Thanks to the Free Market Foundation and its chairman Herman Mashaba for his valuable insight published today in which he asserts that capitalism is not responsible for the global financial crisis.
The other night I watched with interest the SABC 3 news at 19:00, and got a shock while listening to a report from the 24th Socialist International Congress held over two days in Cape Town. My most serious concern was the statement by this conference that capitalism and the free market have failed the world and that they were proposing something else. What that “something else” is was not spelled 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 31 August, 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 FMF, not to remain silent any longer when I hear such utterances
- That I urge other good people of SA and the world to challenge such notions – capitalism, based on co-operation, peaceful interaction, and free markets are fairly new inventions 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), Fuehrer (Germany), Duce (Italy), and President (Cuba and several African countries) – under all these rulers the average individual had and have few, if any, real rights
- Many socialist countries are dependent on grants from capitalists for survival
- Citizens of socialist countries are daily 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
- Most socialist countries have one-party political systems
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 employment figures. The truth of the matter is that the global financial crisis has socialist roots. More socialist policies will result in less growth, greater inequality, increased poverty, even worse unemployment, and more scary, human rights violations.
Under capitalism there is private ownership and control and government plays a limited role in the economy. Under socialism there is government ownership and control and private business and individual property ownership play a limited or no role in the economy. Any part of the economy that is dominated by government is therefore of a socialistic nature. The global crisis is the result of the mismanagement of currencies by central banks, which worldwide are under government control. Based on a view that private banks could not be trusted to manage currencies responsibly, governments everywhere established central bank monopoly control over the issue of currencies. The result has been a catastrophe. It turns out that central banks have acted less responsibly than competing private banks have done in the past in providing stable currencies.
Governments have done what they said private banks would do. Their central banks have over-issued notes and coins and cheated their customers over decades by reducing the value of their savings. Central banks have very often printed excessive amounts of money to bail out their governments that have overspent and taken on too much debt. This deadly combination has resulted in the worldwide financial panic of the past few years. 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 in taxes and for central banks to stop reducing the value of their currencies by printing too much of it.
The Deputy President 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 in this country; the kind of capitalism that is in operation in Hong Kong, Singapore, New Zealand and Switzerland, which are the best examples of capitalism in operation.
At the same conference, George Papandreou, Socialist International president and Greece’s former prime minister, is reported to have said that the “myth of infallible free markets” had served conservatives well. Greece might have averted a bailout if the economy had not been robbed by funds being “funnelled to tax havens”, he said – $21 trillion was hidden in tax havens around the world. There was no “free market” as the market was made for the “powerful”. Whether in developed or developing nations, “citizens are being robbed”, he said. So if citizens hide their own money from wasteful governments such as that of Mr Papandreou are they “stealing”? Or is he annoyed because Greek citizens prevented him from using the power of the state, through currency inflation or high taxes, from taking/stealing their money? If he had got his hands on the money, he would not have paid debts, he would have spent it, and there would still have been a bailout.
Some of the actions that government would need to take to “go capitalist” would be: reduce government involvement in the economy by reducing the role of state-owned-enterprises; end government monopolies; reduce government 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, and remove the red tape that impedes and causes unnecessary costs for small business. What we must avoid is copying the actions of the worst socialist economies, which deprive their citizens of opportunities and limit their choices.
A lack of capitalism and the dominance of socialist ideas in government and central banking have caused the global crisis. The solution is more capitalism and less socialism.
After circulating the article from your posting I received the following edited:
Response to article “Socialism is responsible for global financial crisis”,
by Balixole Mali
The analysis of the mouth piece of Free Market in the name of Mr Herman Mashaba that Socialism is responsible for global financial crisis and its justification proves that Karl Marx was correct when he said that reasoning always existed but not always in a reasonable form. In fact it looks like Mr Mashaba is actually leaving in a different world because those of us who are in a different world as to his understands clearly that Capitalism is responsible for this inequality and this is shown by the fact that as a world we have been forced to fasten belts all over the world because of the recent economic meltdown which is known to be a continuation of the financial crisis of 2008 caused by bankruptcy of Lehman Brothers which threatened the whole financial system.
