Reject the Preachers of Economic Ignorance
Eminent economist and political philosopher Murray Rothbard wrote in his article “The Death Wish of the Anarcho-Communists” a general principle which, love Rothbard or hate him, we should all apply in public policy discourse:
“It is no crime to be ignorant of economics, which is, after all, a specialized discipline and one that most people consider to be a ‘dismal science.’ But it is totally irresponsible to have a loud and vociferous opinion on economic subjects while remaining in this state of ignorance.”
Gillian Schutte, a household name in South Africa’s white-guilted communities, is a chronic sufferer of this ignorance of economics, yet she persistently tries to shove her anti-economic dogma down the collective throat of this country’s middle class.
Her most recent attempt comes in the form of an op-ed for the Sunday Independent (no surprise here), titled “Neo-liberalism is at the root of all SA’s social ills”. Already the title which she or the pro-Big Government editors at the Independent Group have chosen for the piece indicates a profound lack of economic insight, but this being a piece on the Rational Standard, I will allow her the benefit of the doubt. Let’s see what she has to say.
“As South Africa has become more neo-liberal over the years, so too has the violence against the poor increased.”
Alright, so let’s figure out what this mythical ‘neo-liberal’ means, before we can test the veracity of her statement. To make things interesting and tilt the balance of fairness in her favor, I will be using a lefty-social justicy description of ‘neoliberalism’. An organization known as ‘CorpWatch’ describes the concept as revolving around five central tenets: the rule of the market, cutting public expenditure on social services, deregulation, privatization, and eliminating the concepts of ‘the public good’ and ‘community’.
Except for the last tenet (which is just a leftist leap in logic), I think this is a fair enough description. Of course, CorpWatch intends all these things to be seen in a bad light, but, of course, that’s nonsense. I am currently working on another article which will provide an introduction to basic economics, where it will be clear why ‘the market’ is not ‘evil’, why social services keep people poor, and why deregulation and privatization are perfectly logical steps to take in pursuit of prosperity.
So, has South Africa “become more neo-liberal over the years”? Well… no. As we already know, Apartheid was an intensely anti-market system. Only toward the very end of this paternalistic national socialist period did the State start implementing more market-inclined reforms, and, after Nelson Mandela was elected, the Growth, Employment, and Redistribution (GEAR) policy formalized this, leading to a hopeful and free period in our history as far as economics was concerned. Control boards were abolished and the government intended on privatizing several state-owned enterprises, notably our power utility, Eskom.
Fast-forward to 2016. Our economic growth has stalled, and we are likely to start having negative growth very soon. This state of affairs has corresponded directly with the government’s increased intervention in the economy, its indebtedness, and the size of our public service bureaucracy expanding. With the State’s hands in so many pies, every time President Jacob Zuma sneezes, the value of the currency either plummets or some other multinational company calls it quits and leaves our shores.
Our most ‘neoliberal’ years, thus, were the very last years of Apartheid – when we started having something which could be called a black middle class – and the GEAR years. Before then, and since then, it would be more appropriate to call us a ‘mixed market, leaning-socialist’ interventionist state. It’s still a ‘lean’ for now, but while the African National Congress (and the Democratic Alliance, in fact) continue to chase the Economic Freedom Fighters (Schutte’s party) to the left, it will become a ‘tumble’, and Gillian and I can laugh about these articles while we chat in the breadline to get scraps of food from the People’s Revolutionary Food Distributors.
“In fact, violence against the poor has become commodified as manifested in the security industrial complex that has developed and flourished in the gaping divide between the rich and the poor.”
Schutte does what so many in the social justice left do as a matter of course nowadays: call everything ‘violence’.
For foreign readers: do not be fooled, South African private security have not harmed a hair on the collective head of South Africa’s poor. The public police, maybe, but the “security industrial complex”? No. In fact, the security industrial complex has been nigh the only thing enforcing law and order in this country, which boasts about being the rape capital of the world and one of the meccas of murders-per-100,000-people ratings. Violent crime is a South African pastime and the police cannot be everywhere. That is why our private security industry – it is said – is larger than the military and the national police force combined.
South Africans citizens – except the vocal left, like Schutte – appreciate private security. Private security officials do not extort citizens for bribes, unlike the police. Private security officials do not put up roadblocks and harass citizens on the roads, unlike the traffic ‘police’. Private security officials do not intimidate you at your own home or threaten you with arrest for trying to make a living on the streets of South Africa, unlike the police. Indeed, what private security do, to the exclusion of all other things, is ensure that people do not get hurt, and that property does not get damaged. That’s it. But then again, that’s exactly Schutte’s problem with private security.
