Economics – Rational Standard https://rationalstandard.com Free political commentary for the dissenting South African Thu, 15 Feb 2018 10:05:56 +0000 en-GB hourly 1 https://wordpress.org/?v=4.9.4 https://i2.wp.com/rationalstandard.com/wp-content/uploads/2012/01/cropped-RS-Logo.png?fit=32%2C32&ssl=1 Economics – Rational Standard https://rationalstandard.com 32 32 94510741 The Morality of Tax Havens https://rationalstandard.com/morality-tax-havens/ https://rationalstandard.com/morality-tax-havens/#comments Mon, 08 Jan 2018 08:26:09 +0000 https://rationalstandard.com/?p=7034 No one, whether individual, government or society, has a moral claim on the wealth that someone else has produced. This fact has been missed in the choir of condemnation of individuals and companies who place their wealth in foreign ‘tax havens’. Instead of questioning why someone might not want to expose their wealth to potential […]

The post The Morality of Tax Havens appeared first on Rational Standard.

]]>
No one, whether individual, government or society, has a moral claim on the wealth that someone else has produced. This fact has been missed in the choir of condemnation of individuals and companies who place their wealth in foreign ‘tax havens’. Instead of questioning why someone might not want to expose their wealth to potential exorbitant taxes in their own country, people are roundly attacked for doing something perfectly moral – protecting their wealth as they see best. There is more to the leak of the ‘Paradise Papers’ than may meet the eye.

With the continual growth of the state, we have long jettisoned the premise that a person’s wealth is their own to do with as they please. Now the government is the arbiter of what a large part of your wealth should be used for. When government runs out of money, as is consistently the case in South Africa, the demand on the private sector grows bigger and bigger. We are told that business must ‘come to the table’ and contribute more, while at the same time business is demonised.

It is no surprise that those who are taxed more heavily will attempt to protect what they have earned – after the barrage of revelations surrounding the Zuma administration, can we in good conscience demand that those who are productive, run businesses and accrue wealth, be forced to keep their money in the country?

Both politicians and business-owners are mentioned in the Paradise Papers. It is interesting that we condemn both groups for tax evasion. One group contains people who made their wealth through growing businesses, employing people, investing in all types of sectors, trading, and raising the living standards of countless people around them. The other group contains people who ‘made’ their wealth through shadowy deals, cutting corners for government contracts, and using government force to compel others to do business with them. To place in the same bubble people who make wealth through voluntary trade as those who use force to get deals done, is the worst kind of moral error.

We love to call for higher taxes, to rail against inequality, to tell poorer people that their hardship was caused by the big bad man in the suit driving his Mercedes through Sandton. But when we call for higher taxes, we fail to mention that the taxes taken will not come “out of their consumption expenditures, but out of their investment capital” as Ayn Rand explains in “The Inverted Moral Priorities” from The Ayn Rand Letter. Thus, higher taxes mean less investment, which means fewer jobs, lower production, and higher prices.

Why higher prices? Because the businesses being taxed have to make up the hit somewhere, somehow, and the consumer is the one who will feel the slow, steady squeeze down the line. By the time that we’ve brought the rich down to an acceptable level, the standard of living of those lower down the rung will have been wiped out.

The vast majority of people agree that we ought to pay our taxes. But when we repeatedly see how corrupt and wasteful the government is, there may well be a line in the sand that, once crossed, enters the realm of government overstepping its bounds. When you see that the company you invested in is taking a nosedive, you divest and look at other options. The government must make the best possible case as to why you should invest in the country, even if that investment takes the simple form of taxes.

The consistent growth of government means that there are a myriad taxes imposed on both individuals and companies. There is a lot more at work than just an income tax, for example. The more wealth you create, the more you are punished for it.

It will be a lot more productive to combat corruption and lower taxes, thereby encouraging more and more people to pay their taxes in the first place. Shouting at the few productive rich who manage to protect their wealth before someone can steal it will not result in anything tangible. Instead of attacking tax havens we can render them pointless if we make South Africa the best place in which to invest and build businesses.

The post The Morality of Tax Havens appeared first on Rational Standard.

]]>
https://rationalstandard.com/morality-tax-havens/feed/ 1 7034
Why I’m Angry at Alfred https://rationalstandard.com/im-angry-alfred/ https://rationalstandard.com/im-angry-alfred/#comments Thu, 04 Jan 2018 12:01:23 +0000 https://rationalstandard.com/?p=7028 Most people see a supply and demand graph and either get a feeling similar to an orgasm, or they get a feeling similar to when your teacher ranted on about how Romeo’s vocabulary is what won thy Juliet’s heart. Then you get people who look at the graph and draw the wrong conclusions. Why? Because […]

The post Why I’m Angry at Alfred appeared first on Rational Standard.

]]>
Most people see a supply and demand graph and either get a feeling similar to an orgasm, or they get a feeling similar to when your teacher ranted on about how Romeo’s vocabulary is what won thy Juliet’s heart. Then you get people who look at the graph and draw the wrong conclusions. Why? Because the independent variable, that is price, is on the vertical axis and not on the horizontal axis (I know, right). And who do we have to thank for that? Well, that would be none other than Mr Alfred Marshall.

In 1890, dear old Alfred decided to write a book. He called it Principles of Economics. And the principles he laid bare are actually bloody brilliant. I just wish that Alfred took the time to read Bertrand Russel’s The Principles of Mathematics that was published in 1903. Why? Because then he would’ve retracted his own book so as to correct his grave error of placing an independent variable on the vertical axis of a graph. Did he not for one moment foresee how irate it would make me?

Those of us who know that price is the independent variable in its relationship with the quantity supplied and demanded, are able to make some very sound deductions. For instance, we know that a change in the equilibrium price level leads to a change in quantity supplied and demanded, and not the other way around. If the price rises, output rises. This is because an economic incentive is created: you get more in return for what you supply. Alfred, however, failed to see that his apocalyptic blunder would lead to a lot of people to assume the exact opposite, and thus anger me.

