Blame political elite for poverty and lack of economic freedom

13 June 2018
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There has been much talk recently about the "inadequacy" of SA’s 1994 political transition, which led to the 1996 Constitution. It brought about political freedom, they say, but not economic freedom, as the majority of South Africans remain poor.

It is important to engage with this narrative from an economic and a jurisprudential viewpoint.

Prior to 1993 SA was governed under a system of parliamentary sovereignty. This meant, insofar as humanly possible, parliament could do as it pleased. There was no rule of law, but only the rule of 178 men in the House of Assembly. This system gave rise to apartheid.

It had nothing to do with SA’s Roman-Dutch legal tradition, which recognises the inherent rights of all people — black and white — to be free and to own property.

Apartheid denied both freedom and property rights to the majority, and could do so because parliament was sovereign. This is directly relevant to the political economy SA had: one of racial socialism. The apartheid government owned masses of the economy through state-owned enterprises, and indirectly through interventionist regulations.

The government didn’t "own" white people’s houses directly — as it did with blacks, a situation that continues to this day — but legislation such as the Group Areas Act prohibited them from selling their houses to whomever they wanted.

Statutes such as the Native Land Act prohibited white farmers from trading in land with black people, something that had happened frequently in the late 19th century.

Two aspects thus characterised apartheid economics: an interventionist state and very insecure property rights.

What changed when the interim constitution was enacted, and later the 1996 Constitution? Theoretically, the rule of man was at an end. Section 1(c) of the Constitution provides that SA is founded upon the supremacy of the Constitution and the rule of law. Parliament may no longer do as it pleases, and is constrained by the law.

Unfortunately, the current political class is not keen on this. The rule of law, and the freedom and prosperity of the people, have often come in second place to the political considerations of the governing elite. Ministers and regulators are empowered to rule by decree in practically every industry subject to government oversight.

Constitutional democracy also meant racial socialism was (supposed to be) over. Almost immediately after apartheid ended, and up to 2000, SA rose in the Fraser Institute’s rankings of economic freedom.

Blacks were allowed to own property. Institutions that controlled prices were dismantled. It is dishonest to claim that the Constitution and SA’s political settlement left the economy "untouched". SA had a fundamentally different economic order before democracy in 1994.

The political regime pre-1993 encouraged intensive state involvement in the economy, which produced the poverty we see today.

The belief that the Constitution only gave us "political freedom" but not "economic freedom" is false, as the latter was a consequence of the former.

Improvements in the living conditions of South Africans have always come as a result of the law returning to its proper purpose: the regulation of conflict and the protection of liberty and property.

Where law has been used as a tool of social engineering, as with apartheid and the current government’s political ambitions, living standards [and freedom] have fallen.

Of course, the Constitution did not relegate the government to a completely non-interventionist role in society, and highlighted some areas that needed change. But the fabric of the Constitution indicates a clear respect for how economies function.

There is no need for an "economic Codesa" or a "democratisation" of the economy. If left alone, the market is the most democratic phenomenon imaginable. Indeed, we vote with our time, money and labour every second of every day, and each vote has a ripple effect throughout the economy that leads to the success of some firms, the failure of others, and to widespread social change.

Poverty has not been beaten in SA for the same reasons it was exacerbated during apartheid: an overactive state with no respect for the rule of law or for how markets function.

Whenever we have tried freedom, it has worked, but control has consistently produced destitution. This happened on a global scale when the prosperous and free West overcame the poor and socialist East during the Cold War. It happened in SA, where constitutional democracy overcame apartheid.

Let’s stick with freedom, and avoid any notion of overhauling our constitutional order in favour of more paternalistic control.

Van Staden is a legal researcher at the Free Market Foundation.

This article was first published in Businesslive.co.za on 13 June 2018



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