Ghaleb Cachalia’s column refers (“Bozell remarks revive debate over power, partnership and non-alignment”, March 13).
Not everything is a zero-sum game. On the one hand, wars involve resources being used to destroy existing assets and infrastructure — that is by definition a lose-lose.
Ricardo’s theory of comparative advantage from 1817 — tested over the 200 years since — shows that both parties/nations can benefit from trading freely by focusing on where they are comparatively better. This is by definition a win-win. Trade barriers reduce the gains from trade and make the participants worse off.
It is true that President Donald Trump has increased tariffs, and this will reduce trade between South Africa and the US and harm consumers and producers in both countries. It is also true that BEE laws move us away from the efficient frontier, harming consumers in South Africa and discouraging US (and all foreign) firms from operating here. There are gains to be had from reform, especially the broad-based type rather than the 100-industrialist-connected-few variety.
Any analysis of “structural inequality” will show that we are hamstrung in various ways — geographic location being far from markets; low levels of skills; expensive energy; poor transport infrastructure; low levels of capital and First World labour laws — which puts us at a disadvantage. We also have advantages (natural beauty, appealing climate, European timezone and mineral resources) and we should do what we can to leverage these.
Consider the following:
- Electricity/energy prices were an advantage but they are not anymore. A case can be made that mismanagement, over-employment, corruption, cadre deployment and BEE coal input cost surcharges have contributed to this.
- Capital formation (including foreign direct investment) is low by international standards, and our economy has a different market equilibrium as a result of things such as differences in the security of property rights due in part to crime and recent legislation.
Albania, China, Estonia, South Korea and Sweden have shown that economies don’t need special treatment “based on their state of development”. They can pull their own socks up, and trade — increased by trade liberalisation — is an essential part of the journey.
Greg Becker
Via Business Day online
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