Von Mises On Capital and Saving

A weakening rand incentivises consumption spending over saving, as it guarantees that consumers will be able to buy less with rands in the future than they could have bought today. Yet savings are needed in order to accumulate capital over time and for an economy to become more productive and grow wealthy and prosper, i.e. for the manufacturing sector to prosper.

Regarding savings and its relation to capital accumulation and living standards, Ludwig von Mises wrote in The Anti-Capitalistic Mentality that:

The truth is that the increase in what is called the productivity of labor is due to the employment of better tools and machines. A hundred workers in a modern factory produce per unit of time a multiple of what a hundred workers used to produce in the workshops of precapitalistic craftsmen. This improvement is not conditioned by higher skill, competence or application on the part of the individual worker. (It is a fact that the proficiency needed by medieval artisans towered far above that of many categories of present-day factory hands.)  It is due to the employment of more efficient tools and machines which, in turn, is the effect of the accumulation and investment of more capital.

The terms capitalism, capital, and capitalists were em­ployed by Marx and are today employed by most people—also by the official propaganda agencies of the United States government—with an opprobrious connotation. Yet these words pertinently point toward the main factor whose operation produced all the marvelous achievements of the last two hundred years:  the unprecedented improvement of the average standard of living for a continually increasing population. What distinguishes modern industrial conditions in the capitalistic countries from those of the precapitalistic ages as well as from those prevailing today in the so‑called underdeveloped countries is the amount of the supply of capital. No technological improvement can be put to work if the capital required has not previously been accumulated by saving.

Saving—capital accumulation—is the agency that has transformed step by step the awkward search for food on the part of savage cave dwellers into the modern ways of industry. The pacemakers of this evolution were the ideas that created the institutional framework within which capital accumula­tion was rendered safe by the principle of private ownership of the means of production. Every step forward on the way toward prosperity is the effect of saving. The most ingenious technological inventions would be practically useless if the capital goods required for their utilization had not been accumulated by saving.

A continued weakening of the rand is what is causing the regression of the South African economy and driving the living standards of the average South African lower, as it results in falling real savings rates and therefore results in capital consumption. A weak or “competitive” currency is not the way to creating prosperity and turning manufacturing in SA around. We need a strong and sound currency that strengthens against the currencies of governments that are recklessly debasing theirs.