If people assume quantity is the independent variable, the logical deduction that they would make is that the equilibrium price level changes in response to a change in quantity supplied and demanded. In essence, they would conclude that businesses increase prices when they increase production.

This would be pretty nonsensical, as an increase in the price level leads to an increase in quantity supplied because there’s more profit to be made. But thanks to Alfred, people won’t automatically know that quantity is the one who responds to price. This, unfortunately, leads a lot of people to assume that businesses are simply greedy. And that is what angers me the most about Alfred’s blunder.

What has by this time come to be known as ‘The Great Blunder of 1890’ has led people to perpetuate the false narrative that businesses, especially the big ones, are just plain greedy. In all honesty, I’d also believe it to be so if I thought that businesses will simply keep increasing their prices as they get bigger and bigger. I’d also want to limit the size of companies to keep price levels as low as possible. I’d also think that businesses are only interested in charging us more and more. Hell, I’d even go stand in the street with a placard whereon I rant about how capitalism is only bad and then go grab a soy latte at the nearest Starbucks. All in all, I’d be what a lot of people are these days: ignorant.

And that, Alfred, is why I’m angry at you. It’s not because I’m a fundamentalist about on which axes variables go.  It’s not because I don’t understand how supply and demand works.  It’s not because I hate neoclassical economists.  It’s because there are people in the streets shouting about a problem that does not even exist, all because you decided to be different.  Or is it just me?

The post Why I’m Angry at Alfred appeared first on Rational Standard.

]]>
https://rationalstandard.com/im-angry-alfred/feed/ 1 7028
A Free Market in Labour is in the Best Interests of the Unemployed https://rationalstandard.com/free-market-labour-best-interests-unemployed/ https://rationalstandard.com/free-market-labour-best-interests-unemployed/#comments Sat, 16 Dec 2017 06:00:16 +0000 https://rationalstandard.com/?p=6953 Politicians love talking about jobs, not only here in South Africa but all over the world. They are fond of reminding us how much they want to create jobs. But it is clear that government has been the only thing that can and has reduced the potential to create employment. If you want jobs, reduce […]

The post A Free Market in Labour is in the Best Interests of the Unemployed appeared first on Rational Standard.

]]>
Politicians love talking about jobs, not only here in South Africa but all over the world. They are fond of reminding us how much they want to create jobs. But it is clear that government has been the only thing that can and has reduced the potential to create employment.

If you want jobs, reduce the government-imposed costs of hiring an individual to zero. Simple, right? Not if you are allied to unions with an interest in keeping out competing workers, who would drive down wages. This is the basic supply-demand curve: increasing the supply of labour drives down the price of labour. Incidentally, that’s why unions tend to be economic nationalists. They want to restrict the influx of competing labour from other countries as well as raise the price of imports produced in foreign markets with cheap labour or machines.

Now, the government-imposed cost of hiring someone includes, but is not limited to, the following:

1) The minimum wage.

2) Collective bargaining. Without the ability to negotiate, a mutually-beneficial settlement is not reached between employer and employee. Instead, a settlement that is acceptable to the union bosses has to be reached regardless of the interests of any individual worker.

3) Ease of firing. If firing unproductive workers is too difficult, companies will tend to be more unproductive than they would otherwise be, meaning that relative to less restrictive global peers, you are forced to accept less returns and global capital will respond accordingly. If it’s hard to fire, it will be more expensive to hire in the sense that any new employee is a high risk if they turn out to be unproductive.

4) Income tax. When employment is taxed, you get less employment; unless you believe taxing sugar, taxing alcohol, taxing cigarettes, etc. has no effect on the demand for these products.

This is not a comprehensive list, of course, but it does serve to illustrate the point.

The inescapable conclusion that arises from all of this is that unions have strong incentives to use government force to restrict new entrants into the labour market, in the same way that a large corporation has an incentive to use that force to restrict new competitors from entering the market. In fact, along with woeful employment growth, South Africa has experienced woeful small business growth. That’s why you have NEDLAC.

The National Economic Development and Labour Council (NEDLAC) is a very strange beast in a country with a Competition Commission that’s supposed to fight against collusion and promote free market competition. NEDLAC, after all, is composed of big business and big labour setting rules by which other market participants have to abide by. It’s obvious that a consequence of such an entity is likely to be anaemic job and small business growth.

If you are poor and unemployed, it is in your interest to have both small business as well as employment creation. The one relies on the other – without small business, it is impossible to maximise job growth because big corporates are in the business of consolidation, not growth. But government cronies from big labour and big business won’t allow this. This is despite the media narrative of ‘big business versus labour’, the reality of which being that both big business and big labour are enabled by government to act against the interests of the poor.

The post A Free Market in Labour is in the Best Interests of the Unemployed appeared first on Rational Standard.

]]>
https://rationalstandard.com/free-market-labour-best-interests-unemployed/feed/ 4 6953
Would you work for an 2-4, maybe 5 percent commission? https://rationalstandard.com/work-2-4-maybe-5-percent-commission/ https://rationalstandard.com/work-2-4-maybe-5-percent-commission/#respond Fri, 15 Dec 2017 20:47:14 +0000 https://rationalstandard.com/?p=6759 Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy; its inherent virtue is the equal sharing of misery. – Winston S. Churchill Great fuss is made by assorted socialists and other valuable members of the “never closing club of the eternally annoyed, insulted, suppressed and downtrodden” (in other words, […]

The post Would you work for an 2-4, maybe 5 percent commission? appeared first on Rational Standard.

]]>
Socialism is a philosophy of failure, the creed of ignorance, and the gospel of envy; its inherent virtue is the equal sharing of misery.

