No, Gigaba, state intervention won’t spur growth
This article is in response to a report by EWN on finance minister Gigaba’s odd decision to begin ‘direct’ state intervention in the economy.
I will be responding to each claim and statement blow by blow, in a manner similar to some of my other articles. In essence, this article will establish that Gigaba’s plans claims and plans are, by and large, fallacious and dangerous.
“Asian economies which grew strongly after the second World War exposed the myth that governments are only incidental to economic development.”
I have a bit of a vendetta against the Asian model of development.
It is often, ironically, spouted as proof that state-led economies are effective. For those unaware with the Asian model, in short, it is a model where the state works with large corporations to keep labour cheap and encourage mass manufacturing for trade. Many socialists advocate the model, revealing that they either don’t understand the model, or socialism.
In most of the Asian model countries, workers were severely exploited. Unions were banned. The government actively enforced low wages to discourage turnover. Work was not incentivised as a means for personal prosperity, but for the betterment of the state.
The Asian model did experience great economic growth, but for whose benefit? The citizens of the Asian model economies are overworked, underpaid, depressed and, compared to their Western counterparts, unsuccessful.
SEE ALSO: African Tigers: A Reasonable Reason to Hope, And Reason Towards Reason by Paul Hjul
There is only one observed path to development that has brought not only economic growth, but prosperity for the individual, and that is the American and English model of free markets.
If you are interested in my rant against the Asian model, I went into more detail attacking one such country in my essay: How the state’s role in Japan’s development is overstated.
“South Africa’s government has decided to intervene directly in the economy because experience shows that otherwise market failures will be an impediment to growth.”
They’re only deciding to intervene directly, now? What have they been doing up to this point? Oh dear…
The South African government has not been shy to intervene in the economy, distorting the market and pillaging private wealth. Rather than market failure being an impediment to growth, Gigaba should purchase a mirror and see how his precious government has been the primary destroyer and impeder of growth in this country.
Regulations, taxes and an inability to do the basic task of keeping us safe from crime is the cause of our slow growth – not so-called “market failure”.
“Government is the only agent that has a vested interest in ensuring there are vast, affordable and accessible networks for electricity, railways, roads and communications that won’t just help the economy – but also ensure transformation.”
There’s this system called ‘capitalism’ where people who need something pay providers for that thing. Electricity, railways, roads and communications are all such things.
All of these things are already under state control. It seems Gigaba has very little understanding of this country, or he just likes stating redundancies. They are already intervening directly by exercising a monopoly on electricity, railways, roads and controlling much of the communications sector.
As we know from experience, they aren’t doing a good job running any of these. If anything, it seems the government may not have a vested interest at all. They know they can keep pillaging taxpayer’s money, regardless of whether they deliver. On the other hand, private providers only get paid if they work and work well.
So no, Mr Gigaba. Wrong again. If anything, the government is the only disinterested party, as shown from experience.
“South Africa needs massive industrialisation in the secondary sectors to create jobs and wealth on a sustainable basis in pursuit of radical economic transformation and inclusive growth.”
Do we need jobs and wealth? Well, duh. Gigaba understands basic needs, and then he goes and destroys all that by actually admitting that he hates the poor, jobs and every honest South African by spouting more political claptrap such as “radical economic transformation”. We have an idea of what that means, and it is not a good idea.
“Gigaba also says cities are the engines of the economy.”
Cities are places where people live. People are the engines of the economy. Yes, cities are conducive for growth. Well done. The problem is that an unsustainable amount of people are flocking to the cities because they know this already. It is all well and good to state that cities aid the economy, but not substantive.
What is implied is that the city-centres need to be planned as economic zones. If they meant special economic zones in the vein of Hong Kong, then I would be excited, but I doubt Gigaba would gain some economic acumen now.
Rather, Gigaba seeks to push more and more people into the already overcrowded cities rather than address the poverty rampant in the poorer provinces.
“South Africa’s cities have been allowed to develop for too long on a system where people have a 40-square meter house, 40 kilometres from work and have to spend 40% of their income on commuting.”
Commuting wouldn’t be a problem if the ANC actively sought to undo the true aspects of Apartheid and abolish the tribal trust lands. These cesspools do nothing but hold back development of the home areas of many South Africans, forcing them into the cities where they have to live in squalor.
The Apartheid regime encouraged the impoverishment of the homelands to encourage migrant labour. The ANC should be trying to go against this and establish a firm economic foundation in areas like the Transkei to encourage business opportunities at home. This will solve the commuting problem, bring families back together, ease the strain on the overcrowded cities and raise the prosperity of South Africans in general.
All this, if people like Gigaba abandoned their destructive ideologies, abolished the homelands and, for good measure, introduced special economic zones in highly populated but economically destitute areas like the Transkei.