Asia

The Land of Unintended Consequences

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I read in the newspaper that Spirit, a US low-cost airline, has decided to add a $2 “Unintended Consequences Fee” to the price of each ticket. What the …..?

Apparently, this is in response to a new regulation introduced by the US Department of Transport that mandates that airlines cannot charge for changes to a flight booking within 24 hours of the booking being made. Spirit says that this regulation, ostensibly to protect travellers, will impose additional cost on low-cost operators and the “unintended consequence” will be to make airfares more expensive. Their $2 per ticket stunt is designed to demonstrate this – the infamous Law of Unintended Consequences, in action.

I read this piece of news whilst ensconced in the back of a Silver Bird taxi, virtually standstill in traffic gridlock in central Jakarta, which was apt, if not slightly ironic, as I have always considered Jakarta to be the capital city of the Land of Unintended Consequences.

I have travelled to Jakarta countless times in the last decade, and I always have mixed feelings about the place. It is a huge, sprawling city – officially around 10 million people; unofficially probably double that. It is an odd and slightly incongruous mixture of high-rise skyscrapers and shanty houses. Towering freeways built high above the ground on massive pylons contrast starkly to the narrow alleys below, choked to a standstill with traffic – vehicular and human alike. Jakarta is a city of extreme extremes – where the poor live on less than a dollar a day, and eke out a living doing anything they can; and where the ultra-rich fly by “heli-limo” to avoid the city’s crushing traffic below.

I like Jakarta, actually. It has an energy that is hard to describe, but that literally bursts out of everything and everybody, almost despite itself. It is a youthful energy; a surging energy of commerce. Everything in Jakarta seems infused with entrepreneurial hustle and bustle. And I think that it is from this energy – an ultimate capitalist “anything goes” cooking pot – that so many examples of the Law of Unintended Consequences are born.

The whole modern history of Indonesia is an unintended consequence of sorts. From the 16th century onwards, Indonesia was the playground of Portuguese, Spanish, Dutch and British colonial powers, intent on securing access to spices – the valuable commodities of clove, nutmeg and mace – at their source in the ‘Spice Islands’ of Indonesia; and later the sugar and coffee trades as well. This colonial power struggle defined and continues to define much of Indonesia today, four centuries later.

The emergence of this power struggle, however, was largely an unintended consequence of the fact that the spice trade, back in the day, was dominated by Muslim merchants who maintained a tight monopoly on spice imports to Europe through Venice, and in true cartel-like fashion ensured prices remained astronomically high. It was a desire to break this stranglehold that eventually motivated Europe’s great powers to find new sea routes to the East, and ultimately brought them to Indonesia, setting the scene for four centuries of ensuing colonial and anti-colonial theatre. (Some say that the discovery of the Americas by European seafarers was another unintended consequence of the desire to bust the European spice monopoly).

Since then, I’d say the Law of Unintended Consequences has been the most reliable (perhaps only) law in Indonesia.

I first personally observed this law in action about eight years ago during my association with a large Indonesian plantation business. Oil palms grow all over Indonesia, and palm oil is the primary cooking oil used in most of South East Asia, but it can also be used to run your car, if needed. Global demand for “renewable fuels” had thus prompted huge spikes in demand for palm oil, and foreign money (like the private equity firm I worked for at the time) literally poured into the sector.

Somewhat unwittingly, it seems what we were really doing is incentivising Indonesia’s rural villagers to clear huge swathes of land to make way for lucrative palm oil plantations. This included, very often, large areas of hitherto untouched rainforest. So well meaning green policies dreamed up in Brussels and New York and propagated by investment funds like ours backfired completely, causing far more environmental damage than the corresponding benefit. A recent Centre for International Forestry Research report, looking at what happened retrospectively, even demonstrated mathematically that for Indonesian palm oil the net amount of carbon dioxide released into the atmosphere as a result of using the crop as a bio-fuel, actually increased.

Back on the streets of Jakarta though, take for instance the case of the tyre bandits. In an effort to enhance business, every morning many tyre repairmen dump nails and sharp objects onto busy nearby streets, and then sit back and wait for the flood of customers with burst tyres. Great system! Intended consequence: increased tyre repair business. Unintended consequence: good Samaritans. In a city rife with corruption, the repairmen’s activity has touched a nerve and led to the unexpected rise of an unpaid citizen’s army – the self-titled “Nails Wipe-out Community” – who go out every morning and remove the freshly distributed nails from streets using magnets on strings, expecting nothing in return for their efforts.

For me though, the best examples of the Law of Unintended Consequences in action can be found in the interminable Jakarta traffic. Gridlock and congestion is the bane of life in the city. It has been estimated that economic loss from traffic congestion in Jakarta is $3.5bn per year.

In an effort to address this chronic problem, the Bus Rapid Transit (BRT) system was introduced in 2004. Borrowed from Bogota, Colombia, one lane of select main traffic arteries was “repossessed” and made exclusively available for bus use. Intended consequence: increased use of public transport and reduced traffic. Unintended consequence: as the BRT system has indeed gained popularity and been expanded to other areas, the reduction in lanes has seen gridlock increase dramatically.

And, my favourite – also in 2004 a law was introduced that banned cars with fewer than three occupants from entering the Jakarta CBD district during rush hours – popularly referred to as the “3 in 1” system. Intended consequence: reduced traffic in peak periods, and “forced” car pooling resulting in lower pollution.

First unintended consequence: explosive growth in the ojek business. Ojeks are motor-cycle taxis that zip you around town, weaving in and out of the cars and buses and trucks. Ojeks have always been a feature of Jakarta, but prior to the “3 in 1”, were never a mainstay of Jakarta’s “public transport” system. Now, they are used routinely not just by average commuters but by lawyers and bankers and executives, and the industry is rapidly being corporatized and commercialised.

Second unintended consequence: car jockeys. All around the edge of the restricted traffic zone, young men wait in groups, and for a few dollars these “car jockeys” will jump in your car so that your 3 in 1 quota is met. Rather than reduce traffic, which remains as bad as ever, the “3 in 1” system has created a whole new and unintended employment ecosystem. And, even more unintended, the fierce competition between car jockeys for work means that many no longer stand by the side of the road, but instead wander in and amongst the cars so that motorists can see them. Apparently, as a result, traffic accidents have increased dramatically at car jockey hotspots, further increasing the gridlock problem.

And then, I got to experience a Jakarta Car-Free day, where I was reminded that the Law of Unintended Consequence can operate positively, as well. Since 2007, twice a month on a Sunday parts of downtown Jakarta are designated car-free. Intended consequence: no cars on the road, and thus improve air quality in Jakarta. Unintended consequence: happy people. Stroll around the car-free zone, and you will see a most pleasant unintended consequence in action – the emergence of an outdoor culture in a city largely devoid of parks and green open spaces, with all manner of people – families, young couples, kids – using the normally traffic-choked roadways to ride bicycles and skateboards, stroll, play sports and meet friends.

I’m not sure what the moral of the story here is. Perhaps it is that there are two sides to every story. Like the late Steve Jobs said:  “There are unintended consequences to everything. The most corrosive piece of technology that I’ve ever seen is called television – but then, again, television, at its best, is magnificent”.

Categories: Asia

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1 reply »

  1. That’s a very interesting post. I work in government in Australia and the law of Unintended Consequences is a pretty well known bug bear here, especially in the Environment portfolio (just google Pink Batts). I love those guys picking up nails – we should hear more about good samaritans, it would encourage us all to be gooder!

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