– Winston S. Churchill

Great fuss is made by assorted socialists and other valuable members of the “never closing club of the eternally annoyed, insulted, suppressed and downtrodden” (in other words, by failed individuals who would – to adapt a quip from Otto von Bismarck – also have failed in other subsidized jobs and especially in real free market jobs where the good, hard wind of competition from all directions is blowing) about families of entrepreneurs possessing a huge amount of partly-inherited wealth, being able to go sailing in their own yachts (I won’t), living in palaces (I don’t), driving RR or Bentleys (I can’t), possessing private jets (I go tourist class with the most pricey airline), which is in their gutter mind, of course, highly unjust and attracts the ire of the professional and, in most cases, subsidized “social justice warriors”.

Are all the bureaucrats, the subsidized Marxists in academia, “the socialists in all parties” (cf. Friedrich August von Hayek) and all other receivers of subsidies (from agriculture to unmarried mothers) aware what the precise economic advantages and values of one successful enterprise are? And have they understood that success is only possible if the consumers, the clients, the customers accept the products and services of one enterprise?

Have they added through all the years of the enterprises’  existence:

– the salaries paid out,

– the fringe benefits received,

– the taxes on salaries,

– other taxes levied on labour,

– contributions to social security,

– income tax paid by the owners,

– corporate income tax paid by the enterprise,

– the economic value of all the investments done,

– the VAT on its products and services,

– VAT paid by the employed as consumers which they can be as receivers of a salary,

– the general value of the products and services produced and provided,

– the possibility to make savings due to all the salaries and other payments done,

– revenues from exports and imports caused by the enterprise,

– the value of purchases from all kind of business partners,

– the value of patents and all kind of immaterial protective rights created,

– the value of all other civil rights created under that framework (for example the house a worker can build and own),

– the contribution to general economic stability and growth.

Have they – those socialist and nihilist nincompoops – ever thought of calculating all these advantages, and compare it with the entrepreneurs’ income and the wealth of the owners? Surely not, as they can’t calculate.

I bet that income and acquired wealth are very moderate compared with  those enlisted advantages accumulated  together, and even if the enterprise runs through generations (which is not easy, as I know from my own family), it is not more than 2-4 (maybe at most 5) percent of the accumulated value mentioned above. I normally never bet. But now I bet a crate of Villiera Brut rose Champagne that I am right. Bolshies, come on… challenge me!

Can any other way of organizing an economy compare with that kind of success and production of wealth? Are central planning and commanding bureaucracies cheaper? Are all the subsidized fat cats in politics, banks and institutionalized agitators of social justice  aware who is really productive and who is paying the bill? Surely not.

Have we ever calculated the economic costs of all kinds of socialism and welfare states? I do not speak about the cruel costs due to mass murder, genocide and tyranny. These costs should alone be enough to deter every decent one to ‘go’ red. Just the economic costs I speak about. In 1914 in a stupid totalitarian world war, socialism started – it was no coincidence that the German High command organized Lenin’s travel in 1917 into Russia and paid him then millions of “Goldmarks” to further his cause. And then comes one red revolution after the other and that includes FD Roosevelt’s “New deal”, fascists’ economic blunders – although you have to admit in organizing sometimes they had been more productive – blunders by “social democrats” and the ever expanding welfare state in Europe and North America.

That is the one and only triumph of cultural Marxism – it did not abolish the materially rich; it made them vulgar like any gutter-boy, and made them cowards who do not dare to speak out what they actually do for state, economy and society and are actually ashamed of themselves. Therefore, believing that wearing ill-fitting blue-jeans and sneakers make them “people like us”. No, they are not people like us – real entrepreneurs and builders of lasting enterprises are exceptional. They have any right to acquire wealth, enjoy it and leave to whomever they believe is worthy of that.

I repeat my question from the headline: Would you work for an 2-4 maybe 5 percent commission? No, I won’t and socialists and assorted nihilists and bureaucrats, red academics and bolshies and subsidized scum of all kind also won’t, but real entrepreneurs do, did it and will do also in future !

And therefore we should say: “Thank God!”

The post Would you work for an 2-4, maybe 5 percent commission? appeared first on Rational Standard.

]]>
https://rationalstandard.com/work-2-4-maybe-5-percent-commission/feed/ 0 6759
Money, Natural and Artificial https://rationalstandard.com/money-natural-artificial/ https://rationalstandard.com/money-natural-artificial/#respond Wed, 13 Dec 2017 18:05:58 +0000 https://rationalstandard.com/?p=6976 Written by: Rory Short For aeons we have had, and thus have become thoroughly accustomed to, artificial money and its associated problems. Consequently, we think that the problems with money are inherent in money itself. But these problems are not inherent and will disappear if we change our Money System (MS) so that it only […]

The post Money, Natural and Artificial appeared first on Rational Standard.

]]>
Written by: Rory Short

For aeons we have had, and thus have become thoroughly accustomed to, artificial money and its associated problems. Consequently, we think that the problems with money are inherent in money itself.

But these problems are not inherent and will disappear if we change our Money System (MS) so that it only produces Natural Money.

Artificial money is money that is produced independent of any exchange and until the advent of mobile phones, information technology and the internet, we had little choice but to produce new money artificially.

But for us today, with the aforementioned technology, plus the fact that the rand has been a fiat currency since the 1970s, this is no longer the case. What this means is that the rand Money System is already part way to producing only Natural Money; all that is required is to make some adjustments to the Rand MS itself.

So, what does the Rand MS do? It produces and administers money.

What is Money‭?

The beauty and power of money lies in the fact that it can be exchanged for absolutely anything of equivalent value. In other words the units of a currency, legitimate within a legally established monetary area, are universally exchangeable for goods and services within the area.

But how does money come by this miraculous property?

The answer to this question is central to any deeper understanding of money. There is however an even more fundamental question that needs to be answered first. This is: what is an economy? Why this question, you might ask? It is because money’s miraculous ability is totally bound up with its role in the economy.

What is this role?

In order to survive, let alone flourish, human beings have a constant need to make voluntary exchanges of goods and services with one another. Now, each of these exchanges is an economic event in its own right and the accumulation of these events is what makes up an economy.

Basically, if there are no exchanges then there is no economy. Thus, if we are to fully understand what money is, we need to first understand the role of money in exchanges.

