva bloggers.