http://www.engineeringnews.co.za
  SEARCH
Login
R/€ = 13.83Change: -0.12
R/$ = 11.04Change: -0.17
Au 1172.85 $/ozChange: 3.68
Pt 1231.00 $/ozChange: -0.50
 
 
Note: Search is limited to the most recent 250 articles. Set date range to access earlier articles.
Where? With... When?








Start
 
End
 
 
And must exclude these words...
Close Main Search
Close Main Login
My Profile News Alerts Newsletters Logout Close Main Profile
 
Agriculture   Automotive   Chemicals   Competition Policy   Construction   Defence   Economy   Electricity   Energy   Environment   ICT   Metals   Mining   Science and Technology   Services   Trade   Transport & Logistics   Water  
What's On Press Office Tenders Suppliers Directory Research Jobs Announcements Contact Us
 
 
 
RSS Feed
Article   Comments   Other News   Research   Magazine  
 
 
Nov 19, 2010

Capitalism is different from free market libertarianism

Back
Africa|Dutch East India Company|Environment|Flow|System|Systems|Africa|South Africa|United States|Building|Finance|Flow|Systems|Environmental|Infrastructure|Power|Pravin Gordhan
Africa|Environment|Flow|System|Systems|Africa||Building|Flow|Systems|Environmental|Infrastructure|Power|
africa-company|dutch-east-india-company|environment|flow-company|system|systems-company|africa|south-africa|united-states|building|finance|flow-industry-term|systems|environmental|infrastructure|power|pravin-gordhan
© Reuse this



There is a view that people should be free to do whatever they want with their wealth. In fact, most people – rich and poor – would balk at the idea of the State telling them how they can use their money. The South African government’s belief system seems to agree with that view, given the removal of most exchange controls and the deci- sion to allow emigrants’ blocked assets to leave the country without a levy being collected. These changes were announced by Finance Minister Pravin Gordhan in his October Medium-Term Budget Policy Satement. These changes coincide with the planned amnesty on funds held abroad illegally by South Africans.

One of the justifications for the liberalisation of capital movements by government is that this will help weaken the rand. I think this is a weak and disingenuous argument used opportunistically to promote an ideological view about the freedom of people to move their money about the world as they wish. The important question that we in South Africa have to ask ourselves is whether this ideological stance is appropriate in a country where there is a huge level of inequality in income and wealth. This inequality has its roots in colonial and apartheid dispossession, oppression and exploitation. The inequality in South Africa still has a strong racial dimension. One of the compromises that ended apartheid was that the economy and the distribution of wealth would be left largely unchanged. There have been attempts to lessen inequality in South Africa, including black economic empowerment and land redistribution, but these have been piecemeal and relatively ineffective. As a result, inequality has worsened and we are nowhere near dealing with massive unemployment and poverty in our society.

Many people wish to forget South Africa’s past. They ask when we are going to stop looking back and get on with building the future. However, we cannot move forward without understanding the impact of the past. Our politi- cal, legal, economic and cultural institutions cannot be built overnight – they are built over centu- ries and, often, change very slowly. In most historical epochs, building wealth takes generations. Colo- nialism and apartheid destroyed the lives and wealth of indigenous South Africans in order to build the fortunes of the Dutch East India Company, European and US investors and a relatively small settler population. We have to acknowledge that history.

Many people say that we have to accept the way capitalism works – some people are rich and others are poor. They say the rich will not invest if they are told what to do with their money. They say that a capitalist system has to be based on incentives, not rules and regulations. I disagree. We have seen capitalism work very differently in different countries. We have seen capitalism work very differently in the same countries during different periods. The people who say that we just have to accept that capitalism is the same as a free market system are ignorant of the history and geographical variety of capitalism. It is possible to have highly regulated systems of capitalism, where the State directs the allocation of capital and tightly controls the movement of capital across borders. Capitalism does not require free markets. We should not mix up free market libertarianism with capitalism. In fact, the fastest economic growth and economic development and the lowest levels of inequality occurred where there was tight regulation, particularly of financial institutions and capital flows.

The strong global moves to promote environmental sustain- ability and the rules and regula- tions to stop businesses from harming the environment are clear indications that we cannot allow free market libertarianism. The laws controlling drugs, weapons and protecting human rights are further indicators that capitalism should not allow people to do anything they please with their wealth.

