More socialism cannot cure SA's ills

SACP first deputy general secretary Solly Mapaila is on the mark in referring to the abuses and rights violations perpetrated by the apartheid system ("Scientific socialism more relevant than before amid continuing inequality, August 2). Apartheid entailed extensive government control over all facets of life and denied black people their economic freedoms and liberties based on the colour of their skin. It is imperative that SA never return to such a system of socialism ever again.

To the extent that countries have tried higher levels of state dictates and intervention (communism and socialism) in the economy, people's quality of life has, on average, been low. On the other side, where countries embrace economic freedom and protect civil liberties (capitalism), the average quality and longevity of life have increased.

The Fraser Institute's Economic Freedom of the World Index measures countries' economic freedom using data from various sources across a number of categories. In 2000, SA was ranked 58th; in the latest edition the country was ranked 90th out of 162 countries. Countries in the top quartile of the index "had an average per capita GDP of $44,198 [R634,359] in 2018, compared to $5,754 [R82,585] for nations in the bottom quartile".

In terms of life expectancy, in the top quartile it is 80.3 years, compared to 65.6 years in the bottom quartile. Perhaps of greatest interest to those of us in SA who want to make real progress in addressing grinding poverty, "In the top quartile, 1.7% of the population experience extreme poverty [R31.56 a day] compared to 31.5% in the lowest quartile." Greater economic freedom is truly transformative, in the most positive sense, for poorer citizens.

Mapaila argues that socialism is about expanding life quality and ending poverty. To achieve these goals people need to work, to provide their time, expertise and labour, to provide goods and services. Is there an underlying assumption that because someone "needs" something, someone else must provide it? Are we to accept that one person's need entails a right to the life, skills and goods of others? Shall we grant government the power to decide who may work, what work they may do and under what circumstances?

The promises of socialism and communism always happen to just be around the next corner. People just need to give the state more power, more resources, and allow it more control over their lives. In reality, as the few political connected leaders of the given "revolution" gain political power, they use it to entrench their own interests and the interests of those they favour, exacerbating inequality and leaving the majority of citizens in a state of hunger and poverty. In the real world, tackling the problem of poverty requires allowing entrepreneurial and business activity (of all possible forms) to flourish as much as possible.

Perhaps, in a world of infinite resources and perfect knowledge in the hands of a ruling elite, Mapaila would be correct — socialism would work. However, in our world, from both a moral and practical perspective, it would be immoral and high hubris to presume that giving government more power would solve SA's myriad economic and social problems. During the last century, when countries embraced socialism and communism, human rights abuses, increased destitution and in many cases outright massacres were the result. However, where more economic freedom has been embraced the results have been staggeringly positive. SA does not have free market capitalism, and we see the negative effects of increased government power every day, especially in the lives of poorer citizens who are forced into further dependence on the state.

Capitalism does not aim at utopia; any ideology that wants to sell a mirage of a perfect world and complete equality of outcomes should be treated with the utmost suspicion. The truth is that in countries where people are freer they tend to do better, and their families and communities benefit from the innovation and wealth creation that accompany more economic freedom. With more freedom comes increased risk, and sometimes people will make mistakes and choose paths with which we disagree — but do we truly want freedom, or simply for people’s choices and lives to be determined by the state?

Varying levels of inequality will always accompany freer societies — as people and businesses make daily decisions, and short- and long-term investments (of various forms), individual levels of wealth fluctuate. Inequality that results from businesses and individuals adequately catering to the needs and problems of customers should not be of moral concern to us; however, government-imposed barriers to entrepreneurial activity and job creation should absolutely be the focus of policy and structural reform efforts. SA will not seriously address a 74% youth unemployment rate by continuing down the route of centralised government control.

In the context of widespread and deep discrimination the majority of citizens experienced throughout this country's history, there should be a measure of means-tested welfare. But we must not focus on grants and redistribution as means to increase economic growth and prosperity. Without substantial levels of growth all welfare plans will be dead in the water. 

According to the latest data from the UN Conference on Trade and Development, foreign direct investment in SA fell 39% to $3.1bn in 2020. We can be reasonably sure that such investments will decline further after the spate of looting and violence in July. Without substantive investment inflows all of the social compacts will come to naught — actual investment is needed to build factories, infrastructure and, further downstream, all kinds of businesses and the concomitant job opportunities.

For most of history poverty was the general rule. We should always ask: "What are the ingredients that a country needs to alleviate as much poverty as possible?" The rule of law, secure property rights, economic freedom and a limited government that doesn't protect only the politically connected. These are what SA needs.

This article was first published on BusinessDay on 4 August 2021.

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