What is a fair economy?

Jack Bloom on the balance to be struck between equality and enterprise

Most people put a high value on fairness.

According to the dictionary, it is the attitude of being just to all, or the ability to make judgments free from discrimination or dishonesty.

We should all want to be fair in our dealings with others.

But what does this mean when it comes to an economic system that can be said to be fair?

According to Karl Marx, the ideal should be "From each according to their ability, to each according to their need".

This sounds wonderful, but we have seen that communism in practice is a disaster in which a new elite benefit who hold power by dictatorial means.

People need incentives to produce, otherwise you get the situation as in the Soviet Union where a common joke was that "We pretend to work and they pretend to pay us."

Wealth needs first to be produced before any schemes to redistribute it can take place.

Redistribution is usually done by taxation, but too high a rate crushes economic activity so that there is less to tax.

The provocative American thinker Thomas Sowell asks: what is your "fair share" of what someone else has worked for?

A highly significant statistic in America is that 47% of people pay no federal taxes whatsoever, whereas the top 10% of American tax-payers pay 73% of all tax.

The danger in a democracy is that a majority that does not pay taxes is able to outvote the most productive people in order to impose even more taxes on them.

It becomes a case of voting for Peter in order to take from Paul, which becomes unsustainable after a time.

As Margaret Thatcher once said ""the problem with Socialism is eventually you run out of other people's money to spend."

In South Africa, 25 percent of our population receives a welfare payment, but only about 10 percent pays personal income tax.

Tony Leon pointed this out in his farewell speech to Parliament, warning that "Unless we reverse those ratios and start to create real jobs in the formal economy, we will find ourselves in a fiscally unstable and socially dangerous situation."

We have a history of institutionalized discrimination, so some redistribution is necessary.

A basic social safety net for people unable to look after themselves is also essential in any civilized society.

It is a question of balance, and also shifting the emphasis to providing opportunities so that people can look after themselves.

Even rich countries have found that welfare reforms are needed to ensure that people don't get into the habit that "the state will provide".

An unwed mother in New York once yelled at a welfare official "it's my right to have children and your job to look after them".

The one economic system that has proven to create wealth on a mass scale relies on free exchange between consenting parties.

The free market develops naturally, since in any transaction both sides gain otherwise the trade would not be done.

The problem arises when there is coercion, fraud or the formation of monopolies.

The best overall economic outcome comes when fairness is expressed in the rule of law exercised without fear or favour so that there is certainly within which entrepreneurs can work their creative magic for everyone's benefit.

Jack Bloom MPL is a DA Member of the Gauteng Legislature. This article first appeared in The Citizen

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