The institution of “regulation” is so ingrained that many accept its existence uncritically, premised on the notion that it “protects” society from the excesses of freedom. In reality, regulations do more harm than good.
The market and society have always and will always “regulate” the excesses of freedom in line with what the market and society actually require and desire. There is no need for the artificial imposition of political preferences.
We have to ask ourselves: if everyone unanimously wants regulation, then why do we need state force to implement it? With such a high degree of agreement, market and communal (non-coercive) regulation becomes a walk in the park. Individual holdouts can be swiftly dealt with through social ostracism and market boycotts.
If we all “want” the environment protected, or buildings constructed according to high standards – if these are truly things that we value – then we would all only purchase products from those firms that do not harm nature, and we would give no business to shoddy construction companies. In fact, we would encourage our fellows to follow suit, and we would conduct damaging PR campaigns against egregious violators, robbing them of custom and ensuring they become pariahs in society.
Remember, the executives at these businesses would be our neighbours, our customers at our own businesses, and so forth. We do not need “protecting” from them by the state because we are already in a position to protect ourselves. When we ask the state to do it, all manner of perverse political incentives – and harmful socio-economic consequences – result.
Liberty First
This week, the Free Market Foundation (FMF) published its third report in its Liberty First series, this time on “Regulation”. The report, authored by Dr Morné Malan, shows alongside the Fraser Institute’s Economic Freedom of the World annual report that in labour regulation and regulatory burden, South Africa is one of the worst performers in the world.
This despite the fact that South Africa ranks well on sub-components like the lack of conscription, private ownership of banks, and light credit market regulation.
Malan argues that the low performance of South Africa the components of regulatory burden and labour regulation are reflected in data around socio-economic outcomes, being economic growth and unemployment.
The less dynamic labour regulations make the labour market, the fewer initiatives there would be to create jobs. Similarly, if the cost of compliance with the vast swathes of nonsense politicians have ordained is too high, many people would rather go push pens than open their own small businesses and give entrepreneurship a shot.
Taking “a shot” in South Africa is highly discouraged and expensive when it should not and need not be.
In this report, the FMF has honed in on three areas of regulation – Labour, Healthcare, and Education – which concern the biggest immediate threats to South Africa’s economic freedom. Despite this focus, the FMF advocates a wholesale agenda of liberalisation that stretches across the length and breadth of the economy.
Labour
Those in government – of “national unity” or otherwise – and adjacent to it, are adamant that South Africa’s record-breaking levels of unemployment (bizarrely and particularly among young adults) are not in fact to blame on the “protections” of law. What else is there?
Well, the “destructive” and “evil” global forces of capitalism have never had trouble employing people. After all, sweatshops and slave labour – those things errantly laid at the feet of exploitative capitalism – still happen and keep people occupied. Capitalism, they say, wants cheap, exploitable labour, not no labour.
So, it is clearly not the free market’s fault that there is high unemployment in South Africa.
Could it be laziness?
Do South Africans simply have such bad work ethic that they would rather starve than work? Surely not.
There is nothing in any South African culture – except its socialistic political culture – that points to a lack of a desire to work among the masses. In fact, the mere fact that some 1.2 million people applied for 8,000 jobs when Panyaza Lesufi advertised his Nasi Ispani programme means that there is a desperate desire for employment among South Africans. Anyone who advertises jobs on Facebook and elsewhere will similarly attest to this desperation.
So, it’s clearly also not society’s fault that there is high unemployment.
What remains – and what most businesspeople would tell you when the cameras are not rolling – of course, is South Africa’s globally infamous labour policy framework.
As Malan writes, South Africa’s labour laws are “designed to mediate relations between large corporations and unionised employees,” and therefore “disproportionately impact small and medium-sized businesses that lack resources for compliance.”
The FMF has long advocated a Job Seekers Exemption Certificate (JSEC) that would allow the long-unemployed to exempt themselves from the euphemistically so-called “protections” of labour law.
In addition, the practice of bargaining councils asking – and being granted the request – the Minister for Unemployment to extend collective agreements to non-parties that were not present during the negotiations must end. These non-parties are usually small business that become bound by the luxurious contracts concluded between Big Labour and Big Business. This phenomenon has wreaked enough havoc.
