by Steven Crouse

The famed economist and statistician, Milton Friedman said the following about fiscal budgets:
“Keep your eye on one thing, and one thing only – How much government is spending, because that the true tax. Every budget is balanced – there is no such thing as an unbalanced federal budget… You’re paying for it – either in the form of explicit taxes, or you’re paying for it indirectly in the form of inflation, or in the form of borrowing.”

How apt following last month’s delay in presenting the Budget for the coming year. As the show continues to unfold, with the ANC meeting again this week with their GNU partners in the hope of pushing their desired VAT increases over the line, I quote Margaret Thatcher when she famously said, “Socialism is a wonderful form of government. That is, until you run out of other people’s money”. And this is pretty much where the Beloved Country finds itself…

Margaret Thatcher was perhaps the UK’s most vilified Prime Minister, due to her firm stance in reversing the many leftist policies of her predecessors. After winning the 1979 General Election, she introduced a series of economic reforms aimed at reducing the rampant and high inflation of the previous years, while simultaneously averting an oncoming recession (Google ‘The Winter of Discontent’ for context).

Thatcher’s political philosophy meant taking a raft of tough and unpopular decisions that demanded only the strongest leadership and is what led to her monicker of ‘The Iron Lady’. In the trying times we find ourselves, some hard-hitting ‘Thatcherism’ would go a long way, as years of mismanagement and inefficiencies at all levels of government have clearly reached the point where taxpayers have had enough.

But it has not only been the way money is spent (or wasted; or stolen!) that has brought our country to this point – the decades of the ANC’s running the economy without a growth strategy has run out road, and the government now has no choice but to make the harsh policy trade-offs that have long been avoided.

The collision course of idealistic, social policy meeting the immovable concrete-wall of stark reality is upon us. Consider for a moment the first lesson taught in Economics 101, “The Basic Economic Principle”: How to meet unlimited wants and needs with limited resources, and the way forward becomes clear. The only viable solution is economic reform along with a fundamental change of thinking, the kind that translates into actual economic growth. But this requires the courage and bold leadership that Thatcher embodied, but that appears in short supply in South Africa.

Contrast this to a world where such reform is taking shape, pushing back the years of left-leaning ideology, and our economic isolation becomes an ever-greater risk!

So, while you sip on your evening tipple before dinner, remember that government’s role in a functioning economy should remain quite limited. And the primary difference between the public and private sectors boils down to who takes the risks.

In private sector business, risk is taken with private money, by private individuals. In this real-world scenario, a bad decision has dire consequences, and the person risking his or her money suffers for it.

In government and the public sector – and particularly in our government – bad decisions by politicians go unpunished, but it is the individuals in the economy and we, the taxpayers, who suffer for it… a proposed 2 percentage point hike in VAT would have dire effects on personal spending, inflation and, in turn, interest rates. Indirectly, we hope, the more fed-up South Africans get with the wasteful spending on loss-making projects and collapsing services that are supposed to be provided in exchange for our hard-earned Rands forked over as tax, and the demise is clear for all to see. Clear, that is, for all except the ANC!

Last month’s pushback on the budget proposals was the clearest salvo yet that South Africans will no longer tolerate ill-decisions of weak, corrupt, and inept politicians! And the banter in the media and online forums after the delayed Budget certainly point to sectors of government who are genuinely panicking!
Roll on March 12^th…

Wishing you all a positive and productive start to the new Financial Year – let us all hope and pray for the change we desperately need!