Nationalisation or freedom: What would Julius do?

Mar 11, 11 Nationalisation or freedom: What would Julius do?

Julius Malema and his posse are right: the unemployment situation in South Africa, the inequality, the lack of economic freedom, is a ticking time-bomb that cannot be ignored. The poor will eventually stop being okay with rich people riding around in fancy German cars, wearing expensive, imported watches and drinking x-year old whisky that costs their annual family income.

The solution, the ‘cure’ the ANCYL proposes, is nationalisation. How does nationalisation of the mines fix massive unemployment? Nationalisation suggests a change in ownership; it doesn’t change output or productivity. The mines won’t suddenly become more profitable because they are state owned. They won’t be more productive, so they won’t hire more people.

In a recent speech, Malema invoked the example of Botswana. This may explain what he has in mind. In Botswana, the government is a majority stakeholder in mining. This means that the government gets a larger proportion of the profits than would otherwise happen (for example, through taxes) and (some of) this is fed back to the people in public investment and grants. The result? A population dependent on the whims of the government as to how the money is used. Not unlike the population of Bahrain (and several other middle-eastern dictatorships) who are rising up against their dictators because they want freedom, not hand-outs. In many of these places, the standard of living and average income levels far outstrip those in South Africa. It appears that isn’t enough.

Even where a democracy theoretically exists, if most people live on government hand-outs, the power of ruling party over people (because they are dependent on grants) ensures that, most of the time, the people won’t risk voting against them. This means the party stays in power and is able to act with impunity, without the usual checks and balances to curb actions that go against the people’s interests and demands.

This is not to suggest that social grants are wholly bad. Social grants provide a crucial safety net in difficult times. But when they are the only way that the poor can access funds to survive, and in the absence of serious investment to stimulate job creation and facilitate movement out of absolute poverty, hand-outs are a problem.

What is Julius Malema’s vision for South Africa? A country like Botswana where the government has a major stake in mining and enough money to invest in the people, just as long they don’t demand too much freedom? A ‘benevolent dictatorship’ like Bahrain, where natural (oil) wealth is used to buy the silence of the majority?

The ANCYL’s desire to nationalise the mines suggests that, either ANCYL leaders wish to enrich themselves, or they would like to see a ‘benevolent’ dictatorship where the people are reduced to ‘beneficiaries’ of the state – dependent, grateful, abject.

It took significant struggle and the lives of many people to forge this country as a place of freedom. If the ANCYL had to choose between that freedom and their vision of nationalisation, which one would they pick?

Thumbnail image by Bert Kaufmann

  • RT @TheAfricanScene: Nationalisation or freedom what would julius do? — http://tiny.cc/cdkas — #malema

  • Hard Rain

    “This is not to suggest that social grants are wholly bad. Social grants provide a crucial safety net in difficult times.”

    I’m assuming by “difficult times” you mean economic depressions which are usually caused by, and always aggravated by, statist intervention. With social grants, even to the barest minimum of subsistence, the government has free range to enact political and economic policies which impoverish the populace.

    As Bob Dylan wrote: “when you ain’t got nothing you got nothing to lose”. Joe Soap is fine not having a job just as long as the welfare cheques keep flowing and, if they don’t, or if government’s monetary policy causes inflation, he’ll just set stuff on fire until his demands get met or another set of politicos make even more egregious promises.

    “The State is the great fiction through which everyone endeavours to live at the expense of everyone else.” – Frederic Bastiat.

    • Claire Hawkridge

      Agreed that dependence on the state is never a replacement for the dignity of having control of one’s own secure livelihood. ‘Difficult times’, however, do happen and certainly not only as a result of state intervention (even if one assumes that state intervention is necessarily a bad thing, which I would strongly reject). In just the last few months, the poor in SA have faced several shocks: the ripple-effect of the global recession,floods, high global food prices, currency instability triggered by political uprisings in far away but also developing nations. All of these have a significant impact on the fragile livelihoods of the poor. Social grants, as part of a social safety net, help to ease and limit the impact of these shocks. This is good because less people slip into absolute poverty and/or die. Social grants become a problem, as far as I’m concerned, only when they are treated as a replacement for efforts to alleviate poverty instead of a safety net to mitigate the impact of market and state failures, unforeseeable disasters or ‘acts of God’.

