This article was first published by Business Day on 16 May 2024
The dire socioeconomic distress that afflicts SA, as manifested in the downward spiralling of economic growth — especially if one factors in population — is wholly and exclusively a consequence of the statist, interventionist socialist policies of government.
Two facts show the magnitude of our cataclysmic state of affairs. As investment strategist Magnus Heystek points out, more unemployed than employed people. SA debt is now more than R5-trillion. Looking back at 2008, Heystek states that at that point the debt was R500bn.
The question of what needs to be done looms large. The point of departure in propounding a simple, pragmatic solution is to study empirical evidence that explains the high-growth economies’ achievements.
Singapore is the best model to emulate. Juxtaposing the economic performances of Singapore and Malaysia is a useful exercise.
Sourced from countryeconomy.com, in 2018 the per capita GDP of Singapore was $66,837 and that of Malaysia $11,080. In 2020, Singapore’s was $61,274, while Malaysia posted $10,460. The decline in the per capita GDP output of both countries had to do with the Covid-19 pandemic. However, the GDP per capita as recorded in December 2021 for Singapore bounced back to $77,710, while for Malaysia it was $11,476. The populations of Singapore and Malaysia are 5,637,000 and 33,938,000, respectively.
What accounts for the gaping discrepancies between these two countries?
Singapore is the world’s most economically free country according to all indices based on empirical data. It is shown by studies such as the Heritage Foundation’s index of economic freedom (IEF) and the Economic Freedom of the World, which is spearheaded by the Fraser Institute and co-published by the Economic Freedom Network, that comprises more than 100 think-tanks (including the Free Market Foundation) based in various countries globally.
Out of 184 countries, SA occupies the paltry position of 111, as cited by the IEF 2024 report. Both reports indicate that Mauritius is Africa’s most economically free country.
Economically irrational
Economic freedom, a free market, is objectively defined in terms of protection of private property; voluntary exchange; freedom to compete; personal choice; and its concomitant of personal responsibility.
These economic characteristics reflect the economy of Singapore. Unlike Malaysia, Singapore lacks a national or regional statutory minimum wage law. It also lacks affirmative action policies, as opposed to Malaysia, which has such an economically irrational and morally egregious policy.
What should the post-election government do to reverse policies that have devastated a once-vibrant economy? The new government — of whatever coalition — must come to terms with the fact that the incumbent government’s boa constrictor policies and the myriad regulations that have been suffocating the spirit of enterprise should be abrogated the day after a new government is installed.
The incumbent government has neither the political will nor the moral fixity of purpose to implement policies based on individual liberties. The new government must remove any ideological blinkers and implement pragmatic policies that have been proved to deliver and that will have the effect of a rising tide that floats all ships.
The new government must accept the irrebuttable reality that it is the private sector exclusively that creates wealth and employment. The government consumes wealth and pretends to create jobs — at taxpayers’ expense.
Reinforcement of the case for a free market is encapsulated in the words of former president Nelson Mandela: “Money won’t create success, the freedom to make it will.”
