Market flaws exaggerated for voters: GNU urged to decentralise the economy and succeed in its mammoth task

Donald MacKay.

Donald MacKay.

Published Jun 18, 2024


By Donald MacKay

Every flaw to be found in the market is exaggerated in voters. The same consumer who cannot make a rational decision in a supermarket is even less likely to make a rational decision at the polls.

This is why MK got 14.5% of the national vote. This is important to bear in mind, as political commentators make statements such as “market fundamentalism has no future in our electoral system”.

I agree and we have never had anything resembling market fundamentalism in South Africa… Ever. Not even close and I’m not aware of any party advocating for it. I’m so tired of cries about neo-liberalism, when the state debt has been swelling like Jacob Zuma’s ego after the results were announced.

Voters are not one thing: they are millions of individuals casting a single vote every five years in the hope that the party they vote for is capable of improving their lot in life. That’s it. No voter is well informed, although some are less ignorant than others.

Economics, which is simply the study of how incentives affect behaviour has taught us that capitalism makes countries wealthier than socialism. The purer the socialism, the poorer the people.

This has nothing to do with voter preferences. If you doubt this, compare socialist economies (China under Mao, Venezuela, Cuba, and Zimbabwe) to capitalist economies (Taiwan, Singapore and China after Mao). Some of the capitalism has a light state touch (Taiwan) and some of it is state capitalism (China), but in all cases it delivers better outcomes than its socialist counterparts.

Here is the problem for South Africa though: despite capitalism delivering on average, better outcomes for most people than socialism, most voters in South Africa support politicians who are rabidly anti-capitalist.

There is no reason to think South Africa will be an exception here, so the more socialism we have, the more poverty we will have.

If you doubt this, look at our economic performance when we had the most overtly capitalist policies under former president Thabo Mbeki, and then look at the car crash that followed with the jump to the left.

But inequality I hear you cry, and you would be right. Inequality is an unpleasant feature of capitalism, but poverty is a considerably more unpleasant feature of socialism, and it does nothing to solve the inequality problem. The man at the top of communist countries (yes, it’s almost always a man) are living high on the hog, while everyone else is equally poor.

When Russians were eating their pets and then the bark on trees, Stalin was eating caviar. Mao was not hungry when his great leap forward starved millions to death. When confronted with the option of less poverty or less inequality, I’m pretty sure the Russian peasants would have asked for less poverty.

This does not mean inequality is not important, it’s just more important to first address the poverty problem.

The most equal and yet wealthy countries in the world are all capitalist. Norway, Denmark, Sweden, Switzerland, and the Netherlands top the list. And no, the Scandinavian countries are not socialist.

They are fiercely pro-market, with high levels of social support. Danish Prime Minister Lars Løkke Rasmussen stated: “I know that some people in the US associate the Nordic model with some sort of socialism. Therefore, I would like to make one thing clear. Denmark is far from a socialist-planned economy. Denmark is a market economy.”

The Nordic governments do not direct industry, but they do tax it and then redistribute these rents across society in the form of high-quality education and generous retirement benefits.

Norway has a sovereign wealth fund, but it doesn’t manage the oil drilling companies. Their politicians also tend to be less kleptocratic than ours, which helps when money is needed for services.

I hope our new and exciting government of national unity (GNU) is able to bring a dramatically increased focus on the market.

Not on business, but on keeping the market fair. We need to deconcentrate the economy, which means less protection for large, inefficient monopolies.

Fewer subsidies. A drive to make South Africa more competitive rather than on keeping business latched on the government-support teat.

Greater investment in education, including adult education. No one should have to be punished for life because they went to a government school. No one should be unable to live a decent life because they never finished high school (half of the kids who enter school never matriculate, making them close to unemployable).

Yes, decent, dignified work matters but there is no dignity begging at a traffic light.

A heavy burden has been placed on the shoulders of the GNU, and I hope the new government is up to the task. No matter how people voted in the elections, we should all hope the GNU succeeds… For its failure will impose a terrible price on the country.

*Donald MacKay is founder and chief executive of XA Global Trade Advisors. He has been advising local and foreign companies on global trade issues for more than two decades. X handle: XA_advisors; email: donald@; website: The views in this column are independent of “Business Report” and Independent Media.