  • Hard Rain

    I’d venture that all the “shocks” you mentioned are directly or indirectly the consequence of State intervention in economic affairs:

    “the ripple-effect of the global recession” – Yes, the consequences of the failure to prop up a property bubble in place of the popped tech stock bubble of the late nineties. Artificially low interest rates? Federal entities under-writing mortgages? A government-backed cartel of ratings agencies misleading international creditors? The crash culminating in the greatest State bailout in the history of the world?

    “floods” – tough to blame the State for this one, but in many cases rivers are mismanaged because they’re essentially socialized.

    “high global food prices” – government subsidies propping up domestic prices and encouraging the use of foodstuffs as biofuel. Trade restrictions and import tariffs hampering actual market exchange. And then we have the effects of all the Fed’s “quantitative easing” finally hitting commodities.

    “currency instability” – Leaving aside the endless amount of financial regulations and exchange controls, who actually has the monopoly privilege to define and produce “legal tender”? Oh yes, this is, in most places, bestowed upon a supposedly independent central bank by the government.

    “Social grants, as part of a social safety net, help to ease and limit the impact of these shocks.”

    Look, I’m not against social grants/welfare/charity per say, but it’s hardly an act of charity when the funds for the giving are taken by misleading or coercive means.

    Leaving aside how I believe these “shocks” are mostly caused by government in the first place, why do we conclude that the best way to altruistically aid the poor is to have an incompetent entity funded by thievery and malfeasance do the job for us? Surely experienced religious and private charities, held directly and financially accountable to the expectations of their donors, would be far more desirable, simply from a utilitarian perspective?

    I’m assuming your counter-argument would include “but they don’t have enough funds to help everyone etc. etc.”: Of course, but what makes you think the government does? The fact that they can print and steal the money does not actually increase the net wealth of a society as a whole. No, eliminating the government’s burden and influence on the economic affairs of a society will make that society more productive and wealthy which will enable more people to be charitable and more people to not be poverty stricken in the first place.

  • Claire Hawkridge

    Hard Rain, I’m intrigued by your response. The shocks to which you refer could equally be argued to be the fault of unregulated market activity – recession caused by weak banking regulations, food prices spiked by speculation, instability caused by cartel-behaviour in oil-rich N. Africa and floods the result of uncurtailed commercial activity destroying the environment with no strong government to limit them or raise enough taxes to fix the damage. Whatever the cause, shocks should not be a surprise to anyone – whatever the utopian ideal, they’ve turned out to be an inevitable part of the capitalist system. And if they weren’t, things like Tsunamis would still exist.

    Charities and non-profits are great, but they are not sufficient – if shocks are part of the ordinary playing-out of the system, the system must be designed in such a way that it has the capacity to deal with shocks without people dying. Charities and non-profits fill the gaps left by government failures, they don’t replace governments. They’re not required, statutory. People who have money don’t have to give to charities. Without a government safety net, the poor (particularly in a country so ridiculously unequal as SA) are at the whims and mercy of the people who happen to feel like giving them money. The dramatic drop in NGO funding during the recession is a fairly clear indicator that, in the system you propose, the funds will almost always dry up at the same time as they are most needed by the poor. The result? People die. Social grants are not altruism, they’re a necessary safety-net built into an economic system that inevitably experiences failures and shocks. They should be mandatory.

    You clearly feel that government and taxes are regrettable. Your last comment – that removing government influence will make everyone wealthier, more productive and more charitable – shows a touching, if slightly bizarre and history-blind, faith in the markets. I’d far rather live in a system where regulations put human rights above market-efficiency to take from the wealthiest, whether they like it or not, so that in times of crisis the government that is directly accountable to me as a voter will be able to make sure I don’t die.

  • Hard Rain

    “recession caused by weak banking regulations” – In the United States there are over 100 Federal agencies involved in the regulation of the financial sector. Are we to suppose that if there are 101 everything would be okay? You ignored my points about the monetary systems of just about every nation being effectively monopolized by your precious “accountable” State. That is the major problem.

