Wednesday, January 11, 2006

Punchy Good Sense from South Africa

“Has anyone read an economic textbook lately that recommends subsidising the wealthy? Researchers wishing to know how it is done should examine the operations of South African Airways (SAA). They subsidise wealthy passengers, which flies in the face of both rational economics and social policy.”

What a great intriguing question from Jasson Urbach, a research economist with the Free Market Foundation, whose article explains “Why South African Airways belongs in private hands.” It is published by Moneyweb (‘your trusted friend on the Internet’) in South Africa. Check his article by visiting:

Jasson Urbach continues:

“Most of SAA’s passengers are discerning business people who value the frequency, convenience, punctuality and reliability of flights. However, according to the latest financial release, SAA recorded an operating loss of R240m. If government covers the loss, as it has done in the past, taxpayers will be subsidising affluent people who don’t fly on low cost carriers.”

And he comments:

“Adam Smith, David Hume and other eighteenth and nineteenth century thinkers advanced the case for individual freedom and private enterprise economies. They advocated a system where individuals have the freedom to make the vast majority of decisions that affect them. This preference does not assume that people are always rational and seldom make mistakes, but only that the great majority of people are more rational and make fewer mistakes in promoting their own interests than well-intentioned government officials.”

An excellent summary of Smith’s philosophy, without any semblance of dogma. He makes his assertion and leaves it to readers to make with it what they will. If they ignore it, they spend billions of Rand subsidising SAA’s annual losses at real cost to the South African poor, who need infrastructure investment, not subsidised business-class flights for many more than ‘discerning business people’. Don’t let us forget the numerous politicians, civil servants, bureaucrats and parastatal (quango) employees, who enjoy their class of travel at the taxpayers’ expense and the expense of those poorer people who do without what the subsidies could be funding instead.


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