Thursday, February 25, 2010

Zapiro = Genius

Read our previous posts regarding the issues in this cartoon - here & here.


Pornography and liberty

In an article today in the Mail and Guardian, MultiChoice's general manager Jackie Rakitla is quoted as saying: "At this stage we're doing research to determine the extent of interest in porn, and we're looking at the feasibility of implementing such a service."

Understandably this controversial announcement caused great controversy in society between conservatives and liberals others in between.

Permit pornography or forbid pornography
One's position on this issue depends on the perceived effects pornography has on society (positive) and personal value-judgements about what such effects are desirable or undesirable in society (normative). Reading on these issues can be found on Wikipedia.

Each person's liberty and freedom are affected by society's decisions on the extent to which, and the manners in which, pornography is permitted or forbidden. In my uninformed view, South African citizens should afford Multichoice the right to screen any shows its customers are willing to pay for, subject to the protection of all South Africans' constitutional rights.

Perhaps a debate on this issue is relevant to a blog about liberty. Relevant questions are:

    What are the effects on society of permitting pornography in its various forms? What are the effects of forbidding such pornography?

    Which of these effects are desirable and / or undesirable to society and therefore to what extent should pornography be permitted / forbidden?

    What are South Africans' constitutional rights on this issue?

Trust me, I'm an economist

Deathbed of Keynesian Economics Will Be in U.K. by Matthew Lynn

Moral of the story: the macroeconomics you learned at university is probably wrong.

Wednesday, February 24, 2010

Alternatives to hiking electricity prices?

" if there has never been any alternative, and as if South Africans should 'shut up and deal with it'..." Manie van Dyk, DA MP

Despite what NERSA and the SA Government may have you believe, there were actually alternatives to hiking electricity prices. Broadly speaking, there are three sources from which revenue could be raised to finance Eskom's expansion needs. These are:

    1. Consumers of electricity, through price-hikes
    2. Government, through tax revenue or guarantees on Eskom's debt
    3. International capital markets, by selling a majority stake in Eskom to private investors
I am in favour of the last option. I don't see any value to society in maintaining ownership of Eskom that could not be achieved through mere regulation and tax of a privately-owned electricity producer (or producers, preferably). This view echoes the statement of Chairperson of Business Leadership South Africa (BLSA) Bobby Godsell on the nationalisation of the mining industry:

"Why would you want to take massive State resources to own something that you already regulate very comprehensively? ... I would be asking what public good is achieved by taking away ownership."
I would go further by saying that it is in society's best interests, but perhaps not Government's, to privatise Eskom entirely. Such privatisation would amount to splitting Eskom into its various business units and selling the government's share.

Not only does the SA Government need the revenue to pay off its rising debt levels (and future revenue that will inevitably be pumped into Eskom's future failures), but it has a moral obligation to reverse the wealth accumulation of the state under the previous regime (for a reference, see Julian's first comment to this article).

This privitisation process amounts to the liquidation that any private firm would undergo, had it performed as poorly as Eskom over the last decade. In addition, the process would provide an opportunity to restructure Eskom into several smaller producers, reducing the extent of the unfair monopoly Eskom has over both electricity production and distribution in SA.

The DA's Manie van Dyk expresses a similar opinion in today's feature article:

The problem with this is that there was an alternative. Introducing Independent Power Producers (IPPs) would bring with it the efficiencies, technological advances and, most crucially, hugely needed capital funds, that our electricity production sector is currently crying out for. Now we are in a situation where, although the Minister of Public Enterprises and President have both recently acknowledged the potential of IPPs, the state is trying to go it alone on funding when faced with a capacity crisis of epic proportions. The ANC's hands remain tied by their obsession with a state-centred "developmental" approach, which in large part precludes the raising of capital for infrastructure via markets. The ANC government is now trying to raise nearly R400-billion for infrastructure development, in the space of just a few years, via a series of ad hoc tariffs, instead of by means of long-term loans or by securing capital via the markets. That, we believe, is simply an untenable approach.
Simon Spicer, CEO of BLSA, rightly points out that the health of the SA economy is to a significant degree dependant on the health of key state-owned enterprises. The price hikes are really worrying because even the SA Reserve Bank (which is still independent, thankfully) cannot predict the effect they will have on inflation. According to today's article by Dion George, DA MP:

What we do not know, and herein lies significant risk, is what the second-round effects will be. The Reserve Bank confirmed that even its own sophisticated models have difficulty in predicting the magnitude, especially of a continual shock over the next three years. At the NERSA hearings, the case was simply put that our economy cannot withstand an increase at the rate of 35%. 24.8% does not make the pill any easier to swallow. It will go down, but at the opportunity cost of slower growth and unquantified second round effects. The Reserve Bank forecast GDP growth at 2% for 2010/11 and National Treasury forecast 2.3%, presumably having factored in the tariff increase - but we cannot be sure.
Inflation, and how the SARB will respond to inflation, are now the most important factors affecting future economic growth in SA. Remember when the SARB hiked the repo rate up and up and up in 2008, in response to inflation? That piece of monetary policy arguably sent SA into recession long before the financial crisis turned into an economic crisis.

The SA repo rate since 1999:

Monday, February 22, 2010

Maxwele incident - an assault on our liberty

Today, Frans Cronje's article at Moneyweb highlights the liberty that all of us South Africans have lost through the Maxwele-zapping-the-President incident.

If more incidents like this one are allowed to take place South African citizens will increasingly fear the approach of the blue-light convoys of black BMWs that ferry political leaders around South Africa. Many already fear these convoys, which have been known to open fire on innocent civilians who get in their way. What does it say to the ANC that many South Africans now live in physical fear of running into the country's political leaders? It is a phenomenon far removed from the confident embrace that greeted so many of these same leaders on their return from exile or release from prison during the early 1990s.
Do we all now have to live in fear of blue-light convoys, in the same way we live in fear of cash-in-transit vans?

Sunday, February 21, 2010

Conscience Assumptions

The best way to design any social program or incentive scheme, I think, is to start off with the assumption that no-one has a conscience. If history is anything to go by, most humans have very malleable morals, which is hardly surprising if you're a moral skeptic.

Consider this recent example of study loan fraud. Note how "to each according to his need" becomes very problematic very quickly.

Communists & Libertarians Agree

As reported in the Mail & Guardian, Cosatu feels that its support for Zuma through his trials and tribulations is not being adequately rewarded. It seems especially miffed with the proposals for a two-tier labour market.

This is the passage from the article that I found particularly interesting:

'South African Communist Party deputy general secretary and Deputy Transport Minister Jeremy Cronin confirmed that the new budget proposals were also not discussed with the SACP, but said the SACP would “give the proposals [on job creation] a chance”.

“We shouldn’t be protecting a small pocket of workers at the cost of a much larger group.”

He said the labour market is multitiered anyway because of the massive number of casualised workers and the small pocket of workers with decent jobs. “We have to be bold about getting people into work.”'

Jeremy Cronin is more or less on the same page as the Free Market Foundation's Eustace Davie. Davie also proposes a two-tier labour market, in the form of special exemption certificates. An extract from his article:

'Has the time not come to restore dignity to the unemployed? To give them the power to decide for themselves whether or not to work at jobs others might not regard as “decent” or to continue living with misery and starvation?'

Compare the above with the words of Jimmy Manyi: "The big drive for the department of labour is to focus on decent work". Considering SA's unemployment rate, one would think that the department's primary concern is purely the number of jobs.

I have a new-found respect for Cronin. His comments here and his stance on mine nationalization indicate his intellectual honesty and bravery. It appears he is prepared to break with doctrine when confronted with evidence and logic.