Today, we realise that finance and the free movement of capital around the world can wreak huge destruction. We have to curtail finance and capital movements not only to promote South Africa’s developmental goals, but also to promote stability and sustainable economic growth. These problems are not unique to South Africa. Most countries now face questions about control over private wealth. The US is faced with growing inequality, unemployment, crumb- ling public infrastructure and a huge government deficit. At the same time, there is huge tax evasion and illicit flows of capital out of the US. They have to introduce regulation against these capital movements. After the financial crisis, many countries are moving to regulate finance, control capital movements and manage their exchange rates. The South African government’s decision to liberalise exchange controls is going against the flow in international economic policy and is an outdated policy. It reflects a certain libertarian ideology and the power of South African finance, and not the developmental goals of the country.

Edited by: Martin Zhuwakinyu
© Reuse this Comment Guidelines (150 word limit)
 
 
 
 
 
 
 
 
Other Seeraj Mohamed News
The Corporate Strategy and Industrial Development Research Programme (CSID) - the University of the Witwatersrand's (Wits') economics policy research unit of which I am director – hosted a launch of the Department of Trade and Industry’s (DTI's) capacity building...
We enter 2011 with much global economic uncertainty. South Africans should consider the country's economic policies and activities within the context of an uncertain and volatile global economy.
Article contains comments
Article contains comments
More
 
 
Latest News
The retail price of 95-grade petrol in South Africa will drop by 45 cents or 3.3 percent a liter from next Wednesday, while wholesale diesel will decrease by 4.9 percent, the government said on Friday. Petrol will cost 13.16 rand ($1.20) a liter while the wholesale...
Special purpose vehicle GreenCape will, by the end of 2014, make an application to the Department of Trade and Industry (DTI), the Western Cape provincial government and the City of Cape Town to declare Atlantis, on the Western seaboard, a special economic zone...
The German government has committed a further R70-million towards the second phase of the Non-Motorised Transport (NMT) programme. The NMT programme forms part of the Department of Environmental Affairs’ 2010 FIFA World Cup National Greening Legacy Programme.
More
 
 
Recent Research Reports
Defence 2014: A review of South Africa's defence industry (PDF Report)
Creamer Media’s Defence 2014 report examines South Africa’s defence industry, with particular focus on the key participants in the sector, the innovations that have come out of the sector, local and export demand, South Africa’s controversial multibillion-rand...
Road and Rail 2014: A review of South Africa's road and rail infrastructure (PDF report)
Creamer Media’s Road and Rail 2014 report examines South Africa’s road and rail transport system, with particular focus on the size and state of the country’s road and rail network, the funding and maintenance of these respective networks, and the push to move road...
Real Economy Year Book 2014 (PDF Report)
This edition drills down into the performance and outlook for a variety of sectors, including automotive, construction, electricity, transport, steel, water, coal, gold, iron-ore and platinum.
Real Economy Insight: Automotive 2014 (PDF Report)
This four-page brief covers key developments in the automotive industry over the past 12 months, including an overview of South Africa’s automotive market, trade figures, production and the policies influencing the sector.
Real Economy Insight: Construction 2014 (PDF Report)
This five-page brief covers key developments in the construction industry over the past 12 months. It provides an overview of the sector and includes details of employment in the sector, infrastructure and municipal spending, as well as insight into companies’...
Real Economy Insight: Electricity 2014 (PDF Report)
This five-page brief covers key developments in the electricity industry over the past 12 months, including details of State-owned power utility Eskom’s generation activities, funding and tariffs, independent power producers and prospects for the sector.
 
 
 
 
 
This Week's Magazine
In the next 20 years, it was expected that, in Africa, more people would live in cities and towns than in rural areas, United Nations Habitat executive director Dr Aisa Kirabo Kacyira said at the Human Settlements Indaba that took place earlier this month in...
Tough-talking Human Settlements Minister Lindiwe Sisulu has committed government to building 1.5-million low-cost houses over the next five years, telling the Human Settlements Indaba in Johannesburg on Wednesday that the State would achieve this target through the...
Over the past 20 years there has been persistent concern about deindustrialisation in South Africa, as well as the fact that locally produced manufactured products have been increasingly displaced by imports.
Financial agreement for Ghanian independent power producer (IPP) Cenpower Generation Company’s $900-million, 350 MW combined-cycle gas-turbine power plant was finalised earlier this month, paving the way for the project’s construction to begin before 2015 in Tema,...
The revenue implications for South Africa of ‘base erosion and profit shifting’ by corporate taxpayers are firmly in the crosshairs of the Davis Tax Committee (DTC) and Judge Dennis Davis hinted last week that recommendations were being considered to “detect and...
 
 
 
 
 
 
 
 
 
Alert Close
Embed Code Close
content
Research Reports Close
Research Reports are a product of the
Research Channel Africa. Reports can be bought individually or you can gain full access to all reports as part of a Research Channel Africa subscription.
Find Out More Buy Report
 
 
Close
Engineering News
Completely Re-Engineered
Experience it now. Click here
*website to launch in a few weeks