Of course we can, and do, make exchanges without the aid of money, so why is money needed? Because it facilitates the making of exchanges and this increases the volume of successful exchanges happening in an economy, thus increasing its size which is to everybody’s benefit.

Voluntary exchanges without money

For convenience we call such one to one exchanges Moneyless Simple Exchanges (MSEs). ‭These exchanges are logistically very difficult to arrange, however. They require the simultaneous satisfaction of a number of coincident conditions, i.e. both parties must be face to face, they must have with them, and show the other party, the item that they wish to exchange and they must be happy to accept the other party’s item in exchange for their own item. In addition, these one to one exchanges only happen if both parties feel that the item that they are getting in exchange is worth more to them than the item that they are losing.

‎From the last sentence, we can see that money, in its natural form, is just a name for the externalisation of the values that are in the heads of the exchanging parties, namely, the values of the exchanged items.

‎Moneyless Simple Exchanges might be difficult to arrange, but they nevertheless contain all the ingredients needed for the creation of a healthy economic event. These are:

a) voluntary
b) one to one
c) automatically healthy because they are healthy, both
(i) economically, i.e. fair value, and;
(ii) socially, each party, plus offering, is accepted by the other,
otherwise the exchange would not complete
d) when completed they form, one, integral, healthy, economic unit, or event.

‎Voluntary exchanges involving money

‎Money is introduced into exchanges because it hugely facilitates the exchange process, whilst maintaining the economic health, if not the social health, of the resulting economic event. Consequently, in cash-based societies like ours, exchanges using money, old or new, have become the norm. They are not automatically socially healthy, however because all the people involved in exchanges using money do not have sight of one another, nor of all the items involved in all the exchanges.

‎This uncertainty in the social health of completed exchanges could be remedied, however, by attaching a list of its successive holder identities to each UoC. The provision of this information on request will enable any potential recipient of a UoC, in payment of a debt, to decide whether any particular UoC is acceptable to them or not.

‎Money is not a product of nature; it has to be produced by people before it can be used in exchanges, and new money is produced in one of two ways, artificially, i.e. apart from any exchanges, or naturally as a by-product of a completed complex exchange.

‎Initially, money could only be produced artificially and to prevent its fraudulent production if it was given its backing value on issuance. The backing value came from the State’s precious metal holdings – gold in our case. Thus, right from its issuance, artificial money could legitimately be used as a replacement for the item(s) in one half of a simple exchange.

‎We now have the technology (mobile phones, the internet, information technology) which enables us to issue fiat money, new or old, at any point of purchase. We call such money ‘fiat’ because it has no backing value on issuance. It has to gain its backing value from its participation in a successfully-completed complex exchange, otherwise it has to appropriate it from the backing value of all the money already in circulation, and this misappropriation debases the currency, causing inflation. Gained in the correct way, however, the backing value is a natural consequence of a completed complex exchange.

‎Exchanges involving fiat money are of two kinds: complex and simple. Complex exchanges involve three or more people and the use of newly-issued fiat money. Simple exchanges use old money and involve only two people. Old money is money that has  already been used in a previously successful completed exchange whether complex or simple.

‎Complex exchanges use new money

‎Newly-issued fiat money, V, enables one of the two parties, in a Moneyless Simple Exchange, to initiate the complex exchange, whilst the other party is replaced by two people: a seller person and a buyer person.

The initiator anchors the exchange by receiving V as interest-free debt from the Money System. The anchor then uses V to purchase something of value V from the seller person. They then sell something of value V to the buyer person. The income from the sale enables them to settle their interest free debt V. This completes the exchange and fills V, now in circulation, with its backing value.

‎Thus natural money is quite simply the externalised, shared, or equal in value, in quantitative terms, of the items exchanged in a completed complex exchange.

‎The completion of the complex exchange indisputably establishes

‎a) a voluntary exchange
‎b) a healthy economic event, through the use of V
c) ‭the backing value of V

‎The allocation of legitimate backing value to V turns V into old money. This makes it possible for V to serve as a legitimate stand-in for the exchangeable item(s) in one half of any Simple Exchange.

‎Simple exchanges use old money

‎Because of the universal exchangeability of money, Moneyless Simple Exchanges have virtually ceased to exist. Monied Simple exchanges are referred to either as purchases, or sales, depending on their initiator’s role in the exchange.

‎The Pros and Cons of using artificial money

‎Currently we use artificial money in exchanges but its use is not without both negatives and positives. The pros and cons are as follows:

‎Pros

‎a) it completely eliminates the logistical difficulties associated with arranging Moneyless Simple Exchanges;
‎b) money makes visible and quantifiable all ‘in-process exchanges’ in the economy.

‎Cons

‎The Cons depend on the type of money being used in exchanges. If it is natural there are no cons but if it is artificial then:

‎a) where old money, fiat or commodity-based is being used, exchanges are:

‎i) not automatically socially healthy

‎b) where new commodity-based currency is being used, exchanges are;

‎i) not automatically socially healthy;
‎ii) not open to those who have no money.

‎This is money poverty which means that people are unable to automatically participate in a cash based economy and thus the size of the economy is unnecessarily reduced and people experience real poverty in terms of access to goods and services.

‎c) where new Fiat money is being used exchanges are;

‎i) not automatically socially healthy
‎ii) not economically healthy, until the new money gains its legitimate  backing value
‎iii) not open to those who have no money
‎iv) the money is not stable, it is susceptible to chronic debasement, i.e. inflation, depending on the MS responsible for administering it.

‎Inflation means continuous theft of value from all the money already in circulation. The SA Reserve Bank has a target range  for inflation, not of 0% but of 3 to 6 percent. Consequently people are confronted on a daily basis with the ever decreasing purchasing power of Fiat money.

‎In view of the above cons the obvious next question is, can the pros be preserved whilst eliminating the cons? Yes, they can by completing the transition to an MS that produces only Natural Money. We have, however, continued with the artificial money approach even though the Rand has been a Fiat currency since the ‘70s. But there is no reason why the Rand MS could not be altered to produce only Natural Money thus eliminating the four Fiat money cons listed above.

