What Mises Tells Us About Bankrupt Airlines
Apparently, South African Airways is "on the verge of bankruptcy" and is, according to the BBC, "haemorrhaging cash." Unfortunately for South African taxpayers, SAA is also a state-owned operation, it's deeply in debt, and it may not be able to make payroll in the near future.
Clearly, there's a problem.
James Peron, writing at South Africa's Business Day suggests Ludwig von Mises may have the answer:
The mess that is South African Airways (SAA) is widely known today. What many do not realise is that in 1944, Yale University published a book that laid out the reasons for the mess.
While it is true that Ludwig von Mises’s Bureaucracy does not mention SAA by name, it does dissect the differences between "profit management" and "bureaucratic (or political) management".
Mises argues that under each system of management, there exist incentives. Managers and/or owners respond to those incentives.
Transfer the bureaucrat to a system of "profit management" and his actions will change. Put a businessman in charge of a bureaucratic system of governance and he will act like all the bureaucrats before him. Change the incentives and you change the response.
The key word here, when it comes to incentives is "political." It's not the fact that SAA has a bureaucratic structure. Most large organizations do. The difference between SAA and a private organization is that profit is not the primary motivation — because bailouts and other political solutions can substitute for serving customers in the marketplace. IF SAA ceases to make a profit, as is already the case, it seems, it will continue to exist so long as government agents see fit to continue subsidizing it. In a truly private market, of course, an organization that fails to make a profit — regardless of how "bureaucratic" it is — ceases to exist.