Healthcare
An economy whose healthcare has been devastated by state regulation will and cannot last long. The state has already done its part to ensure that for most South Africans who live far away from the few well-functioning public hospitals, public healthcare is a dismal experience. So now it has set its sights on our continentally acclaimed private sector.
Malan here speaks of “nationalisation through regulation,” whereby all the risks and costs of doing business will remain with private hospital groups, while the state will enjoy the benefit of control and ownership. This is what the National Health Insurance (NHI) Act ultimately comes down. It will fully extend the failures of the public healthcare system into the private healthcare sector.
This is not the way to go for an economy in need of a healthy, socially mobile population to grow. Most South Africans by far would prefer to escape the public healthcare system and have private medical aids. The government wants to rob them of this potential.
The FMF proposes that the NHI Act be repealed before it becomes an established part of our law.
Malan writes furthermore, that, “Reforms must, therefore, focus on opening up the private sector to make such [quality private] services available to a broader base of the population as opposed to limiting their impact through harmful restrictions such as those imposed on the provision of low-cost benefit options.”
The government’s age-old restriction on low-cost benefit options (LCBOs) is a directly anti-poor policy that has no place in a country whose highest law provides that there is a right to “have access to” healthcare.
Education
Like the NHI Act, the ink on the Basic Education Laws Amendment (BELA) Act is not yet dry.
We are told that the so-called Government of National Unity scored one of its major victories by getting Cyril Ramaphosa to agree to a delay in the implementation of the Act’s most egregious provisions. One hopes that this leads to those provisions being removed from the Act – it is imperative – but it would be even better for the Act as a whole to be repealed.
Educational outcomes in South Africa should not be surprising given the extent of state interference in what is appropriately and historically a familial, communal, religious, and social phenomenon.
Is it any wonder that those schools in South Africa characterised by active communal and parental involvement are, generally, exemplary, and those schools characterised by active state interference are, generally, collapsed or collapsing?
Malan writes that, “Deregulating the education sector could provide parents and students with the freedom to choose their preferred educational paths, paving the way for a competitive, private-sector-driven education system that could better meet individual needs.”
No free but poor state
One argument that is always wheeled out against free market economics is that “there is no such thing as a completely free market.” To opponents of freedom, this means that no country in the world has come to the “irrational” conclusion that an undiluted free market is a good idea.
What they miss is that there is no example – anywhere – of a free market that is poor.
To the degree that any economy is free, it is wealthier than those that are less free. There are countless examples of states with highly regulated economies that are poor, and there are also examples of highly regulated economies that are rich.
But there are many more examples of lightly regulated economies that are rich, and not one singular example of a lightly regulated economy that is poor.
It is usually here, of course, that the intellectually dishonest opponents of freedom wheel out the sophistry of “Somalia” and construe the foundational, limited services that the state is meant to provide, in the form of courts and police, as “regulation.”
Those of us who believe in a completely free market are not (always) anarchists.
The overwhelming success of free market capitalism, at least in my view, came alongside a state (not no state) limited to those functions that it is meant to provide in society. If it did not fulfil those functions, no market (voluntary exchange) would be capable of forming.
The state is not, unlike how it is construed today, a general-purpose vehicle. It is a very specific kind of institution with a very particular – specified, fixed – purpose, in the same way that a kindergarten, a mechanic’s workshop, a movie studio, and so forth, are specific kinds of institutions with particular purposes.
The state, and kindergartens, mechanic workshops, and movie studios, are then quite unlike the family and the household, which are in fact general-purpose vehicles with open-ended mandates. The state can never be this, for if it becomes that, the entire foundation of the social contract disappears, and the answered question of the legitimacy of the state becomes an unanswered question.
The legitimacy of the state depends on it having a fixed, particular purpose. If it can do whatever it thinks “the people” would prefer, it becomes illegitimate because we know there would always be people – no less bound by the state’s diktat – who disagree.
And only when it fulfils this purpose (I submit) do capitalism and its necessary consequence – prosperity – become possible.
In the absence of the state, or worse yet, in the presence of a state that goes beyond its purpose, all manner of injustice is necessarily enabled. For a more perfect realisation of this recipe for success, a separation between economy and state is necessary, and the notion of “regulation” must reside where it belongs: in market and social – not political – forces.
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
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Image by Gerd Altmann from Pixabay