Let Economic Freedom and Trust be South Africa’s Heritage

In 2000, South Africa was ranked at 58th in the Fraser Institute’s Economic Freedom of the World (EFW) report. In the 2020 edition, South Africa’s ranking was 90th, out of 162 countries and territories. The steady decline of the country’s economic freedom is made real in ever-rising unemployment, lower living standards, rising poverty and hunger, and a general sense of hopelessness. The higher a country is ranked, the better generally its people’s lives are. When a country’s ranking declines, the opposite is true. On this Heritage Day, heading out of the COVID-19 lockdown, South Africans should strongly consider the country’s direction, and the kind of heritage we want to leave for future generations.

More than 10 million people were unemployed before government implemented one of the world’s most draconian lockdowns, with the aim of fighting the COVID-19 pandemic. At time of writing, South Africa has been under lockdown for six months. Reports of business closures and more job losses have become the order of the day. Right now, the figure sits at more than 3 million additional unemployed since the implementation of the lockdown. There is no better time – no more urgent time – than now for South Africa to embrace policies that enhance citizens’ individual and economic freedoms.

The EFW uses data across five areas to measure a country’s economic freedom: “Size of Government”, “Legal System and Property Rights”, “Sound Money”, “Freedom to Trade Internationally”, and “Regulation”. Each yearly report highlights the connections between economic freedom and beneficial societal phenomena. The latest report contains a chapter on the relationship between economic freedom and trust and tolerance in societies.

Writing in the 2020 edition of the EFW report, Niclas Berggren and Therese Nilsson point to the “capacity for economic freedom to generate social trust and tolerance.” South Africans should rightly feel lucky – indeed, proud – to live in a country of such incredible diversity. Over 50 million people, 11 official languages, myriad cultures, and people who seek to come from all over Africa to work, live, build, and thrive here. Tourism is one of the country’s great strengths – and can be even more so after the lockdown, as people from across the world seek to travel.

When we share a higher level of trust with people around us, that denotes a general sense that we feel that others will be reliable. Through exploring the influence of legal institutions (the strength of which influences a country’s economic freedom score), and the market process (voluntarily exchanging goods and services), the two authors ascertain that governments “should consider strengthening the institutions undergirding the market economy, especially the rule of law, if they wish to improve chances for both economic growth and a stronger presence of trust and tolerance.” Real trust and tolerance come about through us interacting voluntarily with each other – true respect can never result from government force.

Economically freer societies foster better relationships between cultures. It is to the mutual benefit of individuals to trade across cultural boundaries. If one engages in discrimination, that ensures that their goods and services will be spurned. When there is a breakdown in trust, people tend to gravitate toward relatively ‘easy’ groupings, and people’s lack of trust in each other, and a desire for someone to ‘solve’ their problems for them, can be exploited by politicians seeking only to expand their own power.

The more economically free a country is, the easier it is for people – with all manner of varying interests and abilities – to create wealth. South Africa cannot only seek to redistribute from those who have, to those who do not – this will not create long-term investment, and definitely not jobs on a meaningful scale. The South African government has largely fallen prey to a restrictive, redistributionist mindset, when the only way to attain economic growth that could be inclusive, and indeed transformative, is to allow people as much economic freedom as possible.

You cannot build without the freedom to do so. The more interconnected the world, the more opportunities there are for people to interact and trade with each other. But the best way for this to happen is when people’s minds are free. Progress cannot come about from an all-controlling, centralising state. We do not need the compulsion of the state to force us to work together. Meaningful progress and interaction results when people are free to realise the great mutual benefits of working together to attain certain goals. A desire common across cultures is that to invest and build for one’s children; when a country has more economic freedom, it is easier for people to do exactly this.

What kind of potential do we see in future generations? What level of trust do we have in their abilities, desire to build, and to carry the country forward? The start of the new decade came with a global pandemic and lockdown that clearly exposed and exacerbated South Africa’s structural economic problems. For those of us alive now, if we adopt the moral ideas and policies of economic freedom, our bequest to future generations can be that of a country with great potential, room for growth, and trust between greatly diverse peoples.

Chris Hattingh is Project Manager at the Free Market Foundation.

Photo by Chrissie Kremer on Unsplash