Author: ‎Rory Short is a retired IT professional who worked and lectured at Wits. His lecturing focused on the front end of the systems development life cycle for information systems. The money system is actually an information system that reports on the allocation (distribution) of purchasing power within the economy.

The post Money, Natural and Artificial appeared first on Rational Standard.

]]>
https://rationalstandard.com/money-natural-artificial/feed/ 0 6976
Reviewing Maimane’s 6-Point Plan to Fix SA’s Economy https://rationalstandard.com/reviewing-maimanes-6-point-plan-fix-sas-economy/ https://rationalstandard.com/reviewing-maimanes-6-point-plan-fix-sas-economy/#comments Thu, 07 Dec 2017 14:39:33 +0000 https://rationalstandard.com/?p=6958 Mmusi Maimane has presented a 6-point plan of what he thinks will help fix South Africa’s economy. Maimane is typically schizophrenic on policy, jumping between support for a liberal free market on some occasions while positing a racial socialistic order on others. What follows is a point by point appraisal of his 6-point plan and […]

The post Reviewing Maimane’s 6-Point Plan to Fix SA’s Economy appeared first on Rational Standard.

]]>
Mmusi Maimane has presented a 6-point plan of what he thinks will help fix South Africa’s economy. Maimane is typically schizophrenic on policy, jumping between support for a liberal free market on some occasions while positing a racial socialistic order on others.

What follows is a point by point appraisal of his 6-point plan and an overall evaluation of the policies themselves and their ramifications.

1. State-owned entities

Maimane has rightfully condemned state-owned entities, stating:

“They are haemorrhaging public money and delivering dismal services at exorbitant prices.”

He argues that non-strategic state assets need to be sold, with the strategic enterprises being reformed to cut down on corruption and incompetence.

As a whole, this is a good point. State enterprises are a drain on the fiscus and cannot surpass the private sector as sustainable and high performing producers. Privatisation will go a long way in reducing negative government spending, corruption and the capacity for state capture.

I would, however, like to know what “strategic” means. If it means that the Army shouldn’t be privatised, then that is fine – but if it means that the state should still have a monopoly on Lenin’s ‘Commanding Heights’, then Mmusi still has a long way to go.

2. Remove red tape

Maimane wants to cut red tape that prevents job seekers, especially young job seekers, from finding jobs. Labour regulations and union interference makes finding a job almost impossible.

While non-specific about how far he is willing to go here, I am very much in favour of this point. We need to make employment viable in this country, and deregulation is the only way to do that.

3. Empowerment

On current government empowerment schemes, Maimane says the following:

“The current system has been used as a mechanism for elite re-enrichment and corruption. It imposes a heavy regulatory burden on businesses and raises the cost and lowers the quantity of service delivery to the poor. We want companies’ greatest contribution to be to society in general, not just to the elite.”

Empowerment is racist and is used merely as a tool to hide corruption behind ‘restitution’. But I fear that Maimane still thinks that some form of race-based appointment is necessary and virtuous. This is definitely not the case in reality.

On the face of it, his condemnation of empowerment projects is good, however.

4. Make SA open for business

This section starts great, with Maimane arguing that we do the following:

  • Reduce corporate taxes
  • Abolish exchange controls
  • Remove trade barriers

This is all in an effort to attract investors to provide much-needed capital for the economy.

Where this heading falls short is Maimane’s argument that a wealth tax and estate tax are more preferable to redistribute wealth, and don’t scare investors.

No, wealth tax will scare off investors. Investors don’t like having their money stolen just because they have it. If Maimane was serious about attracting foreign investors, he would support South Africa becoming a full tax haven, with a minimal flat-rate tax.

Redistribution itself is fruitless and unjust exercise based on the false principle of equality before desert. Any tax aimed at achieving it is an illegitimate tax.

5. Be tourism-friendly

Yes, we do need to make travel to SA easier. But we must also make it safer. I’m sure Maimane will agree that we need to solve our crime so to not scare away even more tourists. Making it easier to arrive will not help matters if nobody wants to arrive.

6. Zero tolerance for corruption

“Corruption is destroying our nation and we need to signal a zero tolerance attitude henceforth,” says Maimane.

Well, yeah. Not much to argue about here. Except that zero tolerance is sufficient to minimise corruption. Corruption follows any organisation that involves a lot of power and a lot of wealth. The key to minimising state corruption is minimising the state.

You can’t loot the treasury if there is no treasury, after all.

The government is too entrenched in our day-to-day lives. And as corruption is an inevitability of government involvement, this means that our society corrupts. Thus, minimise the state and you minimise corruption.

Conclusion

Overall, this plan isn’t bad. It presents quite a few common sense free market solutions to South Africa’s woes – the right solutions. Its only pit-falls are that it may not go far enough and that I don’t think Maimane is truly behind it. Maimane’s policies tend to flip-flop, and he has stated his distaste for liberalism in the past. If the DA truly supports this plan, it will be an improvement, but I’m not holding my breath.

The post Reviewing Maimane’s 6-Point Plan to Fix SA’s Economy appeared first on Rational Standard.

]]>
https://rationalstandard.com/reviewing-maimanes-6-point-plan-fix-sas-economy/feed/ 1 6958
According to Government, ‘uBuntu’ is Marxism Dressed in African Clothing https://rationalstandard.com/according-government-ubuntu-marxism-dressed-african-clothing/ https://rationalstandard.com/according-government-ubuntu-marxism-dressed-african-clothing/#comments Mon, 04 Dec 2017 20:13:56 +0000 https://rationalstandard.com/?p=6933 In a recent newspaper advertisement of government’s National Health Insurance (NHI) scheme, the health department wrote the following in support of its implementation: “Currently due to rising costs of medical care, medical aid schemes have introduced several options which exclude a range of cover for the patients. Further more,many [sic] people exhaust their funds in […]

The post According to Government, ‘uBuntu’ is Marxism Dressed in African Clothing appeared first on Rational Standard.

