SA needs some of Maggie’s medicine

LET us ask: Which is the more important — the creation of wealth or the redistribution of wealth? This begs the notion, to coin a phrase, that if wealth is not created then there is none to be redistributed.

All of a nation’s wealth is created by individuals working alone and together to better themselves and their families. There is no other source of wealth. Societies with little or no natural resources such as Japan, South Korea, Singapore and, apart from its hydroelectric power, Switzerland, have flourished because of the quality of their human capital in the form of education, work ethic and sound family and moral foundations.

Wealth having been created, the state confiscates an arbitrary slice of it in taxation to spend, allegedly on behalf of those who created it, but usually on providing financial means to its political supporters, those in its employ, those it chooses to patronise and those who are unemployed and often unemployable. Tax monies are also provided to loss-recording, debt-incurring and woefully run state enterprises.

In his new biography of Margaret Thatcher, the author Charles Moore quotes her addressing parliament in 1966 on this deplorable governmental stupidity. “I dislike permanent subsidies,” said the lady. “Of course, the chancellor will be very popular with inefficient industries, but I do not wish to be popular with inefficient industries. I would rather be popular with the efficient . . . The inefficient benefit from them [subsidies] because they keep them in business when they ought to go out of business.”

Moore writes: “Harold Wilson’s first two administrations, which ran from 1964 to 1970, accepted almost uncritically the idea that the state could control what the left liked to call the commanding heights of the economy.” In pursuit of these “commanding heights”, Wilson drove marginal tax rates in the UK up to 96.25%,which was payable by a family with two children if their income reached £18 900, even then not an exceedingly large amount.

What this did was to stifle enterprise and drive skilled people from their careers and their country in what became the first use of the phrase “brain drain”.

Such high tax rates also distort the economy by diverting investment away from private initiative and into the state coffers where it is, inevitably, wasted.

Naturally, such swinging tax rates motivate individuals and companies to arrange their affairs to attract the least amount of tax, a right stoutly defended by Adam Smith in The Theory of Moral Sentiments.

Smith also advised that there had to be certainty and clarity and equity in tax policies. This was not the case under Old Labour in the UK and it is certainly not the case in South Africa today. As the British economy crashed and the pound collapsed, writes Moore, Thatcher believed that the government “was little better than a robber”. Sound familiar?

The Spanish philosopher George Santayana wrote: “Those who cannot learn from history are doomed to repeat it.” Surely, thus, it is time for our leaders to wake up to the reality that they are unable to manage the economy, the rand has collapsed, unemployment is rife and institutionalised, crime is rampant and the tax burden, which provides no return to a dwindling minority, is crippling and demotivating.

Thatcher did not mince her words: “Freedom has been gained in this country not by great abstract campaigns, but through the objection of ordinary men and women to having their money taken away from them by the state.”

It is time for fresh leadership to take us, as Thatcher did for the UK, out of the wilderness.