Rebuild South Africa on proven principles

There is a hilarious scene in Monty Python’s iconic Life of Brian, where Jewish rebels in an underground shelter are planning their revolt against the Roman rulers. The leader of the rebels is inciting his men by saying that “the Romans have taken everything from our fathers”. He then asks the rhetorical question: “What have the Romans ever given us in return?” Just before he could answer his own question, one of the rebels uncertainly ventures “the aqueduct?” Another one hesitantly adds “sanitation?”

Another one mentions “roads”. The leader admits this, but before he can continue his motivational speech, his comrades come up with a long list: irrigation, medicine, education, wine, public baths, law and order, peace. The gathering breaks up in chaos, with the leader shouting “Silence!” when he does not want to hear more about what the Romans have done.

This scene has important lessons for South Africa, where all and sundry are now looking for solutions to rebuild the country after the crisis. The president has already been talking about a “new economy” and “radical economic transformation” that should “empower women, young people and mainly black people”. The big question is what the economic policy should be that can pull people out of poverty and misery. Fortunately, however, we are not living in the antique Roman era and over the past 2 000 years the world has learned what does work and what does not.

The ANC’s resistance to this summary of centuries of experience by mankind is that capitalism benefits only the “wealthy”. To this, Friedman has a good response:

“Industrial progress, mechanical improvement, all of the great wonders of the modern era have meant relatively little to the wealthy.

The rich in Ancient Greece would have benefited hardly at all from modern plumbing: running servants replaced running water. Television and radio? The patricians of Rome could enjoy the leading musicians and actors in their home, could have the leading actors as domestic retainers.

Ready-to-wear clothing, supermarkets – all these and many other modern developments would have added little to their life. The great achievements of Western capitalism have redounded primarily to the benefit of the ordinary person. These achievements have made available to the masses conveniences and amenities that were previously the exclusive prerogative of the rich and powerful.”

The only reliable route map out of poverty that history has given us was strikingly summarised by a Nobel Prize winner for economics, Milton Friedman: “The record of history is absolutely clear. There is no alternative way, so far discovered, of improving the lot of the ordinary people that can hold a candle to the productive activities that are unleashed by a free enterprise system ...”

The ANC’s second objection to capitalism is that it results in exploitation and more inequality. Friedman’s reply has important lessons for South Africa.

“In the past century, a myth has grown up that free market capitalism – equality of opportunity as we have interpreted that term – increases such inequalities, that it is a system under which the rich exploit the poor. Nothing could be further from the truth.

Wherever the free market has been permitted to operate, wherever anything approaching equality of opportunity has existed, the ordinary man has been able to attain levels of living never dreamed of before.

Nowhere is the gap between rich and poor wider, nowhere are the rich richer and the poor poorer, than in those societies that do not permit the free market to operate. That is true of feudal societies like medieval Europe, India before independence, and much of modern South America, where inherited status determines position.

It is equally true of centrally planned societies, like Russia or China or India since independence, where access to government determines position. It is true even where central planning was introduced, as in all three of these countries, in the name of equality.”

The third objection is that ordinary workers are prejudiced by economic freedom. However, the father of capitalism, Adam Smith, more than two centuries ago wrote that the “majority of any society comprised, not landlords or merchants, but ‘servants, laborers, and workmen of different kinds,’ who derived their income from wages. Their welfare was the prime concern of economic policy.

“No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable,” he wrote. “It is but equity, besides, that they who feed, clothe and lodge the whole body of the people should have such a share of the produce of their own labour as to be themselves tolerably well fed, clothed, and lodged.”

According to Smith, the legislator’s main economic objective should be the purchasing power of wages, because this is the criterion of the material welfare of the majority of the population. In short, the welfare of a country is determined by the welfare of the labour force.

The ANC’s fourth argument is that the solution lies in redistribution rather than in economic growth. To this, the black American thinker Coleman Huges replies as follows: “I do not know of a single instance in which an underachieving group rose to economic prominence by asking the government for cash transfers, preferential policies in education and employment, or apologies for past injustices.”

The fifth argument of the ANC is that the focus should be on the past because this is the cause of black poverty. The black American economist Thomas Sowell, however, thinks one should rather focus on the causes of prosperity: “There’s no explanation needed for poverty. The species began in poverty. So what you really need to know is what are the things that enable some countries, and some groups within countries, to be prosperous.”

Sowell continues: “What do the poor most need? They need to stop being poor. And how can that be done, on a mass scale, except by an economy that creates vastly more wealth? Yet the political left has long had a remarkable lack of interest in how wealth is created. As far as they are concerned, wealth exists somehow and the only interesting question is how to redistribute it.”

The question is whether a crisis could lead to a reversal in the ANC’s decades-old disastrous economic thinking. Milton Friedman has good news: “Only a crisis produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes the politically inevitable.”

The proven success of the ideas of these thinkers has resulted in the economic upliftment of at least 750 million people in Asia over the past two decades, to name one example. The question is why there still are governments who are opposed to the benefits of a free economy. Friedman’s explanation has the red lights flashing: “The aversion to a free economy is in essence an aversion to freedom itself.”

The question is if this isn’t in fact the ANC’s real problem with a free society and a free economy. The most important difference between socialism and capitalism ultimately is that socialism is mandatory and capitalism is voluntary.