You Don’t Want Free Stuff, and Here’s Why

Marxism asserts that communism would inevitably follow on the collapse of capitalism, and therefore the workers can expedite the process by staging a revolution (violent or otherwise). However, there are two provisos: The workers must have class consciousness (i.e. they must recognize that they have...

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Marxism asserts that communism would inevitably follow on the collapse of capitalism, and therefore the workers can expedite the process by staging a revolution (violent or otherwise). However, there are two provisos:

  • The workers must have class consciousness (i.e. they must recognize that they have similar economic interests); and
  • The state wherein the revolution is to take place must be a highly developed capitalistic economy.

sandtonIn South Africa it is often said that the first world and the third world were combined, with a developing and a developed economy existing beside one another simultaneously. For a long time the government ‘assisted’ only a small portion of the country in building a world class economy, while the larger portion of the population was actively being economically suppressed by the same government.

When our new constitutional dispensation came into being in the mid-1990s, that changed. While these two kinds of economies still existed side-by-side, the clear line dividing them disappeared. South Africa’s unified economy could now develop as one, without arbitrary government intervention keeping one side down or propping the other one up. That was 22 years ago.

In those two decades, the government has attempted to establish a successful welfare state, as well as a successful regulatory state. For example, the National Health Insurance policy currently being pushed by government not only seeks to give all South Africans health insurance, but also seeks to regulate the private medical sector, one of the best in Africa, into oblivion. The White Paper published by the Health Department ignorantly includes a reference to how successful the program has been in Estonia, and proponents of the system always love pointing toward Scandinavia. Estonia and all the Scandinavian nations are some of the most capitalistic in the world, second only to the Asian Tigers.

A ‘national democratic revolution’ in South Africa is untenable with our current economy. Marxists should know this. Where socialism, in whatever watered down form it appeared, has ‘worked’, it was on the back of a highly developed economy which could afford to pay for all the ‘free stuff’. Here, we can neither afford, nor administer such a process. We need a good few hundred years of economic growth and capitalistic freedom before the left can start advancing their ideology of terror.

Allow me to explain, even if we could afford universal healthcare and a massive welfare state, why we shouldn’t want it:

  • Inferior quality: think for a moment of the best and worst services you’ve ever had to deal with. The top group will almost always be private goods and private services, and the bottom group will similarly almost always be government services. The queues at public hospitals are not found at private hospitals and private security always responds to emergencies quicker than the police. There is a reason for this: where goods and services are privately provided, there is a big incentive for the private businessmen to do so well, otherwise risk going out of business. Governments do not operate on the same logic: elections are few and far between, and even then, there are about a dozen ‘alternatives’ to choose from. In the private sector, there are thousands and perhaps millions of alternatives.
  • Price has an economic function: if we wish to have a just distribution of resources and effective management of those resources, we need to defer to prices which have come about as a result of the entire productive and distributive process, through the competing and cooperation of individuals across the world. The National Health Insurance scheme hopes to introduce price controls for healthcare. This, like with anything that is ‘free’ or has its price controlled, will have a disastrous effect on market forces. As Hans F. Sennholz once wrote:

“The pricing process thus reveals itself as a social process in which all members of society participate. Through buying or abstaining from buying, through cooperation and competition, the millions of consumers ultimately determine the price structure of the market and the allocation of the income of each individual.”

Indeed, a price is the outcome of the entire production process, and is not an arbitrary number decided upon at the point of sale by a greedy capitalist. Sennholz continues:

“The market price equates the demand for and the supply of goods and services. It is the very function of price to establish this equilibrium. At the free market price, anyone willing to sell can sell, and anyone willing to buy can buy. Surpluses or shortages are inconceivable where market prices continuously adjust supply and production to the demand exerted by the consumers. […] Africa, Asia, or Europe – government controls over prices control and impoverish the people. And yet, omnipotent governments all over the world are bent on substituting threats and coercion for the laws of the market.”

  • bernie first day as presidentIt’s not free anyway: whether we wish to blissfully ignore this fact or not, it doesn’t go away. The government has proposed that income tax be raised, that value-added tax be raised, and that payroll tax, too, perhaps be raised, in order to pay for National Health Insurance. Whichever way you look at it, anything the government tries to ‘do for you’; you will end up paying for it either directly or indirectly. The opportunity cost is obviously the worst, with P.J. O’Rourke having joked “if you think health care is expensive now, wait until you see what it costs when it’s free,” referring to how much good could have come from the money remaining in the hands that earned it. The wealthy usually pay directly, with this punishment for success having led increasingly to capital flight out of South Africa.

The poor, as always, are the hardest hit, paying the biggest price indirectly. With low wages, value-added tax has a much worse effect on the poor than on the wealthy. Being dependent on government, the poor suffer the brunt of every little mismanagement, oversight, corrupt conduct, or simple bureaucratic disinterest. Whereas they could get quality services from the private sector where prices would always decline if the government did not attempt to hinder competition, or even ‘compete’ itself, they have to settle for what has been historically shown to happen consistently: bad government service.

This article does not even scratch the surface of the fallacies underlying every government promise of ‘free stuff’. What’s worse yet is that government knows that its reasoning is incorrect – the Treasury has many well-qualified economists among its rank and file, after all. However, childlike students who demand things like ‘free’ education are speaking out of turn. They, while masquerading as Marxists who ostensibly know a bit about ‘power structures’, are playing right into the most obvious kind of trap set by the political class. Playing along, of course, is the mainstream media. As Loyd S. Pettegrew and Carol A. Vance notes:

marx took seriously“Politicians of both persuasions use free benefits to build their constituencies and then extend the free benefits to an even wider group. As long as those benefits are for the seemingly disadvantaged or needy, the press will give the programs great coverage and the political promoters become public heroes instead of the public pariahs [Ludwig von] Mises argues they really are.”

South Africa has a worryingly small tax base, a fact that the government admits – knowing their socialistic civil society fans won’t care because they don’t understand basic economic truths. While I am a committed and passionate anti-Marxist (which means ‘pro-human prosperity’), I cannot help but feel the need to point out to these people that they are getting way ahead of themselves. Let the economy grow, as it will, under free market conditions, and then, after poverty has been all but eliminated, they can try their detached intellectualist drivel again.

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  1. Adam Habib Reply

    Lol bra. Check out your economic history. Scandinavia may be capitalistic now (though that’s definitely state capitalism – not free market) but it’s major leaps of development were far removed from capitalism. Asian Tigers as well – capitalistic now, but developed through huge state intervention.

    Enjoy yourself. Stay safe.

    Great article though! Fascinating perspective!

    1. huawei Reply

      hectic. lol.

  2. Altus Pienaar Reply

    Hans F. Sennholz might have a point only if economies are kept smaller and localized. Once centralized, market forces does not play by the rules anymore and corruption in the private sector becomes epidemic. The list of examples is endless; enron, haliburton, mansonto and even closer to home the tiger brands price fixing episode are real examples of how a free market gets exploited to our detriment while the elite flourish.
    Although I do not favor any centralism or government control I cannot see how an effective free-market can exist in the current capitalist system.

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