When corruption rules

WHY ARE some countries economic successes and others miserable failures?

Why is America – and to a lesser extent, also Europe – clawing its way out of the crisis, while Russia is in freefall? Why does Australia fare relatively well, while Zimbabwe is a ruin?

Well, one may write a series of very thick books about this question, an option not open to me today. In the full knowledge that one can give only a partial answer in a column like this, I would, nevertheless, attempt to briefly identify only two factors. We may then apply this to our own country.

First of all, no country can be a durable economic success without the rule of law as opposed to the arbitrariness of a capricious dictator or oligarchy. Success goes hand in hand with investment, and nobody in his right mind will invest without the security brought about by the protection of a well developed legal system.

If I have a few million burning in my pocket, will I invest it in – say – North Korea or Singapore? The USA or Zimbabwe? Germany or Russia?

Any investor wants to make a profit. The question is: Will one make a profit by beginning a tobacco farm in Zimbabwe, or a company exploring for gas and oil in Russia?

The answer is: Probably not.

In Zimbabwe, your farm will be stolen by Uncle Bob before you can say knife. Perhaps you may keep your farm if you grease palms worth a few million, but what happens to your profit margin then?

In Russia, you can safely bet that the Russian mafia surrounding President Vladimir Putin will concoct a complaint or two, resulting in your incarceration and expropriation of your investment. Once again, greasing a few palms may help, but this, too, subtracts from your bottom line.

No, then rather the USA or Germany. They have a lot of bumph to contend with, but you at least have security of your property, and greasing palms will probably get you in trouble. These countries are by and large ruled by a legal system which dates back to the Middle Ages and Roman times. Which is exactly one of the reasons why the West came to dominate the world, and not Asia or Africa.

But there is also a second reason why some countries do better than others. This has to do with correct policy choices.
One is, of course, speaking about economic policy, but also about the interface of economics and politics.

On the one hand, recent history shows that socialism, for instance, is economically disastrous. If you are a member of the poor and downtrodden, of course, socialism seems like an attractive alternative, but it has never worked in any country. It certainly has never been a proper solution to the poor.

But there is more. If you follow a disastrous foreign policy, it will ruin you also.

Take Adolf Hitler for example. Hitler’s foreign policy was, simply put, war at all cost. He started a war against Poland, then invaded Denmark, Norway, the Low Countries and France, he waged war against Britain, and made the fatal mistake of taking on the Soviet Union and the USA as well.

He left a country physically in ruins. Economically, his foreign policy was catastrophic.

At present, President Vladimir Putin is also illustrating the truth of this observation, though, of course, not as extreme as Hitler.
Putin is a superb tactician. The way he occupied the Crimea and is now destabilising the Ukraine is an excellent example of what the Russians call maskirovka – camouflaging your actions to keep your opponents guessing so that they won’t get what you are doing until it is too late.

But he is also a bad strategist. If you really think ahead and not be led by your machismo, you will not underestimate your opponents. This is exactly what Putin did – not so much the Ukraine, but the European Union (EU) and Nato.

Things may, of course, still go horribly wrong, but for the moment the West really have Putin where it hurts. Obviously, the low oil price has something to do with Russia’s economic woes, but the sanctions hurt considerably too.

And the absence of a proper rule of law system does not help either.

As for South Africa, we are ruled by a president who tells the SABC television without batting an eyelid that he did not profit from Nkandla, that he did nothing wrong, and that neither of the three investigations found otherwise. In the meantime, he presides over a government which is without doubt the most incompetent and corrupt in South African history.

The governing party already has the public broadcaster in its pocket, as well as  most of the constitutional “independent” bodies to safeguard and support democracy, and the Prosecuting Authority. It is presently conducting an offensive to subdue the courts and the Revenue Service, while at the same time sniping at the free press.

In the meantime, it wants to make it easier to expropriate land.

In other words: What is happening in South Africa, is that the rule of law is being undermined, while corruption is the name of the game. And this will, no doubt, be reflected in our economic well-being.

Furthermore, the government is following a foreign policy which is sure to irritate our traditional economic partners in the West.
Seen against this background, the government seems bent on making every wrong choice it possibly can.

* Leopold Scholtz is an independent political analyst who lives in Europe. Views expressed are his own.

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