]]>
In a recent newspaper advertisement of government’s National Health Insurance (NHI) scheme, the health department wrote the following in support of its implementation:

“Currently due to rising costs of medical care, medical aid schemes have introduced several options which exclude a range of cover for the patients. Further more,many [sic] people exhaust their funds in the scheme as early as June and they are without cover for the rest of the year. In other words,they [sic] are covered for sa long as they are not sick.

Not anymore. NHI will give cover to all, in line with the Ubuntu principle: from each one according to his ability, to each one according to his needs.” (my emphasis)

For those unfamiliar with the highlighted portion in the above quote, it is a slogan popularized by the founder of modern socialism, Karl Marx, in 1875.

“From each according to his ability, to each according to their need” is based on the fallacy that in a communist society, such abundance of goods will be produced that everyone’s needs and material desires will be fulfilled. Everyone is merely expected to contribute as much as their own capacity allows, but will get in return whatever they need, freely.

Those who understand basic economics, of course, know this is nonsense. The post-scarcity society envisioned by socialists is impossible, and even if it were possible, it wouldn’t make a difference to human relations. Socialism’s, and apparently now uBuntu’s, essence is compulsion. Liberty’s essence is voluntaryism: Do as you please as long as you don’t violate the same right of others.

With all the talk of ‘African solutions for African problems’, and the developing ‘Afrocentric’ criticism of South Africans adopting ‘foreign’ ideas and narratives now needing to be ‘decolonized’, the health department’s statement above is particularly amusing. We have long known that these same critics of so-called ‘Western’ ideas, who to no end proclaim that individual liberty and economic freedom are inherently incompatible with the ‘African context’ and the ‘African philosophy’ of uBuntu, are merely socialists who think their disastrous ideology will work in Africa.

Karl Marx was born in Germany and died in Britain, having lived his entire life in the West. His ideological influences and predecessors were all non-African. Now that uBuntu has been confirmed to merely be Marxism dressed in localized African nationalist rhetoric, surely the next step is to also bin it in the battle of ideas?

To the extent that its proponents want it infused with public policy, all the various conceptions of uBuntu are fiercely opposed to the notion of a society based on voluntaryism, peaceful cooperation, and liberty. As a matter of governance, it should be rejected.

National Health Insurance will be unaffordable and if tried, will seriously hurt our fledgling economy. The quality of South African healthcare will need to be compromised across the board, for no reason other than to satisfy the ideological desires of Aaron Motsoaledi and the ruling party. Going ahead with this disastrous scheme simply because uBuntu apparently requires it is suicidal.

Those who seek to practice uBuntu should do so within the comfort of their own homes and communities, and leave those of us truly committed to a way of life founded on interconnectedness, voluntary community, peace, and freedom, alone.

The post According to Government, ‘uBuntu’ is Marxism Dressed in African Clothing appeared first on Rational Standard.

]]>
https://rationalstandard.com/according-government-ubuntu-marxism-dressed-african-clothing/feed/ 8 6933
Here’s How Exporting Elephant Trophies Will Help Conservation https://rationalstandard.com/how-exporting-elephant-trophies-conservation/ https://rationalstandard.com/how-exporting-elephant-trophies-conservation/#comments Fri, 17 Nov 2017 20:57:57 +0000 https://rationalstandard.com/?p=6854 Recently, the United States Fish and Wildlife Service decided to allow the importing of trophies from elephants hunted in Zimbabwe and Zambia. Naturally, this was followed by a virtue-signalling chorus from left-wing news and media outlets. Buzzfeed made a dramatic video with violins playing minor chords, The Guardian tried to put some spin on the […]

The post Here’s How Exporting Elephant Trophies Will Help Conservation appeared first on Rational Standard.

]]>
Recently, the United States Fish and Wildlife Service decided to allow the importing of trophies from elephants hunted in Zimbabwe and Zambia.

Naturally, this was followed by a virtue-signalling chorus from left-wing news and media outlets. Buzzfeed made a dramatic video with violins playing minor chords, The Guardian tried to put some spin on the story to make it look like Trump’s sons were at fault and Ellen Degeneres started a fund for elephant conservation and in doing so, ironically demonstrated the power of the free market and private charity.

It seems, though, that little has been said in rebuttal to the Fish and Wildlife Service’s statement regarding the rescinding of the ban, which was the following:

“Legal, well-regulated sport hunting as part of a sound management program can benefit the conservation of certain species by providing incentives to local communities to conserve the species and by putting much-needed revenue back into conservation.”

I’m encouraged by this statement because it’s what game farmers in South Africa have been saying all along.

The enormous disapproval of hunting we see on social media is a unfortunate result of a misinformed public. Looking after our wildlife seems to be one thing which people across the political spectrum can agree on, but many people simply do not understand that a legal trade and market for hunting (including trophies) brings fantastic benefits to our conservation industry.

The first thing to understand is that for a game farmer, having a healthy population of animals (whatever the species) is to the farmer’s benefit. The profit motive has allowed farmers to make a living off creating the best possible habitat in which wildlife can thrive. When hunting occurs, it is in the interest of the farmer that it is done in a proper manner. This means that a huge number of variables are taken into account, such as population, animal husbandry, sustainability of the farm’s vegetation, diseases etc.

The notion that hunting is some sort of sadistic and irresponsible act of shooting anything that moves could not be further from the truth. If any farmer allowed that sort of hunting, it would completely unsustainable in the long term, due to deterioration of the environment, psychological impact on the animals and a wide variety of other factors. As with any other industry, the better you serve your fellow man, the more profits you reap. When your business is to conserve endangered species, this can very important.

With this in mind, trophy hunting brings an enormous source of revenue to conservationists. This revenue can then be put back into the farm itself thereby growing the conservation industry. There are always a huge a number of expenses one has to account for on a game farm; but extra income could be used for something like expanding the farm or planting more vegetation. Things like these come with great benefits to animals as they make the environment better for them to thrive in.