    “food prices spiked by speculation” – Speculation is basically the process of market participants extrapolating information from price signals and making a bet on what they think will happen to the price in the future. This is a process of efficiency and economizing. We all cry when a speculator calls a “long” option correctly and makes a profit when a price rises, but do we cry when the same guy calls it wrong and makes a loss when the price tanks (and the other party in the exchange profits immensely?)

    “instability caused by cartel-behaviour in oil-rich N. Africa” – Not sure about what this specifically refers to, but there is plenty of State malfeasance behind the oil game, from currency manipulation to war, from the fascist alliance between the State and corporate transnationals (like the Anglo-Persian Oil Company now known as BP) all the way down to putting a large tax burden on the end consumers of oil- purchasers of gasoline like you and me.

    “whatever the utopian ideal, they’ve turned out to be an inevitable part of the capitalist system” – Natural disasters aside, the “boom-bust cycle” of economies has everything to do with governments manipulating the definition, composition and supply of money and credit into an economy. Central banks are granted the monopoly privilege to produce, control and define what is “legal tender” and have free reign to manipulate the rates of interest, which are the most important prices in a market. This has been the recipe for disaster.

    Nowadays “capitalism” is not used to describe a process of voluntary exchange, production and private property, but rather describes the creeping tyrannies of the State and its mutuality co-dependent corporate allies. Decades ago this was known as fascism, the merger of State and corporate interests. I prefer to use the terms “voluntarism” or “voluntary exchange” to describe capitalism, even the phrase “private property” has been tainted these days.

    “the system must be designed in such a way that it has the capacity to deal with shocks without people dying.” –

    ‘The curious task of economics is to demonstrate to men how little they really know about what they imagine they can design.’ – F.A. Hayek, The Fatal Conceit.

    ‘All this passionate praise of the supereminence of government action is but a poor disguise for the individual interventionists self-deification.’ – Ludwig von Mises, Human Action.

    “People who have money don’t have to give to charities.” – Let’s flip this around: is it a bad thing that charities do not have the right to simply force you, individually, to give money to them? Using the State as a cloak does not resolve the fundamental dilemma that coercing people into surrendering their property is hardly conducive to charity.

    “The dramatic drop in NGO funding during the recession is a fairly clear indicator that, in the system you propose, the funds will almost always dry up at the same time as they are most needed by the poor.” – I don’t want to get started about these so-called “NGOs” (a revolving door between government thieves and mooching vultures), needless to say the situation you site is exactly the reason NOT to have the government giving. The taps can be turned off at any moment for any reason and because the government is so pernicious it can fund what effectively become charity “bubbles”- areas of the world where there is so much slush money funneling around it’s in the interest of these NGOs to keep a “crisis” going on forever. I can think of Haiti where there are so many NGOs competing to “aid” people there are actually turf wars between them! I can think of famines in Africa where people naturally hoard food and prices rises, thus signalling for locals to farm for profit. Before they can do this, however, the UN and its NGOs swoop in and dump free food on the people, destroying the market and the incentive to produce food in the first place. The poor are no better off at the mercy of the State than they are at the mercy of the private donor.

    “Your last comment – that removing government influence will make everyone wealthier, more productive and more charitable – shows a touching, if slightly bizarre and history-blind, faith in the markets.” – Your proposal that the State can be used to protect peoples’ lives is also bizarre and history-blind. In the 20th Century alone over 100 million people were killed by their own governments- and this figure does not even include people killed in State wars! That figure would push the total well into the 250 million range. But the State is here to help us, right?

    “I’d far rather live in a system where regulations put human rights above market-efficiency” – Your idea of “human rights” should more aptly be called “entitlements”. You condone coercion, theft and murder under the aegis of “social justice” to provide an ever-increasing list of demands to the “less fortunate”. Your notions do not address the reason why the “less fortunate” in some places are in such greater conditions than those in others. The only way to truly aid the poor, extend their lives and livelihood, and to allow for successive generations to toil in greater livelihoods, is to increase productivity per capita. In other words, it’s through commerce and exchange.

    “the government that is directly accountable to me as a voter will be able to make sure I don’t die.” – Get real, you’re one sap out of millions. The government is no more accountable to you than all the ants of the world are to me. But we could have a whole other debate about the fallacies and failings of democracy…