As the world awakes to the horror of debt, our nightmare is just beginning

THE launch of the National Health Insurance plan has taken South Africa another step down the road to becoming a welfare state which seeks to redistribute resources from its tax base to a population which faces dimming job opportunities.
As the Financial Mail pointed out this week in an editorial under the banner “Welfare state by stealth”, South Africa now pays social grants to 15 million people.
There are countries where this approach has been successful. The Scandinavian nations have a high tax rate in exchange for which all citizens enjoy access to cheap or free health care and education.
They have done so while their economies have been competitive global players that have created employment and kept tax revenues coming.
Then there are other, less salutary examples. Health care in Cuba and North Korea is free, but the price has been industrial stagnation under repressive regimes which have encouraged desperate poverty.
The question which remains unanswered is which direction South Africa will take. There are very loud voices within the ruling party which would like to see the destruction of the free market and “bourgeois” freedoms enshrined in the constitution. They believe in a hegemonic state of the Cuban stripe.
These loud voices are no longer on the “outside”. President Zuma himself believes that the media enjoys too much freedom and that the constitution is overly liberal.
His youth league leader, Julius Malema, is allowed to develop and propagate a doctrinaire Stalinist vision for this country with only the meekest censure.
The ANC’s economic policy approach — a free market model with a firm regulatory hand and a socially responsible state — is being openly challenged and there are very few voices arguing for the status quo.
Even powerful figures such as Cyril Ramaphosa, who have done well for themselves in business, are unable to criticise nationalisation without first subjecting business to a rhetorical tongue-lashing, such is the power of this lobby.
Whichever welfare model South Africa ultimately adopts, it will be a bold experiment because just 10 percent of the population — five million people — pay the taxes that are being allocated to these ambitious projects.
While the super-rich can easily afford this growing burden, the middle classes are under pressure. Rising education, health and security costs are causing those traditionally loyal to the ruling party to seek political alternatives. Perhaps most sobering is the fact that, unless economic growth miraculously takes off, we are setting ourselves up to borrow on a large scale to finance a very expensive state just as the world wakes up to the consequences of accumulating debt.