President Jacob Zuma addressing the XXIV Socialist International Congress held in Cape Town, South Africa. 31/08/2012.

Recently I watched with interest the SABC3 news at 7pm, and got a shock while listening to a report from the 24th Socialist International Congress in Cape Town.

My most serious concern was the statement by this conference that capitalism and the free market had failed the world and that they were proposing something else. What that “something else” was, they did not spell out, but we can assume that they meant socialism, more of the ideas that caused the current crisis.

My children, who were watching the programme with me and who know my strong views in support of free markets, challenged me and wanted to know my response. The following morning, Friday, August 31, I addressed the issue in a speech at the University of Johannesburg to about 150 Soweto business people. What I told them went along these lines:

That I am committed and have resolved, as chairman of the Free Market Foundation, not to remain silent any longer when I hear such utterances.

That I urge South Africans and the world to challenge such notions. Capitalism, based on co-operation, peaceful interaction, and free markets, is a fairly new invention in the history of humankind, while socialism of the all-powerful state is an ancient idea populated with pharaohs, kings, czars, emperors, and more recently, dictators with titles such as first secretary (Soviet Union), führer (Germany), duce (Italy), and president (Cuba and several African countries) – under all these rulers the average individual has few real rights.

Many socialist countries are dependent on grants from capitalists for survival. Citizens of socialist countries are running away from their countries in search of better lives in more capitalist countries.

Citizens of capitalist countries enjoy the highest standards of living and have the lowest levels of unemployment.

Capitalist countries have the most democratic systems, the most accountable politicians, and the best legal systems.

Socialism only benefits the leadership.

In his opening address to the Socialist International Congress in Cape Town, Deputy President Kgalema Motlanthe is reported to have said that the “global crisis of capitalism and imperialism” was hitting growth, widening social inequality, increasing poverty levels and worsening unemployment figures. But the global financial crisis has socialist roots. More socialist policies will result in less growth, greater inequality, increased poverty, unemployment, and human rights violations.

Under capitalism there is private ownership and control, and governments play a limited role in the economy. Under socialism there is government ownership and control and private business and individual property ownership play a limited role. Any part of the economy that is dominated by the government has a socialistic nature.

The global crisis is the result of the mismanagement of currencies by central banks, which are under government control. Based on a view that private banks could not be trusted to manage currencies, governments established central bank monopoly control over the issue of currencies. It turns out that central banks have acted less responsibly than competing private banks have done.

Governments have done what they said private banks would do. Their central banks have over-issued notes and coins and cheated customers over decades by reducing the value of their savings. Central banks have often printed excessive sums of money to bail out their governments.

The financial crisis is a failure of socialistic currency and fiscal management and definitely not a failure of capitalism. The solution is for governments to stop spending more than they receive and for central banks to stop reducing the value of their currencies by printing too much of it.

Motlanthe is correct, South Africa can do “something else” to improve the lives of the people. We can try capitalism, which has never been seriously attempted here.

Actions that the government can take to “go capitalist” include: reduce government involvement in the economy; end state monopolies; reduce spending; improve the application of the rule of law; increase the efficiency and independence of the courts; improve the quality of policing; abolish exchange controls; free up the labour market to allow the unemployed to get jobs.

The solution is more capitalism and less socialism.

Herman Mashaba is the chairman of the Free Market Foundation.