In the midst of the fiscal crisis in Europe and the already hot presidential campaign here in the United States, it is easy to forget that there is a struggle for economic freedom going on in other parts of the world as well. One of those parts is South Africa, which I wrote about two months ago. Based on the signs of a prolonged global recession and the risk that America will re-elect an economically illiterate president, I explained that:
…there are other parts of the world where a recession could have serious consequences for both prosperity and liberty. One example is South Africa, a country that certainly cannot afford the economic and social repercussions of a global recession. After decades of oppressive apartheid (which was imposed by the British who in turn were opposed by the boer) this nation on the edge of the African continent saw promise of a better future in the early 1990s. The economy was doing relatively well at that time; some of the economic conditions for freedom and prosperity were indeed present. But instead of taking the road to unity, liberty and peace, the ANC government that took over after the Apartheid regime were all too eager to put to work the socialist nonsense that their Scandinavian supporters had spoonfed them for so many years. … As a result, waves of high-skilled professionals emigrated. The exodus went on for many years. It came to a halt a few years ago, though, when the South African economy experienced an exports-led growth spurt. Competent politicians would have seen this gift from a growing world economy as an opportunity toward liberty-oriented reforms, but once again the socialists failed to see the writing on the wall. Their main focus was to redistribute whatever small resources the economy produced, as opposed to growing it to provide for everyone through self sufficiency.
This assessment of the past two decades in South Africa is reflected even more strongly in an article in Business Day, a good South African business journal:
Business confidence plunged to its lowest level in 12 years in July, according to an index compiled by the South African Chamber of Commerce and Industry (Sacci). Sacci’s business confidence index (BCI) fell to 90.9 points from 94.9 in June, reflecting what it described as the negative influences of the domestic and international environments. … The business group said it was concerned about the slowdown of economic growth on a global scale, and the widespread downward revision of expected growth rates for South Africa. Many analysts have lowered their predictions for growth this year to 2.5%, from between 2.7% and 2.9% earlier.
After a GDP growth rate of 3.1 percent for last year, this is indeed bad news. Normally an economy like the South African could sustain and get through a recession without any major problems even if growth falls below 2.5 percent. But in order to function properly, an economy needs a political and legal environment that favors stability, predictability and liberty. Stability means that laws and constitutionally guaranteed rights don’t change on a whim; predictability means that contracts can be enforced years after they were signed; liberty means there is no government there to intrude on the decisions that investors, entrepreneurs, workers and consumers make.
South Africa is having trouble in all these categories. Here is what the Heritage Foundation writes in its Index of Economic Freedom about the rule of law South Africa:
The rule of law remains weak and uneven across the country. The legal system has gained more independence and provides relatively effective protection of property rights. Contracts are generally secure. However, the court system is slow, understaffed, underfunded, and overburdened. The courts impose undue burdens and costs on rights holders pursuing infringement cases. Corruption continues to undermine the foundations of economic freedom.
The corruption of the South African government under ANC rule has now taken such a toll on the nation’s economy and society that even former high-ranking ANC government officials are speaking out. One example is Mr. Tito Mboweni, a lifelong member of the ANC and former minister of labor and governor of South Africa’s Reserve Bank. In a column in Business Day he delivers a scathing indictment of ANC’s warped priorities since it came to power (free registration required):
[The] behaviour of some ANC members and leaders has not been exemplary. Using your official credit card for personal expenditure is simply stupid and theft. Forcing people off the road because you have blue lights is just not on, and it is one way of increasing the numbers of those against you. Cooking up tenders to benefit you or your buddies is theft and immoral, and people must go to jail for that. Building sub-standard Reconstruction and Development Programme houses is pure incompetence and not advancing a better life for all. Staffing state departments and institutions with your unqualified and incompetent buddies in the name of “cadre deployment” is not serving our country and the cause that the ANC so ably led against apartheid. Not owning up to some of the failures since 1994 is not helping our developmental trajectory at all. Forgetting that the basic policy approach of the ANC is non-racialism, not Africans only, is a big mistake, and we will pay dearly for this in the next 20 to 30 years. Employment equity does not mean Africans only.
