ANCYL Misconceives Economic Freedom

According to US economist Walter Williams, a simple definition of “economic freedom” (more generally known as “a free market”), is “voluntary exchange between individuals free of third party intervention”. This is certainly not what the ANC Youth League (the ANCYL) mean in their declaration that “7 cardinal pillars of economic freedom in our lifetime are identified as the most vital components of the immediate tasks and functions to be pursued in the consolidation of real and sustainable economic transformation”.

How is it that a two word concept like “economic freedom” can mean polar opposites to different people; economic freedom in the sense of freedom from government intervention in the sense that Professor Williams understands them, and massive government intervention, theft of property, and the violation of the rights of individuals in the sense that the ANCYL appears to understand them. We turn to The Fatal Conceit: The Errors of Socialism by Friedrich Hayek, for an answer to this puzzling question.

Hayek commences with a quote from Confucius which reads, “When words lose their meaning people will lose their liberty”. Obviously, this matter is not to be treated lightly. Hayek provides an example, “For instance, there was the deliberate deception practised by American socialists in their appropriation of the term ‘liberalism’. As Joseph A Schumpeter rightly put it: ‘As a supreme if unintended compliment, the enemies of the system of private enterprise have thought it wise to appropriate its label’.” That the ANCYL policy is antagonistic towards private enterprise even though the organisation has chosen “economic freedom in our lifetime” as the main focus of its work in the coming year is revealed in the choice of its “7 pillars”, which are (1) Expropriation without compensation for equitable redistribution (2) Nationalisation for industrialisation (3) Inclusive and decentralised economic growth and development (4) Land restitution and agrarian reform (5) Building a strong developmental state and public service (6) Massive investment in the development of the African economy (7) Provision of education, skills and expertise to the people.

In a perversion of language, the ANCYL interprets plunder in the form of expropriation without compensation and pervasive state control to mean “economic freedom”. This confusion of language is dangerous in that it leaves the average citizen not knowing what either side of the debate is actually talking about. The misimpression the youth league is creating through this misuse of language needs to be addressed.

The Economic Freedom Network (EFN), which is a network of eighty free market think tanks from as many countries, who co-publish the Economic Freedom of the World (EFW) annual reports, cannot all be mistaken about the real meaning of economic freedom. The reports measure the consistency of a nation’s institutions and policies based on the core concepts of economic freedom, which the Network describe as “self-ownership, non-interference, and the protection of people and their property from invasion by others. Put another way, individuals (including those in government) do not have the right to take things from others or demand that others provide things for them. Use of violence, theft, fraud, and physical invasions are not permissible but, otherwise, individuals who are economically free are free to compete as they see fit”.

The economic freedom that the EFN describes is vastly different to the policies that the ANCYL claim to support. In fact, implementation of the ANCYL’s proposed policies would destroy economic freedom and cause South Africa’s economic freedom rating and ranking in the EFW study to fall.

South Africa has already slid from 42nd in 2000 to 82nd in 2008, from the top 30 per cent to the bottom 42 per cent, in the ranking of 141 countries ranked according to their levels of economic freedom as measured in the annual EFW reports. Further government intervention would cause South Africa to fall even further and faster, especially if there were to be nationalisation of the mines and farms as suggested by the ANCYL. The extent and rapidity of loss of economic freedom by South Africa during the past decade, from best to worst ranking, is rivalled only by countries such as Venezuela and Zimbabwe.

Declines in economic freedom have serious repercussions. Numerous studies have shown that countries with higher levels of economic freedom grow more rapidly and have higher levels of per capita incomes than those that are less free. Economic growth is primarily the result of gains from trade, capital investment, the discovery of improved products, lower-cost production methods, and better ways of doing things. Increases in economic freedom and improvements in quality of life are closely related, as are declines in levels of economic freedom and deterioration of quality of life.

Possibly the ANCYL did not intend to misuse the words “economic freedom” but their suggestions that the mines should be taken without compensation would amount to theft on a grand scale. Secure property rights and voluntary exchange are cornerstones of economic freedom and are essential for bringing about high economic growth, greater investment, increased job opportunities and reduced poverty.

What would be very good for the country right now is an ANCYL decision to promote economic freedom according to its true definition and drop the policies that are inconsistent with it. By doing so they will achieve their objective, which, according to their policy statement, is the “intensification of the ANC’s political programme of uniting the people of South Africa and building sustainable livelihoods for them through social and economic emancipation of the black majority and Africans in particular”.

The ANCYL are right, economic freedom is the best policy for South Africa to follow, it will provide all the things they wish for the people of the country, as long as the version they adopt incorporates “self-ownership, non-interference, and the protection of people and their property from invasion by others”.

AUTHOR: Eustace Davie is a director of the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.

FMF Feature Article / 16 August 2011

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