BE AFRAID, be very afraid. SA has tumbled down the Economic Freedom of the World (EFW) index to its lowest level to date. During apartheid, black people were denied economic freedom. Now, everyone is.
Do not let the fact that everything gets worse with declining economic freedom scare you. The problem is not that less freedom implies lower living standards, higher unemployment, widespread destitution, political instability, capital and skills flight, crime and corruption, and protests and unrest. These, fortunately, are easily reversed. All the government has to do is stop causing the problem. The frightening part is that they are unlikely to do so because of political madness and greed.
When faced with crises, governments tend to panic and do more of what causes crises, instead of less. They feel a need to “do something” even though the problem is that they are doing too much. Instead of lifting us towards the world’s winning nations at the top of the index, they are driving us towards losers at the bottom. Our government is bigger, more intrusive and more expensive than ever. Yet it promises a greater role for government and spews regulatory diarrhoea.
Our late lamented economic freedom has been the subject of so much media anguish during the past few days that repetition of only a few core facts is required. We fell from the top third (42nd out of 159 indexed countries) to the bottom third (105th) in 15 years. We used to have the freest African economy, now we are 13th.
Our economic freedom declined while Africa’s, and the rest of the world’s, increased. Temba Nolutshungu of the Free Market Foundation points out that “according to research in peer-reviewed academic journals, people in countries with high levels of economic freedom enjoy greater prosperity, more political and civil liberties, and longer lives”.
It is criminally insane, for instance, for our government to consider, and for an academic or two to legitimise, mandatory minimum wages. Unlike the robust economies to which they refer, we have, according to the EFW index, one of the world’s most interventionist labour regimes and, therefore, the world’s highest enduring unemployment.
Laws that raise the cost, risk and difficulty of employment cause unemployment and destitution. The minimum wage idea is so reprehensible that victims of unemployment should be given the names and addresses of academics who tell politicians minimum wage laws will not inflict misery on society’s most indigent and vulnerable people.
The EFW index shows us as having one of the world’s most discriminatory foreign trade policies. Instead of moving towards low and uniform tariffs as we did during early post-apartheid years, beneficiation will accelerate our race to the bottom.
Thanks to the EFW report, there is no longer room for legitimate debate. Pro-market evidence is as conclusive as things get in social science. Instead of learning from the world’s experience, megalomaniacal and uninformed politicians and bureaucrats promote their short-term interests, and that of surrogates, at the nation’s expense, and their own medium-and long-term expense.
Why do they? Would they not be better off with policies known to promote prosperity and justice for all? Would that not make them more popular, secure and enriched?
For whatever reason, most world and African governments are increasing economic freedom while ours is destroying it. Policy sanity might return if their self-interest coincides with that of their compatriots.
One suggestion for achieving this is to link incomes and budgets of politicians and officials to economic growth and unemployment. If the economy grows 10% and unemployment falls 20%, they get 15% more. With zero growth and 10% more unemployment, they get 5% less. Democracy, with all its virtues, falls short of harmonised interests because it rewards political promises more than delivery.
• Louw is executive director of the Free Market Foundation.