Voluntary Exchange and Protection of Private Property for Christmas

At this time of the year, retailers and consumers are at it again. With all sorts of attractive sale inducements, energetic buyers are shopping around but, this year it seems, a lot more carefully.

Now, more than at any other time of the year, retailers go crazy to offer good value for money as people generally have more disposable income in December. Good quality at low prices, significantly discounted prices, two items for the price of one, and so on. Is this “benevolence” on the part of retailers expl
ained in terms of Father Christmas altruism that afflicts them particularly at this time of the year?
Not at all! Instead it has everything to do with the rigorous competition that a market based economy brings about. And this is how it happens.

Retailers generate their income wholly by selling to consumers. In order to maintain or increase their income, they have to foresee, respond to, or stimulate consumer demand. Every retailer would wish to have consumers patronising their business exclusively, to the disadvantage of any competitors.

In the absence of a free market, this wish would likely to granted if a retailer had the approval of a government official or two. With their goodwill, such a retailer could rely on the government to enact policies that favour him to the detriment of his competitors, domestic or foreign. Who would benefit besides the retailer? Why only the government officials concerned. The vast bulk of the populace, the consumers, would lose out. They would be denied the benefit of choice and the chance of obtaining good value for money.

That wish would be totally impossible in a free market. A retailer in an open economy has to enhance his income by competing solely on the basis of pleasing the consumers; by selling them the articles they want at a price they are prepared to pay. Every consumer shops around purely on the basis of receiving good value for money. When you get down to the fundamentals of earning a living and making your money work for you, there is no place for altruistic or patriotic considerations. When it comes to preferentially buying South African made products, altruistic and patriotic considerations can only be tolerated when there is enough money to afford to pay whatever additional expense is incurred in making it possible for such goods or services to be produced ‘at home’.

Any retailers who understand the rules of this game and do not rely on the goalposts being moved hopefully in their favour at the will of political players will succeed and outperform their competitors. In order to offer good value for money, and charge competitive prices for his products, a retailer has to source his materials and labour to achieve lower production input costs from cheaper markets, sometimes domestic and sometimes foreign.

Both retailers and consumers are driven by self-interest. Both need to extract the best deal from a transaction.

The moral of this symbiotic retailer-consumer sale frenzy is that the freer the economic environment, the greater the number of competing retailers, the better the sale value for the consumer. Everyone comes out of this voluntary exchange better off. From just observing what is happening here, now, it is clear to see that freeing up the economy is demonstrably, spectacularly, the right thing to do.

A spectacular Christmas present that is in the power of the government to give every single person living in SA, would be to identify existing policies that negate the principle of voluntary exchange and personal choice and to expunge those that do not meet this economic growth booster litmus test. Should government add to this the principle of protection of private property, and in turn apply all of these criteria to every sphere of public policy, then the country will be well on the way to becoming a high growth economy and by this time next year, the New Year celebration could be about SA having one of the highest growth rates in Africa.

AUTHOR Temba A Nolutshungu is a director of the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author's and are not necessarily shared by the members of the Foundation.

FMF Policy Bulletin / 20 December 2011