You see, Schutte believes the marauding student rioters causing havoc around the country should be free to engage in the senseless violence they have been engaged with for the last few weeks. For her, and those like her who subscribe to Critical Theory and its cadet schools of thought about race relations and ‘power structures’, it is not ‘violent’ at all for these ‘oppressed’ students to, for instance, burn down a university library. That’s just how they manifest their completely legitimate dissatisfaction with a system that ‘excludes’ them, ‘others’ them, and, by its mere existence, is ‘violent’ toward them. In a complete rejection of logic and reason, Schutte and the social justice left believe that defending oneself or one’s property against this lashing out, is ‘violence’, because you are then essentially ‘reinforcing’ or ‘protecting’ a completely illegitimate, racist system.
But Sargon of Akkad dealt with this issue much more succinctly than I can.
“Neo-liberal policies ensure wealth stays concentrated in the hands of the top 10 percent and relegates every one else to hierarchical pockets of struggle.”
While the poor struggle to survive, Gillian and Co. struggle ideologically. And it is this ideological struggle – not the struggle for survival – to which Gillian is referring.
We have dealt with why ‘neoliberal’ policies can only have good consequences for South Africa many times before at the Rational Standard. We have done so with heavy hearts, because it is supposed to be obvious (and to the ordinary observant individual, thankfully, it is).
This mythical top 10% of wealthy South Africans do not occupy that space by accident. But if you read people like Schutte, you will never understand why they are, in fact, as rich as they are (unless she tries to convince you “it’s because of Apartheid!”). Obviously, they are rich because they provided something of value to consumers – something which consumers valued more than the billions of rands they gave these now-rich individuals. Because they provide this service at an acceptable price, they are rewarded with profit, and start climbing the ladder to richness. This is basic economic theory, which we see play out every day.
Of course, Schutte has a relativistic set of lenses which she sees the world through, and believes that, because someone is rich, someone else is poor as a consequence. The left’s obsession with income and wealth inequality (rather than actual poverty) has led to them completely missing how the poor today are – compared to the poor fifty, one hundred, five hundred years ago – extremely well-off. Most South African poor have access to motorized transport in the form of buses and minibus taxis (and for that, they can thank the market economy). Most South African poor have access to telecommunications infrastructure, such as cellphones. Cellphones, I remind you, which are, compared to 20 years ago, extremely cheap. Some cellphones can be bought in a Pep clothing retailer for just around R100 – and, again, only the market economy can be thanked for this being a possibility.
SEE ALSO: Let’s stop the obsession over income inequality! by Phumlani Majozi
To the extent that South Africa has adopted “neo-liberal” policies, they have produced untold prosperity, and a clear ability for the poor to become prosperous. Now, if you really want to see the poor starve while they slave away working at a state farm, you’ll adopt Schutte and her ideological comrades’ worldview:
“They do not keep up with inflation. The price of food has doubled because there are no regulations capping prices.”
The economic growth stall South Africa is currently experiencing is in largest part due to the actions of the State. Not the financial crisis, not the private sector, not corporate corruption, but the political decisions of government. If you find yourself paying substantially more for anything than you previous were, just ask yourself: what was the government doing then, and what is the government doing now? The answer will be: less then, and more now.
What, pray tell, do you think is going to happen when the government implements the national minimum wage? Will companies shoulder this extra cost out of the salaries of their executives? Why, of course not. Whatever those companies are selling you, be it a good or a service, will become more expensive. In all likelihood, the amount of employees working at those companies will either decrease, or any potential future plans to hire more employees or expand operations to other towns, will be shelved. The cost of compliance with the new law will be shifted, effortlessly, onto the shoulders of consumers and workers. This is not because the company is heartless, and, if you think so, you need to brush up on how you reason around the cause and effect of a social problem. It is the law – the State – that caused the problem, and the company is merely reacting in self-interest, like any individual human being can be expected to react.
SEE ALSO: What ‘Statistics’ Can’t Tell You About the Minimum Wage by Martin van Staden
It pains me to engage with Schutte on the capping of prices. This is elementary economics. The idea of price control being a beneficial policy in principle died when the Soviet Union collapsed due to price controls. What? The Soviet Union collapsed due to price controls? Yes, price controls as part of its broader system of market and economic controls.
