The Zero Sum Mind

2016-02-15 04:37

A major conundrum in any political economy is determining who gets what.

In European feudal times the king and the nobility got pretty much everything they wanted and serfs eked out a living on the land granted for their use – provided they rallied to the call when needed.

In traditional African cultures it was - and still is - very similar, with the “Big Men” and clan nobility having the say over how resources are used and distributed.

But then – in the late 18th century - the Industrial Revolution came to Europe.

European feudalism was turned on its head, cities sprang up and the serfs of the land morphed into the proletariat that went on to characterise the workers of the industrial age. Perhaps 150 years later African culture was also up-ended by the cumulative effect of the voyages of discovery and conquest at the influx of white men bringing (to use Jared Diamond’s terminology) “guns germs and steel” to impose their will.

Globally the result was the displacement of hegemonies – such as the South American Incas (by the Spanish) and the Zulus and Matabele (by the Boers and the British). In the process of re-aligning their thinking, those subjugated had to come to grips with not only a loss of control, but new economic paradigms, which many of South Africa’s indigenous population have difficulty with to this day (e.g. a misplaced preoccupation with land ownership - with agriculture accounting for less than 3% of GDP!) .

As the international mercantilist economy gave way to capitalism, the key notion became a mindset move from zero-sum thinking to recognizing the benefits of economic growth – its very antithesis.

But some European thinkers had other ideas.

Karl Marx and others coined notions of socialism, communism and egalitarianism, which focused not on growth and the creation of value, but the distribution of the limited store of wealth already in existence, regardless of personal earning capacity. So the logical consequence of capitalism – the creation and extension of value, capital and resources for the benefit of all who participated - was undermined.

Instead, the distribution of income and wealth came to be determined by fiat and the intercession of the state - flying in the face of economic logic. But the notion had high political appeal in a world of incipient democracy, growing suffrage and burgeoning urban poverty.

The ultimate result, after decades of experimentation was state failures in many parts of the world, as with the collapses of the USSR, Yugoslavia, other eastern European nations, the Baltic states and the total re-configuration of the Chinese and other economies. That was the signal lesson of the late 20th century.

These failures were the result of a late recognition that who gets what can only sustainably be the result of human effort – not state intervention. In principle it is very simple; the harder you work and more you contribute, the more you earn because of the increased value you provide.

National temperament is also an important, but secondary determinant of how a political economy functions. So, for example the French, Dutch and the Swedes would appear to value egalitarianism more than do the Americans.

The US has been served well by a freewheeling high energy business culture that hires and fires at will, and has earned the material rewards to show for it. Apart from generally high economic growth, such cultures are typically competitive and innovative.

France and the Netherlands, on the other hand are noticeably less dynamic, with a smaller gulf between the wealthiest and poorest - highlighting the paradox of socialism and egalitarianism: they work best when adequate wealth and material resources are already accessible to most. Economic growth becomes secondary.

Thus these political economies are to an extent zero-sum by nature and choice - with resources allocated according to socially perceived need, heavily influenced by the state. That is fine when there is plenty to go round.

Free markets and capitalism work differently.

Incentives drive people to build, create and innovate for material reward. The by-products include growing employment, increased buying power, less poverty and greater inequality.

In (the “New”) South Africa we have specialized in taking the wrong option at every fork in the road. The reason for that is a zero sum vision in all aspects of government. To figure why this is so, one need only look at our political elites and the cerebral segments that each represents.

As I see it, there are three.

• Segment 1 – the ANC rump/ African nationalists

• Segment 2 – organized labour and the trade union lobby

• Segment 3 – neo Communists and hard line socialists

There is an argument for a fourth segment – the corrupt robber barons who plunder the public purse and drive our kleptocracy.

But the degree of overlap with the three above is comprehensive and there is little to be gained by apportioning the sleaze - other than to note its high visibility in Segment 1.

At the root of these issues is one truth – a conflict of visions. A mindset dichotomy exists between an ability to grow beyond the present, innovate and transcend what exists – and an inability to do so.

In our sad socio political environment only the latter enjoys full expression.

Our plight is the product of a zero sum mentality, with a narrative that dictates that I may only gain at your expense or cost – so our interests are assumed to be in conflict. Thus government – appointed and driven by a cognitively limited and culturally naive electorate - subscribes to the identical mindset that laid so many economies to waste in the past century.

It is worth noting that that is the entire raison d’etre of left-wing politics and the rationale behind inhibiting market forces.

As markets are coerced and become politicized the loss of individual incentive causes the economy to lose productivity (one example is the South African labour market: overpriced and low in productivity, with barriers to new employment). So ultimately the social economy declines and end up on the rocks: the current state of our economy is no accident.

The economic reality in an environment of individual freedom and the absence of political coercion would, however have been very different.

Zero-sum outcomes would be absent because the natural evolution of enterprise and human creativity promote growth. So ultimately everyone gets to be better off – even if unevenly so, as the result of natural variations in merit and talent. Such variations are an asset, to be used to advantage.

The truly sad part of the current South African narrative is that this is not going to happen with our existing leadership and tripartite alliance in place.

How ever could it?

Have you heard of a nation prospering on a diet of-

• business hostility (pay no attention to Zuma meeting with business last week; he is out of his depth like a rabbit in the headlights; it was a stunt to woo international financial markets into avoiding a ratings downgrade. He is truly desperate!);

• vindictive trade unions;

• aggressive labour protection

• lousy state education, and

• a cabinet packed with communists?

Of course you have not. It is simply not possible!

Prosperity can only result from a rejection of zero-sum thinking and uncoupling from all the above constraints. It can only result from free markets and growing individual enterprise.

And it seems that is not going to happen until we go cap in hand to the World Bank for an IMF bailout – probably because we can no longer pay our grant recipients. Neither of those bodies will assist without a radical change in government approach – or indeed, a change in government.

Bringing that day forward is probably what one placard holder at a recent anti-Zuma march had in mind when he displayed the words “Tax Revolt!”

That is something we should all be thinking very seriously about!

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