It turns out government is fairly awful at running a business.
It was announced today that the state owned South African Airways was essentially bankrupt. The enterprise, wholly owned by the South African government, is hemorrhaging money, according to a cash flow statement released to South African MP’s. Without a 792M Rand (59M US Dollars) bailout from the government, the airline will be unable to pay its employees. The unions are calling for a strike and Alf Lees, the deputy of finance for the opposition, the Democratic Alliance, stated that “Essentially they are insolvent and should have filed for liquidation.” (Do you have a source for this quote?
What is happening to South African Airways is just a symptom to the cancer that is nationalization of industries. The airline is run like a bureaucracy, not like a corporation. Essentially, they take in money with or without doing things the most efficient way for the lowest cost at the highest comfort. From my personal experience with the airline, they send passengers across the airport for their gate, put them on buses, then bus them to the plane that is connected directly to the opposite end of the terminal by jet bridge.
They often have flights that use aircraft way out of fit for the purpose of the flight. The two hour Johannesburg to Cape Town route is the sixth most traveled in the world. However, my flight from Jozi to the Cape was on an Airbus A340 (pictured above), a four engine wide body aircraft that seats over 300 people. The flight was essentially empty. This use of aircraft not fit for purpose and taking up multiple gates at various airports in South Africa for single flights are the largest symbols of the extreme waste that comes with government owned enterprises.
“The airline is run like a bureaucracy, not like a corporation.”
Politicians across the United States today are calling for the nationalization of our healthcare industry, ⅙ of the entire US economy. This nationalization would bring with it bureaucracy and waste, as the government is essentially a third party purchaser. They are spending money that is not theirs on services they are not using. This inevitably causes waste and useless layers of red tape. The healthcare market would operate like the Bureau of Motor Vehicles, the only escape being any personal wealth you can leverage to purchase private insurance. This would cause unnecessary suffering for millions of people, who already suffer enough waiting in lines at the BMV. There would be labor shortages in hospitals and overcrowding of patients in hospitals. The inefficiencies would have to come out somewhere and they would come out on the consumer of the product. Imagine the scenario above with South African Airways, but with your personal health. Also, there would be constant funding issues and the threat of bankruptcy unless benefiting from relentless bailouts, which makes the system toxic.
The issues above are not unique to South Africa. Nationalization of industries, typically pushed by socialist leaders claiming the resource or industry belonging to the “people” (read: government, not the people as a whole), has caused this type of strife in numerous countries. India remained at the same level of poverty until they liberalized their economy and privatized numerous industries in 1991.
Mexico continues to have issues with oil and gas since PEMEX was formed in the 1920’s. Venezuela is in turmoil as a result of the nationalization of their industries in 1999, including oil and healthcare. When nationalization occurs, the resource and industry becomes political. When it is political, it cannot be extracted and developed for the best use possible. Instead it is subject not to the whims of the consumer, but to the whims of whomever happens to be in power at the time. Numerous developing nations in the mid to late 20th century fell prey to nationalization of their industries. We must not let the same happen in the United States, for healthcare or any other industry.
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