Promoting his seminal book, ‘South Africa’s war against Capitalism,’ the economics Professor, Walter Williams averred that “The solution to South Africa’s problems is not special programs, it’s not affirmative action, it’s not handouts, and it’s not welfare. It is freedom. Because if you look around the world and you look for rich people, diverse people who have the ability to get along fairly well, you are also looking at a society where there are relatively large amounts of individual freedom.”
The unfettered liberty for individuals to pursue their socioeconomic aspirations so long as there is no force or fraud entailed in their endeavors should be the cornerstone and point of departure for all government policies. This principle should also be the litmus test in reviewing existing policies in order to expunge bad ones from the statute books.
If one studies prosperous and poor countries, the glaring fact becomes clear that prosperous countries are invariably characterized by greater degrees of individual liberties, especially in the economic arena. The converse is true in respect to economically poor countries. The correlation between liberty and prosperity is substantiated by various empirical studies such as the Economic Freedom of the World, the Property Rights Index, Index of Economic Freedom, World Competitiveness Report and many others.
Economic policies based on valuing highly the individual liberties of the people result in consistently high economic growth rates and other socioeconomic benefits downstream. Policies that are informed by and generally recognize and reflect the primordial instinct for liberty as the core value of human nature, will realize improvements in the lives and happiness of most, if not all people in the shortest possible period.
Individuals tend to collaborate with each other for mutual benefit. By nature, humans are guided by self-interest to seek ways to improve their prevailing socioeconomic conditions. To improve their lives, they seek and explore employment opportunities. They move onto better jobs or positions within the business enterprise. Those managing the business seek to expand their market share. Those with an entrepreneurial spirit plunge into the risky undertaking of starting a business where the risk of failure is ever-present.
As providers of goods and services to consumers, entrepreneurs are dependent on, and, in some ways, at the mercy of, their customers. The consumers, driven by self-interest, seek good value-for-money products. The providers, in turn, seek to maximize returns on their investments while doing their best to provide competitive value for money. None of these decisions are altruistically motivated. Employers, employees, providers and consumers of products all seek to realise the fruits of their labor. Statist policies such as punitive taxes negate this aspect of human nature. Demotivation sets in and the incentive to invest capital or to maximize labor productivity are gradually eroded.
This has been the experience of statist and command economies. It is what resulted in the implosion of socialist economies from 1989 onwards. It is what explains the economic abyss that is Venezuela. Communist China decided to go the market route with the implementation of incentivized, unfettered and liberated markets with individual economic participation in special economic zones. The policies that followed in these areas are compatible with human nature and the immutable principles of sound economics, which explains why China has become the second-biggest economy in the world, lifting over 500 million of their people out of poverty in a few decades.
The late Soviet Communist dictator Josef Stalin’s daughter, Svetlana Alliluyeva (1926-2011) stated this point very poignantly, “It is human nature that rules the world, not governments and regimes”.
South Africa is a catalog of such counterproductive policies. The National Minimum Wage that was enacted. The National Health Insurance that flouts all economic and prudent financial management principles and rides roughshod over a progressively smaller tax base which will bear the burden of this monster while it destroys a sophisticated private health care sector that competes with the best in the world. The commercially unviable state-owned enterprises that cannot survive without tax subsidies. The country is a litany of woeful policies, this sadly against the background of cataclysmic unemployment levels and a shrinking economy.
The problem as diagnosed by Friedrich Hayek is that policymakers are afflicted with the malady of fatal conceit. Their general arrogance of assuming that they know everything about everybody’s diverse interests, priorities, preferences, needs and wants and how they go about pursuing these. The politicians and policymakers then embark on intrusive policies as to how they should conduct their endeavors. In the process, the liberties of individuals and thus business enterprises are seriously impacted. It is no wonder then that countries that embark on such statist tendencies experience poor economic growth, increased erosion of wealth, high unemployment, increased poverty and other negative indicators of unhappy lives such as poor education and healthcare.
Liberty is the source of human progress! And yet, the politicians just don’t get it.
Temba A Nolutshungu is a Director of the Free Market Foundation.