Lessons from China on how to spread wealth

Why does South Africa keep embracing destructive policies when there is no shortage of proof that these policies will fail and spread poverty? Could it be that this is intentional, or that ideologues refuse to apprehend the lessons of history? Perhaps it is a bit of both. In this article, Temba Nolutshungu argues that we should heed the lessons of Nelson Mandela, Mahatma Gandhi and China's Deng Xiaoping, all of whom espoused free markets and individual liberty.


For the achievement of individual freedom, being compatible with human nature and conduct in pursuit of lofty socioeconomic goals and happiness and based on empirical evidence, the free market is, without a doubt, the best arrangement of economic and societal policies. This point is underscored by the wisdom of Mohandas ‘Mahatma’ Gandi (1869-1948) when commenting on socialism and communism and statist expansionist policies, “I look upon an increase of the power of the state with the greatest fear, because while apparently doing good by minimising exploitation, it does the greatest harm to mankind by destroying individuality which lies at the root of all progress”.
 
Voluntary exchange, freedom to compete, protection of private property and personal choice in people’s individual lives are the central principles of the free market. If we really care about people’s prosperity, we will advocate for individual freedom; the evidence of history and the present day supports the case for free market policies and free market philosophy.
 
Increased economic growth means greater prosperity for the people of a country. Instead of increasing the tax and regulatory burden on citizens, government needs to allow the people to breathe, socially and economically. If the economy grows at 8%, incomes will double in 9 years. If we get that growth to 10%, incomes will double in just over 7 years. That is real improvement in people’s lives, not just political, empty promises. But to see anything like that happen, we must implement policies that liberalise the economy and actually make it easier for people to start businesses and expand existing ones, to trade with each other and to get jobs.
 
In opposition to the free market, we have the statist position, which increases dependence on the state for all manner of services and, indeed, many peoples’ livelihoods. We ought to focus on job creation, not forcing people to depend on social grants as their only form of ‘income’. When people are able to participate in the process of job creation and wealth creation, they value this economically productive undertaking and become less dependent on the state to bring about change in their lives; we have to be honest enough to acknowledge whether we want people actually to have the power to own their lives or if we just want them to rely on the state more and more.
 
The government’s role in the economic arena should be confined to allowing people and businesses to operate so long as their socioeconomic pursuits are not based on force or fraud. Its role is to ensure that its policies translate into an enabling environment for the private sector that will see a proliferation of business enterprises.  The private sector comprises business enterprises whether large or small, formal or informal. The government should get off the back of businesses and allow them to do what they know best, which is to generate wealth and create jobs. The crucial point to note here is that government does not create wealth. It consumes wealth. Government does not, and indeed cannot, create real jobs. It uses taxpayers’ money to subsidise public works, for example.
 
It does not do to try and divert attention away from failed statist policies by using different terms. Consider, for example, the ‘developmental state’. This ‘developmental state’ is broadly defined in terms of state directed macroeconomic planning, and is ipso facto a statist scenario. It is Interventionist and dirigiste. A developmental state is necessarily of a socialistic orientation because it depends on bureaucrats who, because of what they deem ‘best’ for society, will try and dictate how people must act.
 
For the most inclusive economy reflecting the participation of the greatest number of people in wealth creation and employment generation, the free market is the route to go.
 
There is a fascinating paradox to be found in the statist ideal country that is China. Deng Xiaoping, while at the helm of the Communist party, instituted the most radical free market policies in recorded history from 1987 onwards - first in the special economic zones such as Shenzen in Guangdong province and currently being rolled out throughout Shanghai. The reforms invariably posted an average of 10% annual GDP growth. Consequently, according to the World Bank, these reforms uplifted more than 800 million Chinese out of poverty! It is interesting that Deng ushered in these reforms explicitly as free markets.  It is equally interesting that the current Chinese leadership echoes this same thinking as they continue to implement free markets reforms.
 
It is amazing that Lei Keqiang, Premier of the People’s Republic of China who is responsible for the widening of special economic zones, stated “Reforming is about curbing government power. It is a self-imposed revolution; it will require real sacrifice and it will be painful”.
 
He has also said, “The market is the creator of social wealth and the wellspring of self-sustaining economic development”.
 
With these reforms in China, millions of people were uplifted from poverty in the shortest time ever recorded or known in human history.
 
We all need to remember these words of our late President Nelson Mandela, “It is not a question any longer about whether the world embraces a free market economy.  The globalised world in which we live has made it imperative that we open our markets both internally and to the outside world.  The free market is not merely an American export; it is the acknowledged route for economies all over the world.  Closed markets and command economies are self-evidently inappropriate for our times”.
 
* Author Temba A Nolutshungu is a director of the Free Market Foundation.