In addition to this, consider the alternative: Right now, elephants are being poached for their ivory. As with many things, making something illegal does not stop criminals from doing it, and in this case, the scarcity of ivory can drive prices up making poaching even more worthwhile a pursuit for poachers.

To use and example, Kenya has been hit by a wave of poaching which has wiped out vast swathes of its elephant population. What if, instead of being poached for their ivory, those elephants could have been legally hunted in a sustainable manner? At bottom, it’s very unlikely that we can actually get rid of the demand for ivory. We must simply choose which route we are going to take: Illegal and unsustainable, or legal, sustainable and helpful to conservation efforts?

There is a saying in the game farming community that goes something like: “If it has a fence around it, it isn’t really wild.” Seeing as human beings have reached a point where now we have embraced agrarianism and property rights (and thank goodness for that), we can never truly return the area we inhabit back to its “wild”, pre-human civilisation state, but we can get pretty close to that and allow the animals native to the region to live there. Enormous game reserves have since come about such as the Kruger National Park which is about the size of Israel and Yellowstone National Park in the United States which takes up a big chunk of the US state of Wyoming.

Game reserves like these have only been possible because people have an interest in conserving species and farmers have managed to make enough money from that interest in order to actually do so.

Like many things, the conservation of indigenous fauna requires a small amount of thinking outside of the box. While the kneejerk reaction is to make hunting and trophies illegal, the laws of economics actually show that hunting can be and has been an integral part of conservation. If we want to save a species, we need to act reasonably and thoughtfully, and not jump on the outrage bandwagon.

The post Here’s How Exporting Elephant Trophies Will Help Conservation appeared first on Rational Standard.

]]>
https://rationalstandard.com/how-exporting-elephant-trophies-conservation/feed/ 5 6854
South African Airways is Not a ‘Strategic Asset’ https://rationalstandard.com/south-african-airways-not-strategic-asset/ https://rationalstandard.com/south-african-airways-not-strategic-asset/#comments Tue, 14 Nov 2017 20:00:44 +0000 https://rationalstandard.com/?p=6733 In this article I am going to give a point-by-point rebuttal to the economic illiteracy expressed in this video. Firstly,  I would like to thank Benji Shulman for posting it on the Renegade Report discussion group and for bringing it to my attention. Below are summaries of the four main points presented in the video: […]

The post South African Airways is Not a ‘Strategic Asset’ appeared first on Rational Standard.

]]>
In this article I am going to give a point-by-point rebuttal to the economic illiteracy expressed in this video. Firstly,  I would like to thank Benji Shulman for posting it on the Renegade Report discussion group and for bringing it to my attention.

Below are summaries of the four main points presented in the video:

  1. There is a demand for South African tourism that tourist operators are unable to meet unless the government provides a “public good”, which in this case is the South African Airways (SAA).
  2. SAA pays more in taxes than what the government spends on bailing it out, so the government does not make any actual losses by giving these bailouts.
  3. The benefits from point 2 above only work if the government owns SAA since it is only the government that can profit from tax revenue.
  4. SAA brings in tourists who cumulatively spend more money in the country than the cost of bringing the tourists to the country.This point is related to the first point but more on that later.

My rebuttals to the above are as follows:

1. This is a classic case of the seen versus the unseen. There is undoubtedly a demand for South African tourism, but why is it not valuable for operators in the tourism industry to collaborate with the aim of bringing in tourists by investing the capital themselves? Even if their cumulative resources are not sufficient to do this, if there is such a strong business case, surely the banks would be salivating at the chance of funding such a no-brainer?

The answer is simply that it is more valuable for tourist operators to invest their money elsewhere. They will take the tourists if we are stupid enough to impose costs on ourselves to bring them here, which brings me to the second point on this.

Government is subsidising the tourism industry (the seen) by taking money that would have been invested elsewhere by us (the unseen). The worst of it is that most of this money would have been invested in the future because, without raising taxes, government has to borrow to fund SAA bailouts.

2. This is just stupid. He is essentially saying government should prop up every company (not just SOEs) that is on the brink of failure as long as the taxes it has received and will receive from this company outweigh the cost of the bailout itself. Following this logic would mean that SAA would still be eligible for a bailout depsite being a private sector entity. Government could just continue to subsidise SAA on the basis that it pays taxes.

What he fails to realise is that money spent propping up an inefficient company is money lost in a productive part of the economy, as I have said in the second part of (1) above.

This is a recipe for a stagnant economy, with higher prices and disincentives for investment and innovation.

3. This third point simply does not hold. As I have said in (2) above, they could just as easily direct money into private companies as long as the overall amount of the subsidy is less than the total taxes paid by the company.

This argument is really an argument for lowering taxes. Why should the state waste time taking away money only to subsidise you later in order to get taxes. For simplifiction’s sake, just lower taxes for everyone and then there will be no need for a subsidy at all. This is far better for the economy because intelligent investment decisions can be made by the market, and not by central planners.

4. I have addressed this in (1). If the cost of bringing in a tourist is outweighed by the money they spend, people who benefit from this could just as well bear this cost themselves. This would clearly be more efficient because everyone who does not benefit from tourism gets to keep their money and invest it where it will work for them.

There is also a reason why the international airline industry is dominated by governments. Governments have over time raised the costs of running these companies to the point where they have to be run at a loss and only governments can do that, which in turn has made international travel more expensive than it would otherwise be.

A major contributing factor to the problem is the political pressure governments have come to feel due the irrationality of human psychology.

Just to take two examples: terrorism and plane crashes. No matter how rare fatal incidents are or how low the average number of lives lost is relative to other modes of transport, because the airline industry relies on scale to operate profitably, each deadly incident has more psychological impact on the voting public than say a thousand deadly incidents related to private automobiles over the same timespan.

So we clamour for the government to impose itself on the airline industry so that we don’t have to endure the horror of hearing that hundreds of people died simultaneously even though a greater number of people die on the road over the same period. A better way to ensure airline safety is simply not to fly on airlines with bad track records. Government does not have the omniscience to predict all possible incidents anyway, so it is in no way a reliable regulator of the industry.

