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Less taxes, more jobs!!!

By: Mpiyakhe Dhlamini 2014-08-03 10:33

According to the World Bank, government spending was 22% of GDP last year, but considering that the GDP calculation includes government expenditure, we can say government spent 28% of what was produced by South Africans (the percentage is even higher because some of that expenditure was funded by debt, which has interest.)

Government is unproductive by it’s nature, but it is a necessity for those things that must be done collectively by all of a nation’s citizens, so because of its unproductive nature government spending must be minimised as much as possible so that they is enough capital in the economy for productive investments which grow the economy and create jobs.

The number one problem facing South Africa today is unemployment and the solution to that problem is more people getting employed (obviously!!).  A growth in employment only occurs if they is investment in the economy, but they is a difference between investment and spending. Investment is calculated to maximise return while minimising risks because in a capitalist economy one has to invest their own capital, so if a bad investment is made, you lose part of your hard work and effort.

Now governments have a habit of calling some of the spending they do “investments” but they are not because it is not their own money, so they frequently and inappropriately weigh the rewards much more than the risks. The greater part of government expenditure is basically wastage (that’s not even including the money lost through corruption, which is most likely replaced by debt meaning a higher tax in future to cover the debt as well as the interest on the debt).

The government is constantly urging the private sector to invest in our economy, while doing everything to make it riskier for them to do so.  If the government were serious the first thing they would do is cut taxes for everyone. This would allow people to have an extra amount to save every month and thus banks would have a greater asset base from which to lend to people who want to start their own businesses.

It is basic economics that if they is more of something, then it becomes cheaper.  The same is also true for money -  if there is more of it in banks, interest rates would decrease. More people could start small businesses because they now had a little extra to save towards the business.

Jobs, lots and lots of jobs would be created (we would need to deregulate our labour market though). This is all within our control, if we start now we could end poverty in this country and everyone would finally have the chance to be the best they can be.

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