Free markets create wealth yet in Africa they are looked at negatively

Capitalism and free markets are often criticised in this part of the world, yet they remain the greatest example of the power of unity and the collective human spirit.

Free markets are frequently mentioned in a negative manner, blamed for failed governmental policies and seen as the cause of poverty and suffering.

However, free markets are the basis of our comfortable modern life and the only reason wealth can be created.

ALSO READ: Vital cog in wellness: Entrepreneur behind medication that enhances good heatlh

An example illustrates this concept.

In an agricultural society, individuals have different preferences when it comes to farming. Some may prefer fruits over vegetables. Since time is scarce, people plant what they prefer.

However, just because what you prefer most is available, it doesn’t mean your entire value scale is satisfied.

Therefore, to obtain what is not available from others, there are two ways: through force or voluntary exchange. Markets are based on voluntary exchange.

Expanding on the example, let’s say person A trades their vegetables with person B, who wanted fruits. Both individuals still produce their own goods, but trade is necessary to obtain what they desire, which cannot or will not be produced by them personally.

Person A can focus solely on vegetable farming, knowing others will trade with him for different types of food. Specialisation is powerful because it allows individuals to focus on what they do best, assuming others are also focusing on different things.

Without this diversity, specialisation would not work, and humanity would not have progressed to where it is today.

An example of how a pencil is made shows the power of specialisation and trade since a pencil, something super cheap across the world, cannot be produced by one single person.

The lead, the wood, the paint, all of it, needs different people from different places to make this one simple, cheap thing.

That is the power of markets. Empirical evidence overwhelmingly supports the claim that free markets create wealth.

The People’s Republic of China is a recent example of how voluntary trading can eliminate poverty at record levels.

It is worth mentioning that it is markets, and not the Communist ideology of the Chinese Communist Party, that created prosperity for Chinese people.

When virtually no markets existed during the time of Mao, China had famines. It was after the institution of markets by Deng Xiaoping that the Chinese tiger we know today was born.

ALSO READ: SA should follow China in free markets and voluntary trade principles

Markets, defined as people trading voluntarily, create prosperity. Throughout the world, less state intervention leads to richer populations.

Unfortunately, in Africa and South Africa, there is still demonisation of voluntary trading. This mindset hinders our ability to fully harness the power of trade for prosperity.

It primarily comes from the leaders who are at times elected and thus maybe it could be somewhat justified in that they represent the will of the people. In other cases, the leaders assume power through military coups.

It is these people, supported by some in the academic field, who are opposed to the idea of Africans using their own agency and no one else’s can prosper without their stewardship.

In the Fraser Institute’s Economic Freedom of the World Index, which measures how free an economy is using standards like ease of opening businesses and the regulatory burden of operating one, African nations rank among the least free economies in the world, with a few exceptions. African states have some of the worst quality of life indicators: the lowest income levels globally and economies whose combined size produces as much wealth as the UK produces on its own.

To those who use injustices of the past to justify the stagnation and regression of the present, I point to the East.

There, too, the westerlies of colonialism and injustice swept through. Yet they are growing their economies at much faster rates than in Africa.

For those who believe in the agency of African and SA individuals to create prosperity without state intervention, we can only hope that one day there will be enough of us to arrest our march to serfdom.

• Mthembu is policy officer at the Free Market Foundation.