The economic system in South Africa

Inaugural lecture--Rand Afrikaans University, Department of Economics, 22 October 1980In recent years widespread support has been expressed in South Africa for an economic system of free enterprise, in which market principles must play an important part. In actual fact, the South African economy differs in many respects from the classical features of such a market system -the state is involved not only in providing classical government functions, but as an owner of productive factors in its own right; there are a variety of limitations placed by the state on the functioning of markets; and some of the essential cultural preconditions for the functioning of a market system are not evenly spread amongst all the population groups in the country. There are, however, signs of a movement closer towards market principles. From an examination of public pronouncements in favour of a free-enterprise, market-orientated economic system, it appears that different aspects are emphasised by different proponents. Some pronouncements have merely an ideological anti-marxist orientation, while others p1ace the emphasis on the association between market principles and individual freedom. Rather than as an end in itself, a market system is seen by some as a means to an end -either by automatically yielding the best results for all, or by being amenable to manipulation towards the achievement of chosen ends. In pronouncements which concentrate on the conscious manipulation of such a system, a distinction can also be drawn between those who favour indirect political interventions aimed at improving the general welfare, and those who seem to have in mind a collusion between the state and particular interest groups.Some pronouncements are aimed at delineating the legitimate functions of the state and the private sector in a market system. Amongst these there is a tendency to expect the private sector to assume responsibility for the provision of collective services which have traditionally been regarded as legitimate government functions. The compatibility of this with the principle of profit maximisation, which underlies the classical view of a free-enterprise economy, is not always fully thought through. In other expressions of view, the emphasis is placed on the relaxation of constraints upon the freedom of economic decision-making, on grounds both of efficiency and of equity. Some go a step further, by suggesting positive measures to enable groups who up till now have not participated fully in the market system, to become fully-fledged participants. Finally, in some pronouncements it is accepted that a market system has certain inherent weaknesses, and the attention is directed towards measures which can alleviate the results of those weaknesses. It is contended that in the interests of rational debate and of orderly procedures of consultation, participants in the discussion of the South African economic system would do well to state more clearly their assumptions about the nature of a free-enterprise system, and their expectations about its functioning and results