In Defence Of The Free Market

IN an article entitled “Free Markets Root Of Global Financial Crisis” published in the Zimbabwe Independent on October 18, Movement for Democratic Change (MDC) legislator and secretary-general Tendai Biti echoes typical outrage with liberalism that has seen a backlash to the current global financial crisis.

Not surprising though, the MDC generally subscribes to the ideology of social democracy, a distant cousin of archaic communism currently associated with the eccentric Hugo Chavez of Venezuela.
Biti’s highly researched treatise, however, though light years away from factual reality, makes good reading especially to those interventionists who romanticise about the virtues of the welfare states. True, his assertion that “the ascendancy of liberal democracy went on to create, among other things, the uncritical and unbridled champions of private property rights, the market and globalisation” has some grain of truth, but for enlightened Zimbabweans, liberalism is more than just that.
Robert Mugabe’s government has proved beyond reasonable doubt that the violation of individual liberties, disregard of the rule of law and deprivation of property rights are ingredients to the carnage and untold disaster associated with Zanu PF’s obsession with commandist polices. Mugabe’s brand of state control is symptomatic of a system that is at the opposite extreme end of liberal values, something that Zimbabweans now know has devastating results by way of shortages in critical goods, services and infrastructure paralysis.            
But to accuse liberalism of “predatory globalisation and infectious accumulation” is to spite the very fundamentals of civilisation. How else can a country benchmark positive growth if not against global competitiveness and wealth? And what has “The terrorist attacks of September 11 2001 should have woken the neo-cons to the false victory of liberal democracy” to do with liberal ideology?  
The market fascism that Biti blames liberals for is no better than the tyranny of democracy that is practised by Zimbabwe, China, or self-enrichment perpetuated by Chavezian ideology under the smokescreen of public good.  James Shikwati of Inter Regional Network Kenya explains that free market principles advocate for the empowering of individuals to engage in private undertakings and for the state (governments) to engage in enterprises that are beyond the scope of private enterprise.
The free market principle, he continues, recognises the importance of a “referee” (regulator) and can never refer to such an important entity in the market as “useless”. In a socialist system that MDC-Tsvangirayi proposes, “no one would ever have discovered that the collapsed companies in America had a problem, taxpayers’ money would have kept them artificially in operation. It is precisely because of the market system that the world was made aware that the companies were in trouble.”  
In fact, the very intervention of governments to bail out banks of their toxic assets is more an act of politicking than goodwill. The market has built-in mechanisms for self-correction, and one such mechanism is to let companies who take bad investments decisions collapse. Of course, social democrats will argue that this causes large-scale unemployment, misery and civil disorder, but these are the features of Zimbabwe’s economic landscape even with state intervention.
Professor Steve Hanke says of central control: “The source of Zimbabwe’s hyperinflation is the Reserve Bank of Zimbabwe’s money machine. The government spends, and the RBZ finances the spending by printing money. The RBZ has no ability in practice to resist the government’s demands for cash. Accordingly, the RBZ cannot hope to regain credibility anytime soon. To stop hyperinflation, Zimbabwe needs to immediately adopt a different monetary system. Central banking is the only monetary system that has ever created hyperinflation and instability in Zimbabwe. Prior to central banking, Zimbabwe had a rich monetary experience in which a free banking system and a currency board system performed well. It is time for Zimbabwe to adopt one of these proven monetary systems and discard its failed experiment with central banking.”
Jim Peron adds: “Applied liberalism means free minds and free markets. It allows the pursuit of conflicting and often contradictory values. But for man to be free, government must be limited.”
For those that value freedom, innovation and enterprise, the presence of government in their daily lives is a negative force. RJ Bright reminds us that people respond to incentives, thus those systems associated with government encourage wrong or irrational behaviour.
Detmar Doering goes into details on why the Soviet empire collapsed in 1989. Socialists, he says, love to pose as the only ones that care about the poor, while they benefit personally from the goodies of free markets. Biti probably drives a Japanese car and lives in a private property that is awash with evidence of free market competition and globalisation. To him, socialism and state control are merely objects of intellectual consumption, while the real thing is about quality life, not as prescribed by government, but driven by the selfish desire for ownership.
True liberalism! Adam Smith was also driven by “a determination to put an end to the misery caused by interventionist policies of absolute mercantilism”.  
If, as Biti correctly points out, “Karl Marx wrote many years ago, this is a system that is continuously arrested by cycles of booms and slumps but is capable of reproducing itself through massive devaluation”, I want to note that socialism is marked by an extended period of dreary monopoly and repetitive routine generally prescribed by an over-dominant state. It closes our minds and exposes us to abuse, much like we know of Posa, Aippa and the Presidential Powers Act.
Frederic Bastiat warns that in systems where government is too big and overbearing, “the law is no longer the refuge of the oppressed, but the arm of the oppressor”.  When a government is too visible in our lives, plunder becomes legitimate, since there is no control mechanism. “Whosoever acquires any influence here can obtain his share of plunder.” Governments have access to weapons, police and soldiers that can easily be used as agents of torture in closed societies, whereas liberal economies can expose such excesses.
Biti then sinks further into intellectual hypnosis: “The point of this article is that history has had its revenge and the unbridled hegemony of the market has been exposed. Bonapartism, Keynesianism, market regulations and welfarism will from now onwards be critical and essential instruments in the management of any economy. In short, neo-liberalism is dead.”
Good Lord, welfarism? How on earth can public expenditure or budget deficits be narrowed where innovation, enterprise and freedom are confined to some bureaucratic dunderheads?  Where civil society is suffering under a yoke of control as in Zimbabwe, who will challenge the practices of a gluttonous central government? Regulation, as Shikwati explains, is not meant to curtail production, but set principles of fair play, but when a referee starts kicking the ball around, he is out of bounds.
Of course every system has its side effects, but to evoke the spirit of Bonaparte is dragging civilisation backwards. We liberals are not anarchists, but simply alert that governments must not be left to their own intrusive devices. I agree with Allan Greenspan that all good things experience temporary convulsions. Any attempt to bring back socialism through the back door will meet with market resistance. Dr Gideon Gono, Reserve Bank governor of Zimbabwe and Goodwills Masimirembwa, chief of the National Incomes and Pricing Commission, are all too familiar with arguing with free market forces. The punishment is swift and vicious.  
*Rejoice Ngwenya is a free market activist and convenor of the Coalition for Market and Liberal Solutions.

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