This article was first published by The Citizen on 2 October 2024
Capitalism and free markets are often criticized by some in this part of the world, yet they remain the greatest example of the power of unity and the collective human spirit.
Free markets are frequently mentioned in a negative manner, blamed for failed governmental policies, and seen as the cause of poverty and suffering. However, free markets are the basis upon which we enjoy a comfortable modern life, and the only reason wealth can be created.
An example illustrates this concept. In society, not everyone can do everything they want or desire. In an agricultural society, individuals have different preferences when it comes to farming. Some may prefer fruits over vegetables, and within fruits, certain types; this variety stems from people’s tastes and preferences.
Since time is scarce, people plant what they prefer most. However, just because what you prefer most is available, it doesn’t mean your entire value scale is satisfied. Therefore, to obtain what is not available from others, there are two ways: through force or through voluntary exchange. Markets are based on voluntary exchange.
Expanding on our example, let’s say person A trades their vegetables with person B, who wanted fruits. Both individuals still produce their own goods, but trade is necessary to obtain what they desire which cannot or will not be produced by them personally.
Person A can focus solely on vegetable farming, knowing others will trade with him for different types of food. Specialisation is powerful because it allows individuals to focus on what they do best, assuming others are also focusing on different things. Without this diversity, specialisation would not work, and humanity would not have progressed to where it is today.
An example of how a pencil is made – a story first written by William Read – shows the power of specialisation and trade since a pencil, something super cheap across the world, cannot be produced by one single person. The lead, the wood, the paint, all of it, needs different people from different places to make this one simple, cheap thing. That is the power of markets!
Empirical evidence overwhelmingly supports the claim that free markets create wealth. The People’s Republic of China is a recent example of how voluntary trading can eliminate poverty at record levels. It is always worth mentioning that it is markets, and not the Communist ideology of the Chinese Communist Party, that created prosperity for Chinese people. When virtually no markets existed during the time of Mao, China had famines, and it was after the institution of markets by Deng Xiaoping when the Chinese tiger we know today was born.
Markets, defined as people trading voluntarily, create prosperity. Throughout the world, less state intervention leads to richer populations. Unfortunately, in my beloved continent and country, there is still a demonisation of voluntary trading. This mindset hinders our ability to fully harness the power of trade for prosperity.
This demonisation does not emanate from every corner of society, though. It primarily comes from the leaders who are at times elected and thus maybe it could be somewhat justified that they represent the will of the people. In other times, the leaders assume power through military coups. It is these people, supported by some in the academic field, who are opposed to the idea that Africans using their own agency and no one else’s can prosper without their stewardship.
In the Fraser Institute’s Economic Freedom of the World index, which measures how free an economy is using different standards like ease of opening businesses and the regulatory burden of operating one, African nations rank among the least free economies in the world, with a few exceptions. Is it a wonder then that African states have some of the worst quality of life indicators, the lowest income levels globally, and economies whose combined size produces as much wealth as the United Kingdom produces on its own?
To those who may want to hide in the injustices of the past to justify the stagnation and regression of the present, I only point them towards the East. There too the Westerlies of colonialism and injustice swept through. Yet they are growing their economies at much faster rates than we are here on the African continent. So, our excuse cannot be colonisation or a history of injustice when we know that it is possible to prosper despite such a history.
For those who believe in the individual agency of African and South African individuals to create their prosperity without state intervention, we can only hope that one day there will be enough of us to arrest our march down the road to serfdom.