SA should follow China in free markets and voluntary trade principles

It is common to hear South African politicians praise the developmental achievements of the People’s Republic of China.

This admiration is superficial because our politicians never emulate the developmental path of those they admire.

The shallow admiration has positive and negative elements. The downside is that while our leaders admire China’s development, they are not inclined to replicate the strategies employed by the Chinese.

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As evidenced by growth projections for the next few years hovering around one to two percent of GDP growth, the economy is struggling.

The unemployment rate is a whopping 32.9% and, most concerning of all, the unemployment rate for youth aged 15 to 35 is 45.5%.

By comparison, as of June, the unemployment rate in China is five percent. Despite the issues with statistics from the PRC, the figures are significantly different.

The youth unemployment rate in China is at 14.9% and this is deemed a crisis.

How does the Chinese government manage its economy? By embracing freer markets and principles related to voluntary trade, such as improved private property recognition and protection beginning in 1978 during the time of Deng Xiaoping, the Chinese economy began to experience significant growth.

Deng introduced economic reforms that set China on its current developmental trajectory.

Free markets and their principles are the driving force behind China’s development.

This is evident because China had a multi-decade history of central planning being the sole economic model under Mao Zedong; the economy was not growing as it is now, after the implementation of markets.

Most importantly, the labour regime in China is quite markedly different from the one in South Africa, as indicated by the unemployment statistics.

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Another major difference is the absence of collective bargaining in China, a key feature of the South African labour system involving unions.

Chinese workers are unable to engage in collective bargaining agreements.

There are organisations like the All China Federation of Trade Unions, which have labour unions, but they are effectively an extension of the state and exist not at the whim of workers, as one would normally expect a union to be.

The Chinese labour market is anything but perfect. The problems it faces are well documented.

However, it is this labour market, with all its challenges, that has driven the development of China, which is highly admired by SA politicians.

We must ask ourselves as South Africans what we actually want. With an economy where the majority of participants are either semiskilled or unskilled, there must be a way to ensure that they can engage in some form of productive activity.

The most effective approach to ensure this would be for the state to eliminate all additional costs associated with complying with its legislation when hiring in the market.

• Mthembu is policy officer at the Free Market Foundation

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