The failure of South Africa over the past 18 years to become a prosperous nation is entirely attributable to the radically leftist policies of the ANC government. In addition to corruption, the ANC has handed out entitlements right and left and promised all kinds of perks to people without neither requesting nor providing an opportunity for them to work for the very same goodies. Instead of creating an economic climate of economic freedom and self determination, the ANC imposed its radical political agenda with no regard for how it was going to pay for it. And just like every welfare state, the South African one has failed.
A dire problem for South Africa is that its welfare state came into the picture at a point when the country was still not quite at the economic performance levels of European, North American or East Asian industrialized economies. The welfare state always creates a drag on the economy, in the form of high taxes and in the form of work disincentives. In the case of an emerging economy as the South African, this drag came at a particularly bad time. A good contrast is India, where the government has given economic freedom a chance to build prosperity without being overly burdened by a welfare state.
This macroeconomic downside of the welfare state has totally eluded the ANC, probably because they thought their ideological agenda was more important than a sound economy. As Mr. Mboweni explains, South Africa will pay a high price for years to come for the ANC”s political mismanagement of the country. But the consequences of this mismanagement are not just going to hit the country in the future – they are already burdening the nation. A story from Cape Argus, a local newspaper in Cape Town, provides a disturbing glimpse of social decay in a country where the government says its first priority is to help precisely these people:
Flames and black smoke filled the air as protesters and police clashed this morning during service delivery protests which brought traffic on Strandfontein Road in Philippi to a standstill. A tear gas caniser fired by police landed in the Khanya creche on the corner of Strandfontein and Merlin roads, causing children to pass out. … About 200 protesters from the Phumlani Village and Riemvasmaak informal settlements started burning tyres and garbage from 5.30am today. Traffic lights were damaged and set alight and roads were blockaded. Police arrived at the scene shortly after the protest began, and 21 people were arrested on charges of public violence. … Residents in ward 67 said this morning that they had decided at a community meeting on Sunday that they would protest today, after their councillor, Shaun August, failed to arrive to attend the meeting to hear their grievances about the lack of electricity and streetlights.
And this is where it gets interesting:
“We have tried time and time again to get (August) to attend our public meetings, he has never pitched up. So today we decided that enough was enough,” said Celena Mokgethi, who has been living in Phumlani for five years. “For instance, we complain that we want electricity and streetlights, but all (August) has to say is that it won’t happen because we will steal electricity from the power lines. That is not an answer!” Residents’ other grievances include the fact that there are only a handful of taps in the area, some of which don’t work, they say. “We live in tin shacks, we use the bucket system, it’s all very disgusting,” said Mokgethi.
How come the utility companies don’t deliver electricity or enough water?
August, DA councillor for Ward 67, said … the DA was involved with the local community, with contractors hired to clean up the area on a daily basis, but demands to electrify the area cannot be met. … According to August, streetlights have been fixed multiple times but cable theft continues to nullify their efforts. He added that drainage problems were self-inflicted, with residents using the system for waste disposal. “We find goat’s hooves and intestines in the gutters all the time,” he said. “We need to educate the residents on proper waste disposal.”
In other words, despite 18 years of ANC rule, large segments of the people of South Africa have yet to acquire the basic skills of living in a civilized, industrial society. The reason for this is not that these people are inept, but that their government has kept them in a life of ineptitude. They have been told that government will provide for them, that they don’t need to do anything to improve their lives, but that instead they can relax and wait for handouts from above.
Instead of educating these people on how to build their lives; instead of giving these people full jurisdiction of their neighborhoods and their own lives; the socialist ANC government has allowed radical elements within its ranks to perpetuate the deplorable poverty that these people find themselves in – all for future political exploitation.
South Africa has enormous potential. That potential is being squandered by naive socialists, reckless ideologues and corrupt bureaucrats and politicians. Hopefully the South African people can rise to the occasion, throw out the political exploiters and rebuild their nation from the ground up.
If that doesn’t happen, then at least South Africa can serve as yet another warning of the dire consequences of giving socialism a chance.