Economic freedom: The battle of ideologies

2014-01-26 10:00

Economic freedom to some means slavery to others, write Thuletho Zwane and Mamello Masote

The commissar of the Economic Freedom Fighters (EFF), Floyd Shivambu, has questioned the validity of the 2014 Index for Economic Freedom, saying his party’s notion of economic freedom includes reclaiming strategic ownership and control of key economic resources.

Shivambu, who is responsible for research, policy and political education at the EFF, said: “Private ownership of strategic sectors of the economy has resulted in slavery of the black majority, with farm workers living in the same or even worse conditions than slaves.”

His is not one of the measures used to calculate the index.

In fact, the Heritage Foundation, which compiled the index, sees state control and the lack of protection of property rights as a hindrance to economic freedom.

The Heritage Foundation is a think-tank that promotes conservative public policies based on principles including free enterprise, limited governance and individual freedoms.

According to Jack Bloom, the leader of the DA in Gauteng, there was a “rock-solid correlation” between higher economic freedom in a country and the welfare of its people.

He said: “Julius Malema [the EFF leader] seems to believe they should nationalise everything. That’s not economic freedom. That leads to economic slavery.”

South Africa, ranked 75 out of 178 countries with a score of 62.5, is considered “moderately free”. Its ranking has declined steadily over the past decade.

Free Market Foundation director Eustace Davie said South Africa’s “very low” ranking was a result of money the state spent on welfare and salaries, as well as the country’s rigid labour laws.

“The minimum wage laws cause unemployment. Would the 8?million unemployed South Africans say they prefer to be unemployed and live on welfare, or get paid below minimum wage?” asked Davie.

Bloom agreed that South Africa’s labour laws, particularly the minimum wage requirements, threaten economic freedom.

“We need basic protections, but above that, labour restrictions are the major reason for our high unemployment.

“You can argue the moralities of it, but minimum wage excludes people from the workplace,” he said.

According to him, the burden on small businesses was particularly heavy and has already wreaked havoc in the clothing industry.

But Shivambu said it was a fallacy that the cost of labour in South Africa was high and should be reduced.

He said minimum wages were essential in the reduction of poverty and starvation, and added: “The DA and all right wing formations will, of course, object to minimum wages because minimum wages reduce the profits of the bosses and farm owners whom the DA represents.”

He said South Africa’s labour was already very cheap because there had not been any real increases in wages since 1994 and “more than 50% of workers are paid less than R2?800 per month”.

According to Nedbank economist Isaac Matshego, some surveys didn’t always give a complete picture of the business environment in a particular country due to their inflexibility.

He said: “The same methodology is applied in surveying the economies of the US and Botswana, although these are completely different economies with diverse dynamics.

“The US has an economy driven by the private sector, while Botswana is a developmental state, with government playing a dominant role in the economy.”

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