Feature Article: Organised labour and the FMF could turn South Africa into Africa’s Hong Kong

“We have come here to make a simple and loud call for all to hear that we want our political freedom to be in line and harmonised with economic freedom now!” said COSATU President Sdumo Dlamini in his opening address to the COSATU Bargaining, Organising and Campaigns Conference. What, then, would be a better way to achieve this than by turning South Africa into an African Hong Kong?

Although organised labour and the FMF, which, as a member of the worldwide Economic Freedom Network, promotes economic freedom, may well approach these matters differently, we have many concerns in common. We all want good healthcare to be available for all, a growing economy, housing for the people close to where they work, good wages, elimination of poverty and unemployment, good governance and an end to corruption.

The mention of economic freedom at the conference raises the issue of how it can be achieved. The best example to imitate of an economy that has in fact delivered these desirable outcomes to its people is that of Hong Kong, the inspiration behind China’s burgeoning economy. Hong Kong has the freest economy in the world. If South Africa could become Africa’s Hong Kong, our country would become dynamic and flourish.

Looking at both countries today, how do they compare? Hong Kong has a population of 7 million, South Africa has 50 million. Hong Kong’s total 2008 GDP was $240 billion, compared to our $180 billion. Its GDP per capita increase (constant 2000 US$) was 1970 $6,085, 1995 $24,123, and 2008 $34,587. South Africa’s GDP per capita for the same years was 1970 $3,104, 1995 $2,960 and 2008 $3,763) With apartheid, the antithesis of economic freedom, as could be predicted, between 1970 and 1995 South Africa’s GDP per capita declined while Hong Kong’s almost quadrupled and went from 1.96 times to 9.19 times South Africa’s GDP per capita in 38 years . 

Mr Dlamini is correct if he believes that increasing economic freedom in the country will lead to accelerated economic growth and an increase in jobs. Currently, Hong Kong is ranked 1st while South Africa languishes in 85th position amongst the 144 countries measured on the economic Freedom of the World (EFW) index. To become a dynamic, growing and labour-absorbing economy, South Africa must move up these rankings. It is the only way there is for us to rapidly reduce our 7.6 million unemployment number.   

If organised labour recognised the urgency and began working to create a dispensation similar to that which brought about the dramatic transformation of Hong Kong, the benefits for its members, the unemployed, and, in fact, everyone in this country would be phenomenal. The economy would grow rapidly, corruption would be curbed, the numbers of unemployed would dwindle; innovation, technology, profits and wages would increase. Economic growth, GDP per capita and the number of available jobs would multiply, not by trickle down but by a flood. As for the unions, they would reap substantial benefits in the form of increased membership and influence as a major co-ordinating force for peace and progress in the economy.

It is not surprising that Hong Kong is top of the economic freedom rankings. In 1998, renowned economist Milton Friedman wrote that “In 1960 ... the average per capita income in Hong Kong was 28 per cent of that in Great Britain; by 1996, it had risen to 137 per cent of that in Britain. In short, from 1960 to 1996, Hong Kong’s per capita income rose from about one-quarter of Britain’s to more than a third larger than Britain’s. It’s easy to state these figures. It is more difficult to realise their significance. Compare Britain—the birthplace of the Industrial Revolution, the nineteenth-century economic superpower on whose empire the sun never set—with Hong Kong, a spit of land, overcrowded, with no resources except for a great harbour. Yet within four decades the residents of this spit of overcrowded land had achieved a level of income one-third higher than that enjoyed by the residents of its former mother country.”

This happened despite the fact that when the war ended in 1945, Hong Kong experienced desperate times. Once the Japanese occupation troops had left, returning deportees, refugees and immigrants flooded into Hong Kong. By 1961, the population of 600,000 had increased to 3.2 million.There were no jobs for all the people living in shacks or on boats in the harbour. But then, enterprising entrepreneurs started finding ways to use such a vast supply of available labour. Hong Kong became famous for the low-cost goods refugees churned out from their homes, millions of items such as miniature trinkets and toys made with moulds and molten plastic.

Although outside observers considered this to be “exploitation” and were appalled, Sir John Cowperthwaite, the Financial Secretary of Hong Kong from 1961, could not be swayed from applying what he called the “positive non-intervention” policy. He left labour relations to employers and employees, limited income tax to a 15 per cent flat tax, abolished import duties, instituted no minimum wage laws, and no government job creation projects. Gradually, as a result of his policies, trinkets and toys for export to the rest of the world made way for high value goods produced in modern factories by an increasingly skilful and well paid labour force.

The resulting “economic miracle” of high growth and development absorbed the huge number of unemployed at such a rapid rate that, by the 1980s, employers were complaining of a shortage of labour.

There is, of course, no such thing as an economic miracle. The dramatic development of Hong Kong occurred because of the implementation of economic freedom.

The FMF has for many years been arguing for the right of the unemployed to decide for themselves what level of wages, type of work, and conditions of employment would be acceptable to them, as was the case in Hong Kong. We have not been heard and employment opportunities have continued to deteriorate. In Hong Kong, with its greater level of economic freedom and no barriers to entry, everyone has benefited from the rapid increase in the demand for labour.

The FMF’s motivation for arguing for a change in legislation to end forced unemployment has been twofold. Firstly, the absolute horror that millions of families remain destitute and hungry because legislation prevents mothers and fathers, brothers and sisters from working to earn some income to sustain them. Secondly, the knowledge that in a free economy where potential employers are not deterred by legislated costs and penalties, the only unemployment that would exist would be of people who choose not to work or are unable to do so. In Hong Kong, it took wise governance and bold policies to eradicate poverty and turn it into a phenomenal economic success. Similar policies would do the same for this country.

By committing to the same goals and agreeing that the only way they can be attained is as explained earlier, organised labour and the FMF, whether working together or independently of each other, can help to transform South Africa, remove the scourge of unemployment, and rapidly increase the wages of workers. For wages to increase at the desired rate, more people need the freedom to work and employers need the freedom to employ those people, so that together they can produce the goods that bring in the money to pay higher wages. Mr Dlamini said it and we agree wholeheartedly. We need economic freedom. But let us all work together and turn our country into an economically vibrant African Hong Kong!

Source: 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.



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