It is also in this world of reality that we know the analysis of Mr Mashaba is just a mere fallacy seeking to brush the ego of the bourgeois class because we are aware of the UNDP Human Development Report (HDR) of 2005 told us that ‘the richest 50 individuals in the world have a combined income greater than that of the poorest 416 million. The 2.5 billion people living on less that $2 a day – 40% of the world’s population – receive only 5% of global income, while 54% of global income goes to the richest 10% of the world’s population” and I wonder if this can actually be blamed on Socialism.
Further to the UNDP Human Development Report, those who are leaving in a world of reality understand that the view by Mr Mashaba that “citizens of capitalist countries enjoy the highest standards of living and have the lowest levels of unemployment” is just a helicopter view not based on facts because the UN’s Report on the World’s Social Situation 2005 in particular the part dealing with ‘The inequality predicament’ is unambiguous and clear that the growing inequality is not confined to Socialist countries but equally the so called economically powerful nations are affected by this and maybe his definition of citizens is in terms of thesaurus dictionary but not about material conditions faced by the majority. The above mention report was actually not made up in the comfort of a boardroom or while in a jacuzzi but was an end product of an extensive and empirical investigation that proves Mr Mashaba’s view as fallacy. Even USA which is an advanced capitalist country has a problem of growing level of inequality and these have continued to increase since the late 1970s.
It is also clear in those who are living in the planet either than the one Mr Mashaba resides in, that if one has to review the reports on poverty and inequality since the Pearson Report of 1969 that a danger remained capitalism, any alleviation of inequality is subdued by the growing levels of economic competition between developed countries which are fuelled by profit driven by commercial interests. One would have expected that Mr Mashaba would step down from the helicopter view and his jacuzzi analysis and start to realize that it is morally correct to advocate for the creation of measures to create equality and that having to start with a net transfer of resources from the richest 5% of the population of the majority world.
>>> “WC PARALEGAL ([email protected])” 9/9/2012 8:22 PM >>>
I am not going to waist time by venturing an opinion on who is responsible for the current financial crisis when the statistics on poverty are there for everybody to see. If the gentleman had bothered to look there is realities that were exposed by the hurricane in San Francisco. That there is massive inequality in the USA too. The president of USA is currently promoting government intervention to deal with growing unemployment, access to health care..
In his article [“Socialism is responsible for the global financial crisis”] he fails to point out that as a response to the Great Depression, President Roosevelt went a different direction to the one he is suggesting, that we all must follow immaterial of our material conditions.
He fails to acknowledge that the infra-structure the champions of capitalism were able to build was through massive state intervention programmes that included protectitionism. That, the USA refuses to sign free trade conventions under the WTO and together with UK continue to subsidise their farmers in contrast to expressed free market system.
The gentlemen fails to acknowledge that USA, Britain etc. were involved in the slave trade and for centuries colonised Africa for the benefit of the development of their countries. Today those countries are referred to as developed world, sit at important world forums and pass judgements on their former victims.
The gentlemen that points us to 1922 Miner’s strike fails to acknowledge the massive state intervention to deal with the “poor white” problem. that followed in the 30s. An intervention that led massive development of whites in agriculture and farming, industrial skills fostered through vocational training, subsidation of identified industries etc.
We made a mistake of listening to people like him that came as international consultants and took the “small business” route “the engine of economic growth” instead of keeping our barriers of entry until we have developed our economic and industrial infra-structure to a point that it can comfortable compete on equal level.
Unless the government is allowed to dramatically intervene in the economy, we are heading for instability to levels that will threaten the very existence of the democracy he so affectionately refers to. To others, that democracy means nothing if no food is immediately on the table.
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