There is a huge difference between money that is handed over voluntarily and money that is taken by force from people.We also need to learn that the market is always better at solving problems than any government ever will be.We must rely on the mechanisms of competition to put forth the solutions.

Lastly, here’s more about why giving SAA our money is such a bad idea.

The post South African Airways is Not a ‘Strategic Asset’ appeared first on Rational Standard.

]]>
https://rationalstandard.com/south-african-airways-not-strategic-asset/feed/ 1 6733
Three Monopolies That South Africa Should End https://rationalstandard.com/three-monopolies-south-africa-end/ https://rationalstandard.com/three-monopolies-south-africa-end/#comments Tue, 07 Nov 2017 22:01:41 +0000 https://rationalstandard.com/?p=6754 South Africa has had a murky history with regards to state-owned enterprises. For decades many companies have been subject to the control of the remarkably inept South African government, and it is this chokehold of the markets that has landed us in the most dire of circumstances. Entities that are protected by legislation morph into […]

The post Three Monopolies That South Africa Should End appeared first on Rational Standard.

]]>
South Africa has had a murky history with regards to state-owned enterprises. For decades many companies have been subject to the control of the remarkably inept South African government, and it is this chokehold of the markets that has landed us in the most dire of circumstances. Entities that are protected by legislation morph into monopolies, resulting in a stifling of competition. Time and time again these legislated monopolies bank on taxpayer rands to bail them out of the repurcussions of what seems to be chronic underperformance. Below is a list of industries that are overshadowed by state-run monopolies that, if deregulated and privatised, will yield far greater returns to the citizens of South Africa.

Aviation

The South African aviation industry has, to a certain extent, been deregulated since 1991. This deregulation resulted in great growth within the industry and consequently higher levels of competition between various airlines. This greater competition was to the benefit of South African consumers as prices were kept in balance through this market competition, despite SAA being continuously bailed out by the South African government.

The Airports Company South Africa has also been partially privatised but the final step still needs to be taken. Unfair competition sanctioned by the South African government is being maintained through keeping SAA as a state-owned company. Notwithstanding the fact that SAA has a horrible profit making history, the airline keeps being bailed out by our government. With each bailout, the airline loses incentive to deliver better quality service.

The South African government should look at the successes of airline privatisation as guidance. British Airways, Iberian Air and Air France have all been privatised which in turn led to huge growth and improvement in services. Rather than following in the footsteps of the eight previous “turnaround” strategies of SAA and wasting R16 billion we should look to the worldwide move towards private and competitive airlines as a model worth following.

If the South African government ever decides to take the wise decision to privatise our national airline we will finally see an airline that is dedicated to its customers and not to the deployed boardmembers that sit at the helm of this sinking ship.

Power production

As certain is the perpetuity of time, so too is the granting of Eskom bailouts. One cannot help but wonder at the persistence with which the government continues to pursue failure.

The problem is not a management or structural issue at Eskom, but instead a structural flaw of our energy market. As with the aviation industry and SAA, Eskom has little incentive to pursue innovation and better service delivery when bailouts are all but guaranteed. This state-owned power producer will continue to fall short of the lowest standards of service and innovation as long as it has the indulgence of a guaranteed income and an insured failure.

Independent power producers (IPP’s) in South Africa are our future. If the South African power production market is decentralised more capital will naturally flow into more efficient energy alternatives. South Africa is well placed to reap the benefits from our vast amounts of sunshine and long coastlines for solar and wind power.IPPs that risk capital to develop technologies to produce power should be the competitors of Eskom and not the suppliers where Eskom fails miserably. By privatising Eskom, the power-hungry and short-sighted politicians are eliminated from the equation, and are instead replaced with enterprising individuals who are better qualified to provide quality services.

Railways

South Africa has the tenth longest rail network in the world. Yet the state-created rail monopoly has only resulted in disinvestment and considerable economic damage.

The clearest and most recent example of the failures of our national transport company is the Transnet Durban-Gauteng fuel pipeline that opened nine years after starting construction. Costs for this project spiralled from R12.7 billion to R30.4 billion. The recent, and very much controversial, Canada-USA fuel pipeline is twice as long, yet it cost 35% of what the Transnet version cost. This is indicative of the ineffectiveness of Transnet.

Our extensive railway network is vastly underutilised and inefficient. Only two Transnet rail lines make a profit. This loss is made despite a huge demand for alternative logistics and transport options. Furthermore, the commuter routes in our cities and between our biggest cities are not utilised. South Africans instead turn to privately owned bus or long distance shuttle services. The appalling management of the South African railway network has very much contributed to the overburdening of  roads, as well as to the great amounts of interprovincial traffic. Prasa posted a loss of R1.2 billion in 2015 in addition to very many other fiascos, such as the wasteful purchasing of the incorrectly sized train-carriages for our railways.

Ending this monopoly and opening the market brings new opportunities not only for South African businesses, but also for the South African people. We need to get South Africans on the move. We need to get goods moved around and to get our people to work. By getting more freight and traffic onto our rails we will reduce damage to our roads and highways.

Conclusion

Imagine South Africa had only a single grocer where all South Africans had to buy groceries. Imagine that this grocer was placed in this position because legislation placed it there and the same legislation prohibited any other grocers. Imagine this legislation was enacted because the government felt that everyone should be able to have access to groceries.

Why would this company want to have better services for its customers when it is the only or by far the largest grocer in the country with no competition? Why would this company want to sell better, fresher and more products if it knew that by the end of the year government will purely make up for any shortfall or loss that it makes?

It seems ridiculous when we imagine only Pick n Pay as our national grocer. The same ludicrousy exists within the state-legislated monopolies of our aviation, power production and railway industries.

The post Three Monopolies That South Africa Should End appeared first on Rational Standard.

]]>
https://rationalstandard.com/three-monopolies-south-africa-end/feed/ 5 6754