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ARTICLE: THE URGENT NEED FOR ECONOMIC LITERACY

zuma-world-economic-forumIn a recent article (abridged in the Cape Times, 20 January 2014) Professor Jane Duncan pointed to the fact that although socialist ideas are widely espoused by the masses there is little reference to socialism in most of our media. She says that objective viewers "would probably conclude that socialism was consigned to the dustbin of politically bankrupt ideas long ago."

She sees the National Union of Metal Workers’ (NUMSA) decision to abandon the ANC as "a turning point for the country’s politics" because of its resolution "to explore the establishment of a movement for socialism." However, when left-wing commentators and organisations like NUMSA refer to "socialism" they generally mean "communism" - and not European-style democratic socialism. Irvin Jim - the Secretary-General of NUMSA - made it clear to me in a radio debate last year that he supports the establishment of a communist society in South Africa and views Cuba as a role model. The same is broadly true of COSATU, which has committed itself "to build Marxism-Leninism as a tool of scientific inquiry" and to "build a socialist movement coalescing around the SACP." At its 2006 Congress, COSATU asserted that "the dictatorship of the proletariat is the only guarantee that there will be a transition from National Democratic Revolution to socialism."

The reason why articles propagating this type of "socialism" (i.e. communism) have little traction in most of our media is because all past attempts to establish "socialist" societies have without exception ended in poverty, stagnation and totalitarianism. Free markets on the other hand are not an artificial construction but are the natural and universal mechanism for human economic cooperation. They rest firmly on transparent self-interest in which people and companies compete freely with one another to provide better and cheaper goods and services to the public. In pursuing their own interest - as Adam Smith observed - people frequently promote that of the society more effectually than when they really intend to promote it. He added that he had "never known much good done by those who affected to trade for the public good."

Free enterprise is the only proven vehicle for the generation of wealth and genuine economic progress. It is a vehicle that can be driven recklessly by greedy and irresponsible bankers - as was undoubtedly the case in 2008. However, the main causes of the 2008 crash were firstly, the disabling of the vehicle’s brakes by the "too big to fail" approach of governments; and secondly, the failure of the regulatory traffic police, who instead of imposing a reasonable speed limit, encouraged reckless driving by guaranteeing enormous volumes of worthless mortgage bonds. 

Nevertheless, Prof Duncan does have a point. There is an alarming disjuncture between the socialist and populist perceptions of the masses and the more informed media debate on economic issues. Our failed education system has left millions of South Africans particularly susceptible to the superficially appealing nostrums of socialism. They are easily seduced by ideologies that promise immediate short-term benefits through the distribution of property that belongs to others. People like the idea of struggling against "evil oppressors" - caricatured as "imperialists" and "monopoly capitalists".

The problem is that this process is invariably destructive of the long-term interests of all those involved - and particularly of workers and the poor. Irresponsible trade unions and rigid labour markets are among the main causes of South Africa’s unsustainable levels of unemployment and its failure to attract the foreign investment that is essential for sustained economic growth.

  • AMCU miners who are threatening to strike for R12 500 per month (higher than the purchasing power of average wages in Poland or Israel) are jeopardising the future of the mining industry and of their own jobs.
  • Last year NUMSA strikes cost the car industry about R20 billion - and led to the cancellation of BMW’s expansion plans.
  • The recent 52% increase in the minimum agricultural wage will lead to the loss of tens - and perhaps hundreds - of thousands of jobs.
  • Between 2008 and 2012 South Africa lost 440 days in strikes per 1000 employees - 18 times more than Britain during the same period.
  • According to the World Economic Forum’s latest Global Competitiveness Report, labour-employer relations in South Africa are the worst of the 148 countries surveyed. Hiring and firing practices are the second worst and flexibility of wage determination and pay and productivity are in the bottom six.

Clearly, this is unsustainable and threatens not only the interests of the workers involved but also of employers, the economy and the country.

The problem is not that the readers of our newspapers are insufficiently informed about socialism - the problem is a lack of basic economic literacy throughout the broader society. The main source of information for many disaffected workers and protesters is the inflammatory rhetoric of communist unions and populist demagogues. There is an urgent need for accurate, authoritative and widespread information on how the economy actually works. 

The Free Market Foundation used to provide excellent basic economic courses for workers - but its private sector donors, for some unfathomable reason - no longer fund such programmes.  Nevertheless, it is manifestly in the interest of business - and of our broader society - to support mass communication programmes to inform workers and the general public of basic economic truths - that

  • if wages increase without improvements in productivity, jobs will be lost;
  • if workers regard employers as class enemies rather than as partners, companies will find it difficult to succeed;
  • workers in free economies have much higher standards of living than those in "socialist" economies;
  • profit is a good thing. It is much better than making a loss; and
  • communism has been a disaster wherever it has been tried. 

By Dave Steward, Executive Director of the FW de Klerk Foundation

Photo credit: World Economic Forum / Foter.com / CC BY-NC-SA


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