Eco­nom­ics is cer­tainly no ide­ol­ogy

The Star Early Edition - - LETTERS - Phum­lani Ma­jozi and Martin van Staden

EO-LIB­ER­AL­ISM” has be­come a con­ve­nient term to ide­ol­o­gise eco­nom­ics, treat­ing it as an “idea” which can be de­bated and po­ten­tially dis­carded. Cer­tainly this is the ap­proach taken by so­cial jus­tice ac­tivist Gil­lian Schutte in her ar­ti­cle: “SA needs an egal­i­tar­ian econ­omy” pub­lished in The Star on May 25.

Eco­nom­ics is not an ide­ol­ogy, whether it’s called neo-lib­er­al­ism or cap­i­tal­ism. It is not a set of the­o­ries or opin­ions, but a set of value-free facts.

For in­stance, there can be no de­bate about in­cen­tives in the pri­vate ver­sus pub­lic sec­tors. Un­less fraud is at play, in the pri­vate sec­tor longevity de­pends en­tirely upon con­sumer sat­is­fac­tion oth­er­wise the firm dies.

In the pub­lic sec­tor, the sat­is­fac­tion of the cit­i­zen is im­ma­te­rial, as the in­sti­tu­tion of gov­ern­ment can­not be liq­ui­dated and sold off to its debtors (Greece still has an in­de­pen­dent gov­ern­ment and is not a Ger­man prov­ince).

And, un­like in the pri­vate sec­tor, those who mis­man­age gov­ern­ment in­sti­tu­tions rarely face con­se­quences. De­trac­tors might say con­sumers are not sat­is­fied with many pri­vate firms, which leads to an­other fact of eco­nom­ics: value sub­jec­tiv­ity.

When a con­sumer sac­ri­fices an amount of his money, labour or time in ex­change for some­thing else, it means that he val­ues that some­thing else more than that amount of his money, labour or time.

There­fore, con­sumers might seem to be very dis­sat­is­fied with for in­stance an ex­pen­sive health in­surance com­pany but the eco­nom­ics – the facts – in­di­cate that they still value the ser­vice they are re­ceiv­ing more than the amount be­ing charged.

How­ever, when gov­ern­ment props up mo­nop­o­lies or sub­sidises un­prof­itable firms then the con­sumer’s sat­is­fac­tion takes a back seat. These waste­ful sup­ports are made us­ing tax­pay­ers’ money – money for which South Africans, poor and rich, have worked very hard.

At­tempts to ide­ol­o­gise eco­nom­ics into the straw-man “neo-lib­er­al­ism” or or­tho­dox eco­nomic “the­ory” em­anate from those who are ac­tu­ally en­gaged in try­ing to re­place eco­nom­ics with their ide­ol­ogy. And this ide­ol­ogy can take any form. In our past, apartheid was the ide­ol­ogy with which na­tion­al­ists tried to re­place eco­nom­ics and to­day that ide­ol­ogy is of­ten called “so­cial jus­tice”.

In the name of so­cial jus­tice – it is de­bat­able how “so­cial” and how “just” it is – the price mech­a­nism has given way to price con­trol, whereby in­cor­rect mar­ket sig­nals have been sent down the pro­duc­tion line caus­ing overand un­der-pric­ing.

For ex­am­ple a con­tribut­ing fac­tor to the in­flated price of data is that some ser­vice providers are forced by gov­ern­ment to pro­vide data to ed­u­ca­tional in­sti­tu­tions at a dis­counted price.

An­other ide­ol­ogy-laden “eco­nomic” pol­icy is the min­i­mum wage, which con­trols the price of labour and pre­vents an ex­change of work for pay if the rate is be­low that which so­cial jus­tice ide­o­logues deem de­cent, even if the worker has no ex­pe­ri­ence and is will­ing to ac­cept some­thing rather than noth­ing.

To take an anal­ogy from Dr Chris Freiman, as­so­ciate pro­fes­sor of phi­los­o­phy at the Col­lege of Wil­liam & Mary: “Some­one who em­ploys a pau­per at be­low the min­i­mum wage would ap­par­ently be more morally rep­re­hen­si­ble than some­one who does not pay the pau­per at all.” If an em­ployer can legally of­fer the pau­per noth­ing, then why is it il­le­gal to of­fer him some­thing that is bet­ter than noth­ing? Schutte and Thomas Piketty’s view of the Marikana mas­sacre as a con­se­quence of “neo-lib­eral” poli­cies demon­strates their will­ing­ness to re­place eco­nom­ics with ide­ol­ogy. Marikana was the only con­tem­po­rary ex­am­ple of con­flict caused by “in­equal­ity” that Piketty could find to use in his 700-page mono­logue. How­ever, it is in­cor­rect to an­a­lyse what hap­pened in Marikana with­out due re­gard to the reg­u­la­tory con­text.

South Africa’s labour mar­ket is heav­ily con­trolled by gov­ern­ment in­ter­ven­tion, which means that lower-thanideal wages might be due to the higher in­di­rect price of labour im­posed by gov­ern­ment.

The un­for­tu­nate con­flict that oc­curred was more likely to be a protest against un­fair­ness, rather than the aca­demic idea of “in­equal­ity”. With Pres­i­dent Ja­cob Zuma’s gov­ern­ment de­ter­mined to stran­gle the econ­omy with more anti-mar­ket in­ter­ven­tions in the name of “rad­i­cal eco­nomic trans­for­ma­tion”, South Africans may face an­other fu­ture Marikana mas­sacre.

Piketty and com­pany like the Marikana ex­am­ple be­cause it ap­pears to en­dorse the Marx­ist idea that the poor will “rise up” against the rich. Yet this has never hap­pened with­out the pres­ence of Marx­ist agitation, ie it is a self-ful­fill­ing prophecy. In­stead the poor as­pire to be­come the rich and, where free mar­kets have been al­lowed to func­tion, have be­come much more in­ter­ested in pri­vate prop­erty and free­dom from gov­ern­ment in­ter­fer­ence as they move into the mid­dle classes.

“Rad­i­cal eco­nomic trans­for­ma­tion” must be eco­nomic to stay true to it­self. Eco­nom­ics dic­tates that if the heavy hand of gov­ern­ment is felt in the econ­omy, con­sumers – and es­pe­cially the poor – are go­ing to suf­fer. The Free Mar­ket Foun­da­tion

RE­MEM­BERED: Mem­bers of Amcu gather to com­mem­o­rate Marikana killings four years ago in this file photo. Marikana was a protest against un­fair­ness, not against ‘in­equal­ity’, say the writ­ers.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.