Spot the difference

• This column was first published in Maverick, 22 February 2007. Go to www.maverick.co.za to subscribe to it in full print glory.

The ANC government is falling into the same socio-economic policy trap that bedevilled the Nats. And it will fall much harder.

What would one call an economic policy that lauds public works programmes to combat unemployment, that indulges in grand social engineering schemes involving forcible market interventions, or that advocates price caps and wage floors in the vain hope that this will solve perceived supply or demand problems? What about an industry of which half is state-owned and under-performing, and half is highly regulated and subject to a myriad tariffs, quota requirements and levies to protect favoured local industries at the expense of local consumers? What would we call a policy that is opposed to the self-indulgent materialism of the modern, Western world, as Mbeki declared himself to be in his previous State of the Nation speech?

If it reminds you of national socialism, you wouldn’t be far wrong. It is little different from the economic policies of the old National Party, other than that instead of benefiting a small minority, the policies are now intended to benefit all South Africans – critical though that one difference is.

Let’s be clear from the outset: this is not a defence of the Nats, nor a claim that the ANC is racist. I do not wish to argue that limited and temporary measures to redress the gross injustices of the past are not both politically necessary and fair. I also need to make clear that in using the term national socialism, I’m speaking only of economic policies. I’m not suggesting that there is any risk the ANC will impose the kind of social policies that the old NP (and indeed the German Nazi Party) entertained.

What I’m hoping to argue is that if an economic policy of national socialism, with high levels of public make-work programmes, expanded tax-funded social welfare programmes, and other forms of government interventionism in the economy, didn’t work for only a few million whites, why would South Africa be able to afford these benefits for all of its citizens?

The argument that government service delivery is a bad idea would be harder to make if it worked. But it doesn’t. Even the rich countries of Europe can’t afford the social security programmes and entitlement schemes they have now. Why would we be able to afford it?

Despite admirable words and unquestionable good intentions, every time the president makes another State of the Nation speech, we hear that “more must be done”. I’d say, “So do it already, instead of giving money that was supposed to be spent on transport sector education to an outrageous swindle to buy half of South Africa’s sport clubs.” But the fact is, government service delivery does not work, and this shouldn’t surprise anyone. Sadly, however, in many areas, the private sector isn’t even permitted to try.

Telecommunications is a classic example. Telkom, when it was still largely state-owned, was given a monopoly in return for a commitment to deliver lines to under-serviced areas. It rolled out the lines, and then promptly cut the majority of them off for non-payment. Having met its rollout targets, and having since been listed, its shareholders are reaping the benefits of years of profiteering, at the expense of South Africa, and with the blessing of the government. The hangover of this failed policy endures, though it is often described as “failed privatisation”. As if privatisation means merely turning an inefficient state-owned enterprise into a profiteering private-sector monopoly.

Now there’s the latest grandiose dream: “integrated human settlements”. That anyone can buy property anywhere isn’t good enough. Your neighbour has to be poor too, and live in a R50 000 house. The smart investor will immediately spot an opportunity to buy up the undercapitalised properties to build and sell R1 million houses instead, but I’ll bet the lucky new owners won’t enjoy the freedom to sell their “low-income” properties. The rich won’t go for it, and I doubt the poor will either, so all that will happen is properties that aren’t in “integrated human settlements” will get even more expensive and dump yet another layer of potential home-owners into the rental market. It’s a daft idea on so many levels. But then, that goes for social-engineering dreams in general.

It is true that the ANC was elected by an overwhelming majority. This frequently happens when governments promise their constituents health, wealth and a better life. The sad fact, however, is that these things are not within any government’s power to promise.

If the goverment really wants to reduce unemployment, and tackle poverty, and raise the standard of living of all South Africans, there are plenty things it can do.

It can make it a priority to grant formal title deeds to low-income earners with properties in townships. This would not only guarantee security of tenure, but will permit them to sell property and buy upmarket, or offer collateral for the credit the government always complains they can’t get. And while it’s reviving dead capital, in Hernando de Soto’s words, it can sell off – or give away – the huge tracts of valuable but unproductive land it owns itself. Instant poverty relief. Just add water.

It can radically reduce the red tape and tax burdens that makes it so hard for startup companies to grow from small-time labour brokers or second-economy informal businesses into proper formal-economy organisations, with access to capital and an ability to focus on the backbreaking, high-risk work of creating new wealth and jobs. Instead, government puts the cart before the horse by trying to conjure jobs out of nothing and extorting the means to do so from the very people who are best positioned to create them in the first place.

It can reform the labour laws which today protect the employed at the expense of the unemployed. The easier it is to legally cut staff costs when it proves to be unsustainable, the more inclined companies will be to operate at optimum – rather than minimum – staffing levels, and the more likely it is that dead capital now bound up in failing businesses will be redeployed to where it will generate job-creating economic growth.

It can unilaterally remove import tariffs on all goods and materials, to make South African industry more competitive in the global market by lowering input costs, and to benefit South African consumers by making their hard-earned rands stretch further. The rich might be able to afford to subsidise a few thousand workers in inefficient industries by buying expensive “Proudly South African” jeans, but I know a fair number of people for whom this cost would be the difference between healthy living and malnutrition, or between raising an unskilled, unemployable yob and sending a child to school.

We’ve learnt many lessons from our apartheid past, but one lesson our government has apparently not learnt is that national socialist policies were in large part what doomed it. Just because the intended beneficiaries now include all South Africans doesn’t mean that the policies themselves are any more sound. And if the economy appears strong, it performs despite these policies, not because of them. In reality, and given the exceptionally favourable global economy, it underperforms its true potential by a long way.

So instead of crowing about our sub-five percent growth rate, while offering more noble-sounding bureaucratic wishlists about poverty and unemployment, a future State of the Nation address might note that South Africans are energetically and optimistically creating new wealth at its real capacity of eight or ten percent. It could report that government, by the alacrity with which it got out of the way, has freed all South Africans to help deliver on the constant promises of addressing poverty and unemployment.

Copyright (c) 2007, Business Century Publishing (Pty) Ltd.