Price controls produce two problems (and no long-term benefits, whatsoever), which are also generally caused by other forms of State intervention:
(1) It destroys the incentive to produce a quality good or service and causes disastrous ripple effects. If I am a baker who charges R20 for the quality loafs of bread I produce, and the State caps the price at R10, I will charge R10 and put significantly less effort in to the bread I am baking. I will immediately cease buying higher quality wheat (they, in turn, will also thus be affected by the price controls, and also dumb down the quality of their wheat production) and I will, as a matter of course, dismiss some of my employees. I will use less electricity, leading to decreased revenue for the power utility. I will cancel whatever cleaning services I was making use of, and clean the shop myself, thus leading to a decrease in their profits. This tragic list of changes can go on forever. Please click on the ‘Library’ link above, and download a free .pdf copy of The Economics of Freedom by Frederic Bastiat. Read especially his essay on “What Is Seen and What Is Not Seen”, to understand what I am talking about here.
(2) It destroys the price signaling mechanism of the market. Richard Ebeling writes the following in his essay “The Impossibility of Socialism”:
“Given that nothing ever stands still—that consumer demand, the supply of resources and labor, and technological knowledge are continually changing—a socialist planned economy would be left without the rudder of economic calculation to determine whether what was being produced and how was most cost-effective and profitable.”
Naturally the left doesn’t care about cost-effectiveness and profit. But despite them not caring, what will happen is that we will have shortages of some goods, and surpluses of others. Coupled with the first point, this usually means that supermarket shelves will be empty – and stay empty – because farmers do not know if there is an increased demand for the foodstuffs they are producing. Moreover, if the farmers cannot charge more for their product when there is, for example, a drought, whatever they are selling will be sold at price far below market value, satisfying a few early shoppers, and leading to the demise of the farmer’s business. Please watch this video by Learn Liberty, which illustrates the absolute necessity of a free pricing mechanism in the market:
“Draconian laws that are engineered to look democratic and which are supposedly there to protect human rights strip the poor of their rights and protect the rich. When the poor, who are unable to bear the burden, rise up to claim their constitutional rights, they are brutally disciplined by the state arms of police and militia.”
Which laws is she referring to? Most laws which have an effect on the economy – labor laws, industrial and professional regulation framework laws, etc. – do not protect the rich. What they do end up doing, to the detriment of the rich and the poor, is protect cronyists, i.e. those people who are comfortably in bed with the government to frame regulations in their favor, and against their smaller competitors. But Schutte is not against the cronyists, because she believes in more government intervention in the economy.
Logic dictates that the more the government involves itself in the economy, the more big corporations will involve themselves in the government. Before we can ‘get money out of politics’, we need to get politics out of money. If you think about this in terms of Schutte’s price control delusions, the only thing that is going to happen is that the big companies in the market will cozy up to the State and tailor the price regulations in their favor. This always happens, and no amount of “but it will be a People’s Government” fantasies will change human nature.
SEE ALSO: Human Rights Day – What Are (Your) Rights? by Martin van Staden
Schutte tries to appeal to constitutional rights, forgetting that the Constitution itself says that any protest must happen peacefully and within the bounds of the law. The terrorizing student riots sweeping South Africa are not lawful, and so it is very silly for Schutte to appeal to the Constitution when the Constitution is telling her and her social justice acolytes that it is not going to come to their defense. Our Constitution is far from perfect, being in favor of welfare and State intervention far too often, but Gillian, even the People’s Revolutionary Constitution still has some common sense provisions which do not give petulant children the right to destroy and maim as they see fit.
“Neo-liberal states rely on their police force, their military and the massive privatised security industry because they need to protect the rich from the poor. South Africa is a prime example of this and it is clear our ANC-led government is captured by global capital via white monopoly capital and dictated to accordingly.”
Oh, the police and private security are used to protect individuals from violence? Who would have thought? As explained earlier, Schutte does not classify resistance against an apparently (and ostensibly) illegitimate racist system to be ‘violence’, and, as a consequence, would expect the police, and private security, to stand by and watch – like the Zimbabwean police stood by and watched – as the mob seizes what they believe they are entitled to, with whatever force they see fit.
Oh, and there is no such thing as ‘white monopoly capital’. People such as Schutte use this phantom in their discourse often to evoke an emotional response by the reader. White monopoly capital is a lefty way of saying ‘businesses which are doing well, and which currently, or were once, controlled by individuals who happen to be white’. Notice how even businesses which are today owned by black individuals are also classed as being part of this white monopoly conspiracy. All you need to read into this is that the left misunderstands economics and believe that it is unfair that they cannot afford some things.
“But it is the black body that is most brutally disciplined by the state and institutions. This has been highly visible in the treatment of black students in the past week.”
Here is the fallacy we’ve been seeing in the United States recently, but now also in South Africa. Black people are apparently attacked in an unprovoked manner by armed individuals, well, just for the fun of it.
