Alternative to master plan is not anarchy

Failing to plan is planning to fail, or so the popular expression goes. However, as is true for many of these pithy inverted expressions, to communicate by clever means does not mean you’re communicating something clever.

Since the relaunch of master plan-focused industrial policy in 2019 under the first administration of President Cyril Ramaphosa, there has been an almost complete reliance by many on such centrally managed plans to direct economic activity in a variety of sectors.

To some extent it is little wonder that these initiatives have taken on such a foundational status in the industries where they have been implemented. That is, after all, what they were designed to do.

The trade, industry & competition department describes these projects as the “centrepiece of the national vision, co-ordinated by the presidency” and goes on to say that, “[The strategy] emphasises co-creation, that is, a building and action-oriented partnership between the state, organised labour and the private sector”.

Such a description (one would think) is bound to raise questions from numerous analysts, commentators and advocates across civil society and in the media on the appropriateness of what, at least on the face of it, resembles a form of collusion between ostensibly independent (or even adversarial) parties.

In fact, it is an almost perfect encapsulation of the very practice condemned by Adam Smith in his Wealth of Nations, which has, ironically, been nearly universally misquoted by various competition regulators:

“People of the same trade seldom meet together, even for merriment and diversion, but the conversation ends in a conspiracy against the public, or in some contrivance to raise prices.” (Book I, Chapter X).

If the connection between the two is unclear at this point, the following section from Smith’s seminal tome should clarify matters: “It is impossible indeed to prevent such meetings, by any law which either could be executed, or would be consistent with liberty and justice.

“But though the law cannot hinder people of the same trade from sometimes assembling together, it ought to do nothing to facilitate such assemblies; much less to render them necessary.”

Given that these initiatives practically necessitate an entanglement of business, labour and government, it is quite bizarre that they should be viewed as inherently “business-friendly”, “favouring private industry over government interference” or even that they promote a “free-market orientation”.

Not free-market capitalism
Such statements could scarcely be further from the truth. Call it corporatism, cronyism or even fascism, but co-opting dominant businesses from various sectors into serving political agendas, having government craft policy to support those businesses at the expense of their competitors and consumers, and undue influence whether of or by organised labour, is certainly not free-market capitalism.

However, these policies should not merely be condemned on ideological grounds. Rather they ought to be rejected, perhaps mainly because they simply do not work. In fact, as my colleague Zakhele Mthembu has shown, such plans always fail (“Freedom of choice,” February 2). And yet it does not necessarily follow that eschewing such attempts to generate co-ordinated plans implies scepticism of all forms of planning.

Frederic Bastiat, the early 19th-century French economist whose work is at home in pro-capitalist libraries, warns against confusing government with society. The upshot of which is that we often fall into the trap of thinking objections to the state’s role in a particular endeavour is tantamount to objecting to it being done at all. Bastiat explains that one may disapprove of state-mandated religion, nationalised healthcare or government-run farms without being against faith, medical care or food. The same holds true for planning.

Whereas master plans are state-led, centrally determined, one-size-fits-all attempts to dictate the behaviour of millions of individuals, the alternative is not anarchy but rather allowing a multitude of unique plans to be developed by the very firms, consumers and employees who will be most directly affected by their outcomes.

It seems only appropriate to conclude with a final pithy platitude, but one that does ring true in a world seemingly driven by co-ordinated master plans: big business loves big government, but what’s good for big business isn’t necessarily good for the market.

Or, as former US consumer journalist John Stossel has argued, “When big government colludes with big business to kill competition, we all pay the price.”