Rob Hersov writes that free-market reforms can drive economic growth and reduce poverty, as seen in countries like China and India. Hersov argues that South Africa’s economy, however, remains heavily regulated and state-dominated, stifling progress.
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By Rob Hersov, capitalist activist.
Capitalism is rarely a popular cause in rich countries, where people take free markets for granted but prefer government giveaways.
However, countries with heavy state control, shortages, and poorly managed public services often support free-market reforms.
Neither capitalism nor socialism exists in an ideal form, but economies leaning toward free market solutions perform better than those with heavy state intervention. Most countries have mixed economies, balancing private sectors, state-owned enterprises, and government regulation. Achieving the right balance between capitalism and state intervention is crucial.
South Africa’s mixed economy leans heavily toward state intervention and overregulation, hindering growth and job creation.
Key features of capitalism include property rights and the ability for buyers and sellers to act in their self-interest, with prices set by supply and demand rather than officials. Competitive markets benefit consumers with reasonable prices.
Critics argue that capitalism neglects the poor, but capitalist growth generates wealth that can address social costs. Democratic accountability helps address market failures like pollution and poverty.
While some point to the Cuban healthcare system as a socialist success, it suffers from long queues, crumbling infrastructure, and drug shortages. State health systems fare better in growing free-market economies. And Cuba is now suffering load-shedding, just like South Africa has done.
The fall of socialist economies in Eastern Europe in the late 1980s highlights the struggle to find successful socialist examples. Nordic countries are often cited, but they are not at all socialist as free-market economies support their generous welfare systems.
Hardline socialist policies like nationalisation, land seizures, and price controls typically lead to declining living standards, shortages, emigration, and corruption. Venezuela under Hugo Chavez exemplifies this, with severe shortages and economic collapse following such policies.
Conversely, countries adopting free market policies thrive.
Free market reforms in China and India have lifted hundreds of millions from poverty. In the late 1970s, China shifted from a failing command economy inspired by the success of the capitalist Asian Tigers (Hong Kong, Korea, Malaysia, Taiwan).
Key reforms in 1978 allowed Chinese farmers to work independently, boosting food production and leading to broader economic liberalisation. India’s 1991 foreign exchange crisis prompted market-driven policies, boosting growth, and attracting foreign investment.
South Africa lags in enacting market-based reforms. Apartheid-era policies enforced state control, discrimination, job reservations for whites, expropriation, and public enterprise monopolies, stifling economic growth. The ANC later removed some controls and partially privatised Telkom, but 700 state-owned enterprises and empowerment regulations remain, hindering progress. Poorly managed entities like Eskom and Transnet throttle growth, and the proposed NHI faces real scepticism.
Recent reforms, such as lifting electricity production restrictions and allowing private firms to run ports and rail lines, are insufficient for rapid growth.
From 1994 to 2022, South Africa’s average annual real growth rate was about 1.2%, among the lowest of emerging markets, compared to China’s 7.9% and India’s 4.6%. Growth in these countries has lifted millions out of poverty.
To break free from low growth and high unemployment, South Africa must urgently privatise public enterprises, eliminate empowerment laws that inflate prices and hinder merit-based hiring, and reform wage settings by bargaining councils. The costs of free market reforms are significant, but the human cost of inaction is far greater.
And, if the GNU is to survive, South Africa urgently needs economic growth.
And, to do that, South Africa needs to understand that “socialism hasn’t been tried properly” is the Great Lie of the past and the present – and the future.
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