Individual Liberty delivers economic freedom and progress

Reading time 5 min.

Everyone says they believe in freedom. The kind of freedom that endures is individual liberty that comes at no cost to anyone else. Increasing such liberty is the best way to solve many of South Africa’s and the world’s problems.

Friedrich Hayek, the eminent 20th century economist, wrote The Road to Serfdom, published in 1944, to warn of the potential consequences of the steady erosion of individual liberty. He wrote that “(I)f capitalism means here a competitive system based on free disposal over private property, it is far more important to realise that only within this system is democracy possible. When it becomes dominated by a collectivist creed, democracy will inevitably destroy itself.”

A collectivist creed exists where individual rights are subordinated to the so-called “rights” of the collective. SA has a long history of political trampling on individual rights. The property of “black” owners was confiscated by the enactment of the infamous 1913 Land Act. The reverse side of that appalling injustice was the little-recognised injustice imposed on “white” individuals who were prohibited from selling or letting their property to individuals with different skin pigmentation.

Apartheid-era politicians convinced the “white” voters that they were acting in their best interests when they secured for them the exclusive right to vote in elections by trampling on the rights of “black” citizens. The politicians had secured their collectivist (socialist) objectives by manipulating the voting system to attain and maintain their minority dominance over the entire country.

Apartheid socialism in SA was extremely harmful to the country’s economic growth. Comparing SA’s performance to Hong Kong, for instance, World Bank figures show that SA’s 1960 GDP per capita (in constant 2000 US$) was $2,204, Hong Kong’s was $2,968. In 2010 the comparable figures were SA $3,748 and Hong Kong $35,671. SA’s GDP per capita increased by only 70.05 per cent (1.01 per cent per annum) in 50 years, while Hong Kong’s grew by 1101.18 per cent (5.20 per cent per annum).

An absence of voting rights, no racial bias in the laws, and a high level of economic freedom characterised Hong Kong’s administration. SA, by contrast, during most of the 50 year period, had limited and racially oriented voting rights, a much lower level of economic freedom, and a persistent collectivist racial bias in the laws.

Hayek warned that “the most advanced socialists openly admit that the attainment of their ends is not possible without a thorough curtailment of individual liberty”. There can be no doubt that apartheid consisted of a “thorough curtailment of individual liberty” of the entire SA population. As my colleague, Temba Nolutshungu, has pointed out, “liberty is indivisible: it is not possible to have liberty for some and not others in the same country”.

High unemployment and poverty threaten to swamp the orderly functioning of SA’s administration. Worldwide economic turmoil also poses a threat that could cause increasing economic hardship in the country.

Arguing for a deliberate and consistent programme to increase individual liberty as a counter to the looming crises that face us might appear incongruous and, to many, counter-intuitive. Frequently, politicians argue that in order for them to deal effectively with crises they need increased power over the lives of citizens. All too often, the crises are the result of their own misconceived policies.

Increasing the individual liberty of citizens, especially their economic freedoms, in most cases, will not only be the most effective solution, it is the only fundamental solution to an otherwise insoluble problem.

At a time when another and even more damaging world recession threatens, it is most unwise to contemplate a collectivist economically harmful policy such as nationalisation. Government should rather be researching ways to free up enterprise in the country so that large and small firms will be better able to withstand a recession. And if, with good fortune, another recession does not occur, greater ease of doing business will allow for the accelerated growth that is so sorely needed.

Creating an enabling environment that attempts to make SA recession-proof can be done by halting all proposed legislation and policies that increase instability and uncertainty and removing existing legislation and regulations that hamper enterprise and trade. In particular, government should give attention to legislation and regulations that impinge on individual liberty, including those that are based on race.

One glaring example of where individual liberty could solve a seemingly intractable problem is in unemployment. Give back individual liberty to the 7 million unemployed and they will find their own jobs. Only a small change to the laws is necessary to return full common law decision-making rights to the unemployed so that they can negotiate contracts with any employers they choose, and obtain gainful work on any terms and conditions they find acceptable.

The individual rights of the jobless to contract as they choose have been taken away from them, supposedly to give them job security and protect them, if they had a job, from unscrupulous employers. This becomes a tragic insecurity when it keeps them from finding jobs. Return their freedoms to them so they can take care of themselves and their families.

Another example of how increased individual liberty can solve a headache that appears to have no cure is to return to parents and their children the liberty to make their own decisions about the children’s education. Fundamentally, education should be dealt with in the same manner as any other service. It should be demand-driven and not supply-driven.

Demand from parents and their children should determine what is taught, how it is taught, where it is taught, when it is taught and by whom it is taught. If this were to occur, the complaints of employers about job applicants not having the required skills would disappear; large numbers of young people would not end up illiterate after a decade of schooling; attempts to fit square pegs into round holes would occur less frequently, and teaching would once again become an honourable profession.

In circumstances distinguished by individual liberty, unemployment would decline rapidly and education would improve beyond recognition. In good times citizens would prosper at a “Hong Kong” rate and in hard times do significantly better than in less economically free conditions, at no cost to anyone else.

Eustace Davie is a director of the Free Market Foundation. This article is syndicated by

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Franklin Cudjoe
Franklin Cudjoe is head of Ghanaian think tank, IMANI, a non-profit, non-government organization dedicated to fostering public awareness of important policy issues concerning business, government and civil society. He is also editor of The Foreign Policy Magazine named IMANI, the fifth most influential think tank in Africa in 2010. Franklin was named Young Global Leader 2010 by the World Economic Forum.
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