This article was first published by Business Brief on 5 August 2024
South African policymakers learn all the wrong lessons from other countries. Rather than look to the free and prosperous societies of the United States and Europe, politicians and pundits would rather push us to imitate Russia, China, Venezuela, Cuba and Zimbabwe. And even when policymakers identify genuinely good role models, they take the wrong lessons.
The Asian developmental states are used as an example of the success of central planning, yet this cannot be further from the truth. Singapore, South Korea and Japan were far from the socialist, centrally planned states that the central planners in government would like us to believe.
Rather, the three nations above became successful because they leveraged the skills of their people in a vibrant free market, utilising policies that enabled competition, and the growth of big businesses.
Where there was central planning, it usually failed. Japan tried to centrally plan its economy with protectionist policies, subsidies and resource rationing. The industries that were meant to benefit from this floundered, while the businesses that were left to their own devices in a free market, without subsidies or help, flourished.
The trade unionist and socialist ideologues in government would also not like to admit that all three of the examples above engaged in active anti-communist and anti-unionist policies. Communism was outright banned in these countries, and labour regulations were firmly in favour of the employer.
Ironically, even Communist China would not sit well with unionists today, with workers receiving very few rights and privileges.
What should SA do?
The Asian Tigers aren’t a good example for South Africa to emulate. Our cultures, histories and global contexts are entirely different. But there are lessons we can learn from the Asian Tigers, as well as advanced economies like those in the United States and Europe.
Economic freedom is inextricably linked to the prosperity of a country. And while inequalities may exist in some of these societies, it is better to be poor in a rich country, than poor in a poor country.
Of the top 10 freest economies, six are also in the top 10 GDP per capita rankings. While GDP per capita is not the most reliable economic indicator, it does give a basic indication of how well an economy is performing. When you expand the list of countries ranked by economic freedom, while comparing it to lifestyle indexes, economic indicators and just general knowledge about those societies, the findings are clear. The freer the country, the richer, happier and more prosperous it becomes.
South Africa needs to embrace economic freedom. Not the type of neo-Stalinism that the Economic Freedom Fighters espouse, but a genuine love for free markets.
To accomplish this, policymakers should not be pushing for more redistribution, more regulation and more red tape. Rather, the government should be embracing a policy of cutting back legislation that has held back economic growth.
Affirmative action and race-based policies like Black Economic Empowerment (BEE) have been proven to not help the genuinely deserving or even those who need it, but rather only serve to enable corruption and stifle employment and the growth of businesses.
If BEE, race quotas, procurement requirements and the host of racialised legislation that infects this country were to be eliminated, investors would flock to our shores. Employers would no longer be afraid to grow their businesses and employ additional staff without fear of violating quotas.
Labour regulations need to be lessened as well. Unions are over-empowered in this country, with a practical free seat in the government. Unions are important for defending the rights of workers, but they don’t help the unemployed. Unions must not be given as severe protections as they currently are – and should definitely not be a part of government.
Strike and protest culture, pushed by unions, needs to be stifled – with legislation allowing businesses to keep running with replacement workers without fear of violence.
Additionally, it must become easier to hire and fire workers, to incentivise businesses to take a reasonable risk hiring young and unproven employees without fear that they will be unable to fire them if they prove inadequate.
Parastatals and incompetently run government services should be privatised, allowing a vibrant and competitive free market to replace their function, and provide a much needed alternative to the malaise which is state-ownership.
In essence, South Africa needs to embrace a radical free market, which will enable the generating of wealth, the creation of jobs, and the growth of prosperity for all South Africans. All we need is for policymakers to act rationally, put their long-dead ideologies aside, and embrace what has worked for the richest countries in the world.
