If irrefutable evidence showed the world would benefit from permanently exempting Elon Musk from paying taxes, would you be ok with that?
If the US granted Musk a life-time exemption from paying taxes while shifting NASA’s mandate away from building rockets, it seems quite likely that US taxpayers and space exploration would both benefit. Space X is substantially more efficient at launching rockets than NASA and Musk seems as motivated as anyone to escape Earth’s gravity.
In addition to disrupting markets for cars, batteries, rocket launching and now tweets, Musk has paid over $10 billion in taxes and he has created a multi-billion dollar charitable foundation. Yet his greatest enduring contribution is likely to be his personifying how focused, determined individuals can, within inspired teams, overcome seemingly insurmountable challenges.
The world needs his results, insights and inspiration much more than his substantial tax payments or charity. Polarised public dialogues have made solution paths more elusive and harder to navigate. Thus, Musk’s penchant for problem-solving would have helped spur him to buy Twitter.
Identity politics and political posturing
Issues today are routinely framed by identity politics while being subordinated to aggressive political posturing. This combination, and its consequences, have been super-sized in SA. The delayed transition from Verwoerd to Mandela was, rather swiftly, followed by the Zuma-era entrenching rampant corruption and incompetence.
Whereas it seemed rational to expect that the 1990s political transition would deliver economic justice, it is now easy to argue that removing the ANC is necessary to fix our economy. But while this is almost certainly a necessary condition, it would be far from sufficient.
With a nod to Musk’s purchase of Twitter, concerned South Africans must urgently upgrade our national dialogue. This could begin by addressing the question: How can it be that none of our leaders has ever had a plan to achieve anything resembling broad prosperity?
The answer mostly distils down to apartheid followed by the ANC’s feudal-like biases. Both are irreconcilable with the global integration that has sharply upgraded economies across all other regions.
The ANC’s perception of politics and economics did however prevail across the world for many centuries. Nobles controlled land and they paid tributes to the monarchy while peasants accepted their lot in life. Patronage-based politics is not new, rather it is outdated to the point of inducing rampant unemployment and poverty.
Two hundred years ago, agriculture still dominated economies and nearly ninety percent of households were extremely poor, as against less than ten percent today. Most of today’s extreme poverty is in rural Africa. Conversely, other regions have advanced spectacularly through industrialisation followed by globalisation. Incomes soared and democracies flourished.
Patronage versus competitiveness
The ANC is not fond of constitutional restrictions. Nor are its patronage biases compatible with the competitiveness required of companies seeking to globally integrate. As the ANC sees companies and land as natural sources of wealth, they expect owners and managers to be beholden to political decision makers – and therefore prepared to support the ruling party’s patronage network.
This has resulted in the ANC joining business leaders and others in advocating for investment-led growth. However, such a growth path can’t prevent the majority of our young adults becoming permanently impoverished unless it is accompanied by sweeping policy reforms leading to such investments funding value-adding export initiatives. But such reforms aren’t being considered, as they are irreconcilable with the ANC’s patronage-based structure.
Coalition expectations
Expectations are rife that a coalition government would fix the economy by being less incompetent and corrupt than the ANC. Such logic is as sound as expecting the 1990s transition to lead to sustained high growth or that a Ramaphosa-led ANC would purge corruption and fix Eskom. As the saying goes, ‘hope is not a plan’.
A more reality-based approach would be to provide long tax-holidays and special dispensations from all anti-competitive regulations for all new value-adding export initiatives. This would require acknowledgement that South Africa’s consumer spending is woefully inadequate to noticeably alleviate our obscene level of youth unemployment. This has long been true, and failing to acknowledge it has blocked solutions.
It is naive to expect a coalition national government will suddenly stoke such realism when a long-suffering electorate has consistently tolerated a national dialogue devoid of solutions or an objective analysis of our economic challenges. Noting that most SOEs are broken and then presuming that fixing such glaring failures will make things less awful is not adequate messaging from the electorate.
Symptoms versus the core problem
Our crumbling SOEs and rampant youth unemployment are symptoms. The core problem is that historical injustices have been exploited to frame economic issues in ways which accommodate massive patronage. The political-economic feedback loop that should translate dreadful economic outcomes into a contestation of solution proposals has been made dysfunctional.
Those reliant on patronage represent a huge voting bloc, whereas those whose prospects have been devastated dominate the ranks of disaffected voters. Thus, we desperately need robust debates informed by competition among potent solution proposals. Instead, social justice spin escorts us along our downward spiral.
Consider how the ANC frames our youth unemployment crisis as a moralistic dilemma between fiscal rectitude and subsistence payments. Rather than debate difficult-yet-doable solution options, this framing has been broadly accepted.
Many people will have read the lead sentence above and thought that it is only fair that the world’s richest people pay taxes. This seems valid but as a pragmatist might ask, ‘What would the consequences be?’ If something benefits all law-abiding citizens, most particularly those least well-off, there can be no legitimate social justice arguments to oppose it.
Managing productive assets
What our journey has blurred is that some people are far better than average at managing productive assets and designing solutions. Our economy is extremely vulnerable and yet our politics still refute or ignore this key consideration.
If Musk was dedicated solely to fixing South Africa’s economy, he would avoid social justice potholes while homing in on how we violate economic development basics and 21st century commercial realities. Everything we know about him suggests that he would see myriad creative paths for young South African adults to integrate into the global supply chains. For this to scale adequately, such paths would need to be profit-focused; not funded by philanthropy. Taxing those profits would slow progress to fund bureaucrats, if not cronies.
Focusing on investment-led growth is certain to make matters worse unless such capital mobilisation increases value-added exports. Yet this core consideration is absent from our national discourse.
Localisation-focused
No country is as distant from the world’s top economies as South Africa. Only the worst-performing nations are as localization-focused as we are.
Musk substantially upgraded the auto and rocket industries by demonstrating what is possible. Executives of competing companies adjusted accordingly.
The ANC’s horrific economic stewardship can’t be reversed without unwinding its destructive exploitation of social justice concerns. We must urgently reset our national dialogue by debating solutions common to successful nations.