Wednesday, April 12, 2017

224. Radical Economic Transformation

Handout: Radical Economic Transformation

Power to the people.

The market system has spontaneously developed through the ages in much the same way as language and law. It was not planned or designed (not like the other contrived economic systems) – it is the result of what social scientists call “spontaneous order”.

The features that make a particular society open and free as opposed to controlled by vested interests is the degree to which it upholds the institutions and practices that makes it possible:

• Private property and private property rights.

• Consent as the basis of agreement between individuals and groups.

• Minimum intervention and use of force by the state in the private affairs of people

• Rule of law (as opposed to the discretionary rule of men).

The supporting social institutions typically include a liberal constitution, a free press and free speech that does not incite violence, an independent judiciary and a vibrant civic community.

In a market economy:

• The government simply allows and protects the private ownership of property that is legitimately obtained. The access to proper title especially in Urban Areas, but also in rural communities is critical to unlock the "dead capital" and wealth of the people.

• The right to the voluntary exchange of labor, goods and services between consenting participants. The minimum wage laws keep the young less experienced and other vulnerable groupings out of the marketplace.

• There is no fear of confiscation through taxes and expropriation for the common good. The total collapse of the Zimbabwean economy stands as a stark reminder of this.

• Willing buyers and sellers meet in an unfettered marketplace. The Subdivision of Land Act is particularly onerous and is retarding the sale of land to previously disadvantaged groupings.

• The value of goods and services are determined by buyers and sellers that are allowed to trade freely.

• Goods are traded without subsidies and price controls, and tariffs are absent.

• No special licenses and onerous regulatory controls are forced onto businesses and individuals. The "professionalisation" of many vocations (financial services, the estate agency business and others) have made it increasingly difficult for young persons to enter those industries.

• The involvement of the state is limited and there are normally various checks and balances in place to limit the actions of the state (Constitutions, separation of power, Bills of Rights, democratic institutions – such as parliament and an independent judiciary). Also, in such a free market economy:

• People trade with their property and labour in any way they see fit.

• Participants do not act in a way that would infringe on others to behave in a similar way; and if they do, there are remedies that they can apply emanating from an easily accessible and unbiased legal system.

• Excluded from relationships is the use of force or the threat of force (or acting in a fraudulent way). • Individuals take responsibility for their actions and cause no damage to others lives and property (again, if they do, there are remedies available to arbitrate and compensate).

• There is a free movement of people, goods and services (not like in Apartheid South Africa where free movement was severely restricted). • The role of the state is not to promote the interest of any one group (not like the current and previous dispensation where there is legislation that stipulate certain group rights that override individual rights).

• The government sees its role as the protector of property rights of all – an ultimate arbitrator. This is particularly important with the land reform process where past inequities have to be resolved.

• The constitution and laws value individual liberty and the rights of groups to promote their group interests as long as it does not done in a way that it offends basic human and individual rights.

• Economic growth is high is because of having low tax and simple and fair tax regimes – this has become evident in countries such as Ireland, Mauritius where taxes have been reduced and the import processing zones instituted in many countries, where tax rebates and other tax incentives have led to increased economic activity.

• People spend more time and effort on creating wealth than on efforts to protect themselves from the tax authorities.

• Government upholds a policy of protecting the value of the currency and therefore takes no inflationary actions. Also government does not overextend itself to gain political favour (balanced budget).

• Nobody is granted any special privileges on the basis of race or gender.

• No special subsidies, tax concessions, import controls, tariff protections granted to favour some special interest groups.

• Political power and influence is curtailed to the essential services of foreign relations, the army, the judiciary and internal safety and security and perhaps a few others.

• Rules are kept simple and understandable and victimless crimes decriminalised. Common law principles uphold with the minimum of statutory interventions. All non-coercive actions legal unless specifically prohibited.

• There is no unrealistic building, zoning, health and other restrictions on trade.

• No costly processes involved in setting up of businesses, the subdivision of land and the meeting onerous regulatory requirements. • One would have a society where the government allows communities a bigger say in those decisions that affect them directly.

• In such a society the government also refrains from making life-style choice on behalf of citizens. Individuals take responsibility for their own decisions without a paternal Apartheid like state attempting to take decisions in "their best interests". The citizenry are treated like adults.

With this overview of how Radical Economic Transformation can increase the wealth and participation of all, through a free market system based on classical liberal values, one would be in a better position to judge to what extent a particular arrangement or policy can be regarded as assisting or damaging a country’s ability to be prosperous. Charl Heydenrych – 7 April 2017

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