This is obviously nonsense.
The students are ‘treated’ in this manner because they are being violent. I have seen, especially last year, white students also being dragged away by the police when they overstep that thick boundary between ‘peaceful protest’ and ‘violent riot’. To anyone who has been present at this riots – and who doesn’t have a leftist agenda – you will distinctly remember that the security guards and police usually stand in a formation protecting property or other students from an advance by the rioters. They, themselves, do not advance at a peaceful group of demonstrating students.
But – again – Schutte sees defense of property and persons as reinforcing an illegitimate racist system. In other words, even if the police are simply defending something, she sees this as offensive violence. Critical Theory is a terrorist ideology, ladies and gentlemen, and should be rejected, otherwise we allow this kind of perversion of logic to rule society. Schutte is open about this redefinition of violence, writing:
“Most media fail to mention the violence meted out to them by the university management through their anti-protest rhetoric…” [my emphasis]
“This militia-type presence on campuses is unconstitutional…”
No. ‘The Constitution’ is an actual statute with actual provisions. It is not always going to be what you want it to be. ‘Militia-type presence on campuses’ is not mentioned or implied anywhere in the Constitution. The Constitution does provide, however, that we have a right to security of our persons. And no, Gillian, this does not refer to your kind of ‘security of person’ which means ‘students with a legitimate ideological goal being allowed to destroy and maim as they see fit without themselves being harmed’. The Constitutional provision is directed against actual violence, which includes the students’ riotous behavior, and excludes the police and private security’s defensive action being used against them.
“… the children who rise up to claim their right to a free education.”
I am glad Schutte and I can agree on one thing, being that these are children, if not in body, but in mind.
There is no right to free tertiary education in our Constitution. And there is no right to free anything in reality, despite what the Constitution might say. There is a wealth of literature on this topic on the Rational Standard. Feel free to click on the ‘education’ tag of this article and have a look.
“Perhaps on some level the lack of tangible action from civil society reveals a demographic which is also threatened by an educated black collective.”
As the left often likes to remind us, education and wisdom are not the same thing. The students who are currently rioting around the country (and I emphasize that they do not represent any racial group: they represent a terrorist ideology called socialism) are overwhelmingly from the humanities. Very few of them are educated in economics, and few of them are from the philosophy department in the humanities. They are often in the first two years of study in a BA degree, majoring in sociology or a related field. And it goes without saying that the (actual) sciences are virtually unrepresented in this ‘collective’. So, again, no, Gillian. You are incorrect in your assumption that giving these students a primer to Marx and Biko and Fanon renders them ‘educated’. They are dangerously ignorant, and you are reinforcing their ignorance with your anti-economic nonsense.
“… we consume scenes on TV news of battles between armed police and unarmed students – a phenomenon which is fast becoming normalised to the general public who are asked to believe that the students deserve this treatment. They do not.”
The cops are armed with non-lethal weaponry and only use it to protect themselves, other students, and property. So yes, if they are compelled to use their weapons, the rioting children do deserve what they are getting.
“It is time we recognise neo-liberalism as the number one enemy. When the majority does, it will be impossible to continue to support a neo-liberal government.”
I addressed this closer to the start of this article.
Our government is not neoliberal, and for 95% of South Africa’s existence, since 1910, we have not had a neoliberal government. What we did have, however, were interventionist governments flavored by some or other kind of socialism.
And that is our number one enemy: socialism. Socialism is not an economic theory, but anti-economics. It is an ideology of (real) violence whereby everyone is expected to strictly toe the ideological line set for them by the State, and if not, they will be sent to gulags or, as a better alternative, killed. Gillian Schutte is trying to convince you that freedom is more violent than violence itself.
Rothbard’s immortal principle that it is unacceptable for those who do not understand even the basics of economics to be given the spotlight of public discourse, is important now more than ever. At South Africa’s current rate of regression, we stand to repeat all the mistakes we made in the past which led to our current state of affairs where millions waste away in State-created poverty. We politically and socially conscious South Africans must stop taking anti-economic ideologues like Gillian Schutte seriously. She does not understand what she is talking about, and she does not want to understand. But an understanding of economics is, quite crucially, the key to South Africa’s potential prosperity.
Socialism as an ideology – I repeat, it is not economics – should similarly not be taken seriously. It has very little intellectual merit, if any. However, we must recognize that socialism does threaten our future, and is unquestionably dangerous. As Nicholas Woode-Smith writes, “bad ideas are kept alive through a dogmatic and total adherence to an ideology without or in spite of reason”, but are similarly removed, if we just engage in reasoning.