Of tax, lies and red tape

Tax, Lies and Red Tape: Confessions of an unreconstructed neoliberal fundamentalist, by Dawie Roodt

THERE are three good reasons for reading Dawie Roodt’s book.

Firstly, it is an entertaining overview of general economic principles. Secondly, it is a very provocative book which will have you smiling in agreement or vehemently disagreeing, but will not allow you to read in neutral. Thirdly, it contains keen insights into the state of our economy that you ignore at your peril.

Roodt’s approach to economics and tone of the book is clearly visible from the start. In Chapter 1, entitled “True confessions of a feisty free marketer”, Roodt writes: “Contrary to what certain members of our reigning party may think, the economy is here to serve you and me, not their blue-light brigades, free-loading cadres and clueless kleptocrats.”   

He then goes on to articulate his view of a sound economy, starting with his belief in the rights of citizens. These rights include the right to life and your material assets. The implication is that depriving you of anything - from your life (murder) to your property - is a sin.

From this flows the idea is that, inter alia, the state should not interfere with your right to sign an employment contract with whomever you please, and to trade with whomever you please. The only constraint should be that you have no right to limit the rights of others. Roodt favours capitalism, or as he prefers to call it, the free market system.

Government, he believes, disturbs the “invisible hand” that Adam Smith identified as the controlling force of economics.

This “invisible hand” is what makes people, seeking their own best interests, contribute to the welfare of others. The baker bakes as much bread as he can so he can make as much money as he can, and in the process feeds his family and provides foods for other families.

The stance Roodt takes on most matters is clear from his view on rhino poaching. For centuries, there has been an Asians market for rhino horns, but in 2009 a national moratorium on the horn was implemented. This led to an increase in demand and a further and tighter clamp on hunting rhinos and trading in their horns.

A rhino cost about R250 000 in South Africa. A kilo of its horn sells for R720 000 in Vietnam and the average rhino carries six kilos. The animal is worth 17.3 times more dead than alive.

People react to economic incentives, and the unintended effect of trying to protect rhinos has been to make killing them more lucrative than breeding them. If we bred more rhinos and deregulated markets, explains Roodt, prices would drop and so would the incentive to poach.

The most serious part of the book is the chapter titled “How the state spends your money”. This chapter will enable readers to make more informed choices about whom the wish to run their country.

The money any state has is a function of the money they receive from the employed citizens of the state. This money is part of the hard-earned cash of citizens who entrust government with its allocation.

Citizens' votes are a mandate to government to allocate that money, which is why it is so important to understand a party’s economic policy. How your money is allocated will either help or hurt you and your family.

What should the state pay for with the citizen’s money? Roodt’s view is, essentially, as little as possible, only that which is a “collective good”. Defence is a collective good because all South Africans benefit from being defended. The same is true of law and order, and an independent judiciary.

Nothing else should be provided by the state. The rest should fall to the private sector to supply - at better prices and of better quality than states generally do.

There are other non-primary functions that states do assume, such as education, health services and the like, but in South Africa these have become the priority. Almost 60% of the fiscus is spent on social services. 

A whopping 16.5% of the fiscus is spent on keeping the state functioning, now that it has assumed responsibility for so much more than the essentials of the collective good. The decision citizens need to make is whether their money is best spent in this way. Clearly, Roodt does not think it is.  

The unemployment situation in our country is a “ticking bomb” that has to be defused. Government’s response to this very serious issue is to focus on job creation.

In his provocative style, Roodt suggest that government should be destroying jobs, not creating them. His logic is the more workers a company employs, the more expensive its output will be. Real, sustainable jobs cannot be created; they are the result of something entirely different - economic growth.

Entrepreneurs do not employ people because they want to, rather because they have to. Without good workers, entrepreneurs cannot achieve their economic intentions. Without the ability to terminate bad workers and employ good ones, economic growth cannot occur.

Worker’s rights can be violated in many ways. Forcing employers to pay uneconomic wages leads to the termination of workers. This, he explains, will result from the recently mandated wage increase for farm workers which will cost 50 000 to 100 000 people the opportunity to be employed.

Roodt’s writing style is easy and he is determined to provoke. You will undoubtedly find some of his ideas objectionable, but keep reading: the value of the book lies largely in its ability to force you to reconsider your position, even if only to conclude that you are right and Roodt is wrong.   

Readability:    Light --+-- Serious
Insights:        High -+---- Low
Practical:        High ----+ Low

 - Fin24
* Ian Mann of Gateways consults internationally on leadership and strategy. Views expressed are his own.

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