Opinionista Ivo Vegter 30 July 2013

Malema’s righteous anger… and naïve confusion

It is not uncommon for economic populists to confuse cause with effect, or correlation with causation. Julius Malema is no different from any other would-be revolutionary, as he demonstrated when he misnamed his new political party the “Economic Freedom Fighters.”

Julius Malema’s new political party, which has issued a manifesto and looks set to contest the 2014 elections, may prove to be a welcome addition to South Africa’s political landscape. It is capitalising, if you’ll excuse the term, on the righteous anger of the unemployed and the poor. Their frustration is very justifiable, and merits a political champion.

Many South Africans have yet to taste the material fruits of freedom, and continue to suffer in conditions of dire poverty and high structural unemployment. Malema’s Economic Freedom Fighters (EFF) duly vow “to emancipate the black people of South Africa, the working class in particular, from economic bondage”.

The argument is superficially correct. It is true that South Africans continue to suffer in poverty and unemployment, because while South Africa has achieved political freedom, it has yet to achieve economic freedom. Where Malema goes wrong, however, is in advocating not true economic freedom, but instead calling for more of the sort of statist policies that are the root cause of South Africa’s failure to deliver on the economic aspirations of the majority of its people.

As John Kane-Berman so eloquently described it, in a speech I discussed recently in The Long Walk to Serfdom, the National Development Plan “tries to appease everyone, from domestic unions, to foreign greens, to big business seeking protection”.

It is rooted in an obsession with government regulation and control that is indistinguishable from the policies of the National Party, which the latter were forced to abandon.

“What is needed?” asked Kane-Berman. “Liberalisation. The National Party was forced to liberalise, and so, one day, will the ANC.”

The key to Malema’s misconception lies in that word, “liberalise”. If it is freedom you seek, it stands to reason that liberalisation will get you there. However, while Malema’s freedom fighters do battle on economic grounds, they are not fighters for “economic freedom”.

On the contrary, his party’s manifesto explicitly describes itself as “a radical, leftist, anti-capitalist and anti-imperialist movement with an internationalist outlook … [that] draws inspiration from the broad Marxist-Leninist tradition and Fanonian schools of thought.”

In short, he wants more socialism, not less of it. As Gareth van Onselen described it: “The sheer audacity of the EFF’s manifesto, coupled together with the fire-spitting persona of its founder, has overnight rendered the [Young Communist League] effectively null and void. The title, ‘the vanguard of radical socialism’, now belongs to the EFF.”

Malema’s manifesto duly lists the party’s objectives: “Expropriation of South Africa’s land without compensation for equal redistribution in use. Nationalisation of mines, banks, and other strategic sectors of the economy, without compensation. Building state and government capacity, which will lead to the abolishment of tenders. Free quality education, healthcare, houses, and sanitation. Massive protected industrial development to create millions of sustainable jobs, including the introduction of minimum wages in order to close the wage gap between the rich and the poor, close the apartheid wage gap and promote rapid career paths for Africans in the workplace. Massive development of the African economy and advocating for a move from reconciliation to justice in the entire continent. Open, accountable, corrupt-free government and society without fear of victimisation by state agencies.”

It is a vague and naïve wish list, but it is undeniably radical and socialist. Their revolutionary and rhetorical appeal may be why Malema fails to recognise these demands as little more than an intensification of the policies of the NDP. They are the very same policies that failed the National Party before, are failing the ANC now, and will fail his own party in future. They differ in degree, but not in kind. The NDP, too, as Kane-Berman says, observes that state capacity is low and the burden on the state too great, while disdaining privatisation and making market failure the scapegoat for government failure.

For example, Malema calls for the nationalisation of land and industries. With or without compensation, such a programme would expropriate private property only to vest it in the state. A true call for economic freedom would demand that the state cede the property it monopolises, in land and public enterprises, so that the national wealth of our country can be restored to the people, as the Freedom Charter demands.

The alternative that Malema proposes is merely a stronger version of the ANC’s approach to land reform. As argued in detail in my serfdom column, the acquisition of land by the state, with a view to lease it back to emerging and small-scale farmers, inevitably creates a class of landless peasants, as tenants in life-long bondage to the bureaucrats in government.

Many of his other proposals are also quite contrary to economic freedom. A minimum wage, for example, makes it illegal for someone to accept work that pays less. The alternative is not always employment at what some elitist determined to be a decent wage, but unemployment. One can understand the emotive appeal of a call for higher wages, but how does a policy that makes some jobs illegal enhance anyone’s freedom?

Protected industries also restrict the freedom of others. Instead of being free to choose, tariffs and subsidies create artificial price signals that distort economic behaviour. In the cases of tariffs, they deliberately increase the price of competing goods, which harms all consumers in the vain hope of protecting a mere handful of workers. Conversely, subsidies are a costly and usually perpetual drain on public finances that create an artificial advantage for selected goods that otherwise would not be able to compete. In both cases, they can only increase the opportunities for corruption and victimisation that the EFF manifesto rails against. (And remember that the public finances are not only drawn from income tax on the wealthy, but also from sales tax and assorted other duties and levies that impact the poor directly, and corporate tax that affects productivity and employment indirectly.)

Malema’s policy demands are not features of a free economy. That may explain why the EFF’s manifesto soon ties itself into knots trying to explain its own internal contradictions. For example, it follows up the call for nationalisation with the admission that the Freedom Charter says “people shall have equal rights to trade where they choose, to manufacture and to enter all trades, crafts and professions”. This circle is squared by stating that “there will never be wholesale nationalisation and state control of every sector of South Africa’s economy”, but only for “strategic sectors and assets”. And what, pray tell, if one wants to be a property developer, a miner, or a banker by profession?

More importantly, in light of Kane-Berman’s observation that “what the private sector does in SA generally works, and what the government does generally doesn’t”, why would you want “strategic sectors and assets” under exactly the wrong sort of management?

“Money won’t create success, the freedom to make it will,” Nelson Mandela once wrote. Malema focuses on the effects of economic freedom. He wants the poor to have money, and he is not wrong in that desire. However, unlike Mandela, he disregards the causal relationship between freedom and prosperity.

For years, advocates of individual liberty – that is, economic freedom – have banged their heads against obtuse post-colonial discourse about the centrality of a powerful government in a developmental state.

At every turn, government’s regulatory failures are recast as the private sector’s failure to remedy them. The failures of partial liberalisation efforts are blamed on the liberalisation, rather than its partial nature. The consequences of privatising government monopolies are blamed on privatisation, rather than the maintenance of monopoly power. Valid case studies could easily demonstrate the statist ideologues to be wrong, but in South Africa they rarely involve full, rather than “managed” liberalisation, or the establishment of free, competitive markets rather than private monopolies or cartels. And when they do arise in foreign countries, they are answered with the objection that South Africa is a “developmental state”, in which the ordinary rules of economic theory do not apply.

By tapping into the populist anger about South Africa’s lack of progress against poverty and unemployment, Malema may well force the ruling party to revisit its best-of-both-worlds confusion about economic policy that is contained in the NDP. He might give those who understand and favour true economic freedom the impetus to clarify how their policies differ from those of the EFF, and why true freedom is demonstrably superior in creating prosperity and reducing poverty.

If Malema’s misnamed Economic Freedom Fighters spark a national conversation about the true nature of “economic freedom”, he will have done South Africa a great service. This is a conversation that is two decades overdue. It is the conversation that should take centre stage, in the run-up to next year’s elections. DM


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