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‘White monopoly capital.’

‘We can’t do this because then the rich capitalists will take all the money.’

‘You just don’t care about the poor!’

‘But who will build the roads?’

After being on a South African university campus for awhile now, I have seen the tragic demagoguery of a vocal majority of students. I have voiced my opinions in politics lectures and seen the current student organisations on campus. Sadly, capitalism is an ideology demonised and despised as being evil, exploitative and caring very little about the poor.

I think capitalism is actually none of these. Despite this, there is a constant rhetoric among the political Left that Capitalism just doesn’t care about the poor. People turn to Socialism to try put themselves on a moral high-ground and claim to be the champions of the oppressed. This, however, could not be less true. Here I hope to show that not only do Capitalists care about the poor, but they care more about them than any statist.

One word rather synonymous with poverty is ‘unemployment’. South Africa is known to have an incredibly high rate of unemployment and unemployment naturally leads to poverty, for when one has no income, one generally has no money. Our dire state of poverty has also lead many opposition parties to base their political campaigns around job creation. The Democratic Alliance has constantly mentioned the issues of job creation and recently staged a huge march in Johannesburg for jobs. The EFF even makes the claim that they are the ‘last hope for jobs’. So that naturally leaves us with the question: how do we create jobs?

This is where I think free-market capitalism is strongest. Ultimately, if you want to say you care for the poor, you need to support some kind of way of creating more job opportunities for them so that they can earn an income.

Currently, small businesses in South Africa face huge issues with starting up, due our monstrous volume of job legislation. All the legislative ‘red tape’ for small businesses and potential entrepreneurs in South Africa simply creates yet another barrier to the poor. It discourages or makes it severely difficult for businesses to expand or even simply start up. What’s frightening is that the political Left are pushing for more business regulations.

I’ll use the minimum wage as an example to show how government regulations hurt job creation. In a free-market, the wages that employers pay their employees have to (in the greater scheme of the business) be less than the market value which that employee provides for the business – otherwise, the business would be making a loss on each employee hired.

As an example, let’s say I want to start up a lemonade stand. I can squeeze enough lemons to make ten glasses of lemonade in an hour and I make a profit of R5 on each glass of lemonade. Now let’s say that I want to hire someone to squeeze lemons for me to increase efficiency. The government requires me to pay a minimum wage of R100 an hour to my employee even though he only provides me with R50 of profit every hour. This means that I would be running the business at a loss and it would be a much better decision to simply downsize and not hire anyone.

When the government artificially forces businesses to pay their workers at a rate higher than what the workers provide for the business, the business is left with two options: rack up prices to compensate or downsize and fire workers. More often than not, the best business choice is to downsize and this leaves people jobless and many-a-time, poor.

By contrast, if we were to take out all government regulations from the private sector, the number of available job opportunities would greatly increase as businesses feel comfortable to expand and entrepreneurs decide to start up their own businesses. In addition to this, competition means that businesses end up self-regulating instead of having the government force it on them. When there are more businesses and so more competition, it becomes within the interest of an employer to pay their workers well. Because, now, workers will have more choice of where to work and so cannot be exploited. This is the freest, most fair and ultimately the only way that we will severely decrease unemployment in South Africa.

So while the leftist wants more regulations and claims to champions workers’ rights, the only rights they are championing are those of the lucky few who have managed to get a job in their regulated, business-unfriendly economy. The Left is either deluded when it comes to economics, or they simply don’t care to see what benefit a free-market would have to the poor. Until South Africa adopts a fiscally-conservative tax policy and free-market private sector, we will always have many unemployed and even more in poverty.

If you really cared about the poor then you should support an environment where they can lift themselves out of poverty. Until then, it seems that the cycle of poverty may continue indefinitely.

  • Matthew Richard Murphy

    Very nice article, Nick! I particularly enjoyed the example of lemonade that you gave – It puts things into perspective.

    • Shona Graham

      yep to make money one must have slaves and starve them, great perspective, who would want people to eat if it fucks up your big plans!

  • Mcanthony Msaenz Mamaile

    Very good valid points, however the point you missing is the minimum/living wage being the main problem with the exclusion of other factors for instance highly inflated kickbacks for the high ups in short the unnecessary inequality margin. Of course people will tend to leave quickly to another if the minimum wage doesn’t translate to living wage yet that mostly doesn’t mean the employer is forced to adjust the wage because instead there will always be some quick replacement. You should also remember not all corporations adhere to policy so I’m talking about reality, of a plethora of working class who are at the receiving end of that deal, don’t seem to move an inches better than they would have if they were not employed anyway, so what is the use…The capitalism you talking about thrives on the condition that there should be Have nots & the haves(emphasis on TOO MUCH)…

    • Shadeburst

      Capitalism thrives on the condition known as full employment.

      Minimum wages benefit the haves at the expense of the have-nots. This is so obvious it shouldn’t have to be spelt out.

      • Mcanthony Msaenz Mamaile

        Yes it had to be spelled out on the basis that the article was purporting that capitalists care more….

  • Shadeburst

    Nicholas, can you give some examples of the excessive red tape?

    A small company can be run in the owner’s personal capacity and does not HAVE to register with CIPRO.

    As soon as a business appoints employees it must register with SARS for PAYE/SDL/UIF and with the UIF as well. That takes a couple of hours. The monthly EMP201 return takes ten minutes to complete and the semi-annual EMP501 might take a few hours.

    If the company’s turnover is small it doesn’t need to register for VAT. Even so, with modern accounting software it takes only an hour every two months to complete the return, make the payment and reconcile the VAT account in the general ledger.

    Then there’s WCA which obviates the need for the employer to take out expensive insurance against employee injuries at work. It takes an hour to register plus another hour every year to complete the return.

    Larger companies with lots of employees have to complete returns for BEE etc. Yes that is a bit of a schlep, but then these are not start-ups.

    From time to time your local council may send round building and fire inspectors. The standards are not very strict.

    Compared with other industrialized countries we get off lightly.

    • Mcanthony Msaenz Mamaile

      Daunting task, that is why some companies outsource this service to be handled by Some other institution that is only off course if having those employees, experienced ideally brings more value to your business….