Allow the entrepreneurs to grow the economy

Mankind has not been delivered from abject poverty in the last three centuries by kings or governments but by the activities of entrepreneurs who have constantly and persistently discovered new ways of utilising resources for the benefit of consumers. Unfortunately, this vital function entrepreneurs perform is little understood, often not appreciated, and sometimes vilified, even by their greatest beneficiaries.

Entrepreneurs who provide consumers with goods and services that they want, at better prices than anyone else, and also have happy and contented workforces, are society’s heroes. And when they do it right, they grow wealthy. Those quasi-entrepreneurs who, to grow wealthy rely on government favours, skew the market and prevent independent traders from doing what they can to benefit their fellow man.

The SA government’s faith in government investment and spending to improve economic growth and create jobs, including investment in state-owned enterprises, is misplaced. Government central planners tend to overlook the fact that any resources invested by government are either taken or borrowed against future takings from private citizens. They do not recognise that it is impossible for them to have the necessary knowledge to invest more astutely than competing private enterprises. Apart from the reality that government planners cannot deal effectively with the complexity that is involved in such an attempt, they are also subject to political agendas, which are often totally unconnected to economic realities

Private enterprises are dispersed throughout the economy. Individually, they are ever alert to events occurring in the microcosms of the economy in which they have particular expertise and base their investment decisions on the wishes of consumers who buy the goods and services they provide. Government is incapable of emulating the cumulative effect of the focussed decisions of thousands of such entrepreneurs.

Think for a minute about food. We all need to eat; if we had no food for a long period of time, we would die. This essential commodity in our lives is produced, processed, packaged, transported, warehoused, distributed and sold by private individuals and enterprises.

The process begins with farmers, both in South Africa and overseas. There are dairy farmers, cattle ranchers, sheep farmers, wheat or maize farmers, citrus farmers, market gardeners – for whatever foodstuff there is a demand, wherever the climate and soil are suitable, there are farmers growing it.

From the farmers, the food goes to abattoirs, canners, bottlers, cheese-makers, dairies, and so on, to be processed and/or packaged. Then it is distributed around the country by transport companies, or shipped to other countries by exporters, to a plethora of retail outlets. We can shop for groceries at huge hypermarkets or tiny neighbourhood spaza shops. We can shop at specialty stores such as butcheries and greengrocers. For the price-conscious, there are discount wholesalers. Or we can splash out on more expensive imports by shopping at upmarket delicatessens or department stores. If we run out of bread or milk after hours, we can buy it at an all-night café.

Whatever the perceived need, an adventurous entrepreneur has sought to fulfil it. And if their store consistently offers the goods we want at what we perceive to be good value for money, we may well travel halfway across town to take advantage of it.

Now, what would it be like if government decided that food was too important to be left in the hands of the market? Judging from our experience of similar situations we can expect that government, concerned about those people, especially children, who are not getting enough to eat, will believe that everyone should be assured of adequate food, and decide that all families should receive ‘free’ taxpayer-funded groceries. Instead of purchasing the food from existing producers and suppliers, it will take over those functions and turn former stores into government depots from where people have to collect their rations on appointed days.

Because officials are not interested in differentiating on the basis of people’s individual tastes and needs, everyone in a specific age group gets the same grocery pack containing food items that a committee of officials has decided are nutritious and adequate for a balanced diet. As the consumers of the food have no say in what is produced or provided, they end up with a bland diet that appeals to very few. The people who work at the food depots are not beholden to the food dependents so they are inclined to treat them rather badly. Most people would agree that the result would be disastrous and rather unpleasant.

Even when entrepreneurs, with spectacular success, do supply us with what we want, when we want it, including food, politicians and government officials seem unable to resist tampering with the process.

In the Soviet Union and China, the tampering by Stalin and Mao Zedong led to mass starvation. Tampering on a lesser scale causes less visible harm but harm nonetheless, whether the intervention takes place in the food chain or in any other sector of an economy.

Governments should resist interfering with peaceful and honest enterprise, leave business to business, and concentrate their attention on applying the rule of law and protecting people and their property. What applies to food and the food chain is true of the entire economy. In every field of endeavour, there are knowledgeable and capable people who are better equipped than government, not only to produce and supply goods and services, but also to decide upon the best utilisation of resources. Let the entrepreneurs flourish and there will be more jobs for the unemployed, and more food for the starving. The needs of everyone will be better satisfied and everyone will be able to lead a happier and more contented life.

Author: Eustace Davie is a director of the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.

FMF Feature Article / 19 April 2011

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