Co-operation and voluntary exchange build winning nations

No nation can be forced to excel. Any nation, faced with force, the threat of force, legislated inequality before the law or any other political power mechanism that creates disharmony will eventually sink into poverty.

The choices President Zuma is going to be called upon to make will be difficult. All the signs indicate that he will receive conflicting advice from two distinct groups within his party. One group will advise him to make purely political decisions; use force; utilise the levers of power now in his hands to institute unjust compulsions and prohibitions against people on an arbitrary basis; dispossess people of their property; take assets and income from those who have them and distribute them among those who have less. Measures supposedly intended to alleviate poverty and improve conditions for the majority of the people.

Tyrants throughout history have followed the path of force, compulsion and coercion. Lenin, Stalin and Mao Tse-tung (Zedong) combined the use of force with alluring philosophies that essentially promised that everyone who was poor could become rich by plundering the material wealth, skills and capabilities of those who were better off; a strategy that could be described as “the slavery of the producers”. Every time, this path inevitably led to war, bloodshed and destruction, the flight of the wealth-creators, leaving behind poverty and misery for the majority of the people.

The former Soviet Union countries and China have now struck out on a different path; implementing policies that reward those people who best serve their fellows through innovation and hard work. Policies based on voluntary exchange and mutual co-operation for mutual benefit. They have discarded the fundamental socialist thesis of, “from everyone according to his ability to everyone according to his need”, something which has never worked in practice because it is based on faulty theory. In a world of scarce resources, people are compelled by circumstance to be self-interested; they need to be able to take care of their own and their families’ immediate needs first, before they can be in a position to do anything about their concern for others.

If we examine the personal lives of politicians who espouse communist and socialist ideas, we will find that they are as intent as anyone else on accumulating assets and living in comfort. The houses they live in, the cars they drive, the life-styles they follow, are the same as those of politicians who do not espouse communist and socialist ideas. They do not demonstrate their professed creed by sharing their wealth with the poor. There is no problem with this inconsistency, except when they demand that force be used to transfer other people’s assets to the poor, but exclude their own.

The second group in President Zuma’s party are the realists who recognise that the people of SA respond well to encouragement and will make positive contributions to the economy and society in a policy environment that promotes productivity and excellence. They also recognise that when people are treated badly, they respond negatively.

The policy differences that will emanate from these different conceptions of democratic governance are vast. Policies based on force, coercion and statutory plunder will lead to lower growth, reduced foreign investment and a stagnating economy. Policies based on voluntary exchange and peaceful co-operation will lead to high economic growth, increased foreign investment, rapid reduction of unemployment, reduced poverty and a contented society.

Analyses contained in the Economic Freedom of the World annual reports, covering the period 1980-2006, clearly show that countries with institutions and policies that promote personal choice, voluntary exchange co-ordinated by markets, freedom to enter and compete in markets, and protection of persons and their property from aggression by others, create better circumstances for the advancement of human welfare than any potential alternatives. Essential institutions and policies are: secure protection of privately owned property, impartial enforcement of contracts, stable money, low taxes, and free trade. Benefits include: higher per capita incomes, higher economic growth, more foreign investment, higher capital formation, higher incomes for the poor, longer life expectancy, and greater political rights and civil liberties.

SA was ranked 54th out of the 141 countries rated in the 2008 Economic Freedom of the World annual report, which is a significant drop from the 41st position reported in 2002. This decline in the rankings is explained by the fact that new additions such as Kazakhstan and Mongolia slotted in above SA while the economies and institutions of other countries such as Cyprus, Guatemala, Latvia, Hungary, Lithuania, Malta and Zambia have improved to such an extent that they have overtaken SA.

High government consumption expenditure, a high top marginal tax rate, crime, foreign exchange controls, high tariffs, burdensome labour regulations, centralised collective bargaining and costs of bureaucracy detract from SA’s rating. These items are not merely of academic importance. They impose costs on business and make SA a less attractive investment destination. Given our extraordinarily high unemployment rate and dire need for increased capital investment and job creation, all these issues demand the close attention of President Zuma and his government.

Mr Zuma, co-operative government has a great deal more to offer the people of this country and you, as their President, than government by force and coercion. Please do not allow any member of your government, or the government officials under their control, to initiate force or coercion against the people of our country. Rather build a winning nation by promoting co-operation and voluntary exchange. The nation will truly benefit from policies that have that objective and you will go down in history as a great statesman.

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 / 26 May 2009

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