Libertarian Shock Therapy: A prescription for South Africa

In the wake of South Africa’s profound failure under statist policies, a call for libertarian shock therapy emerges. Jonathan Katzenellenbogen’s article prompts Leon Louw’s exploration into how a libertarian approach, as advocated by South Africa’s pre-eminent libertarian, could lead the nation to prosperity. Essential to this vision is deregulation, freeing people to interact for mutual benefit. Labor liberalisation, consumer democracy, and slashing red tape emerge as crucial facets, promising rapid results. A libertarian government’s shift could consign failed relics to history, fostering liberty and prosperity for all.

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How a libertarianism government would transform South Africa.

By Leon Louw*

Statist policies have failed South Africa so comprehensively that the country needs libertarian shock therapy. But how?

Jonathan Katzenellenbogen wrote a provocative article in BizNews (10 January 2024) about challenges facing Argentina’s new ‘libertarian’ president, Javier Milei. The article asks ‘how a libertarian might lead South Africa’. As arguably South Africa’s pre-eminent libertarian, I was prompted by Katzenellenbogen to explore the idea.

Under interventionism the economy stagnated with the world’s highest enduring unemployment, millions of people destitute, thousands of ‘informal’ slum settlements with four million slums, failed state ‘enterprises’ (SOEs), dismal education, and so on. Virtually everything done by the government is catastrophic.

There cannot be informed debate about the fact that libertarian policies provide liberty and prosperity for all. This is clear from all relevant indices, especially the annual Economic Freedom of the World (EFW) Report. But which aspects of libertarianism are essential? Katzenellenbogen, like most, focuses on economic freedom. The worst that might happen, he suggests, is that only a few measures ‘will stick’.

Most importantly for prosperity, there must be ‘deregulation’. When and only when economies are liberated, people are liberated. What free people do is interact to mutual advantage. What controls do is ban the right for people to improve their lives as defined by themselves. All mutually voluntary interaction occurs because it renders those involved better-off in their opinion. Freedom is the right to decide for yourself what you do, including or especially the right to do what governments prefer you not to do. The libertarian principle is that nothing should be done to people and property apart from that to which they consent (‘consent axiom’) without coercive government interference or common crime (theft, fraud etc).

Katzenellenbogen notes that austerity cuts in spending might cause problems like lay-offs that lead to Milei not being re-elected, unless it scraps promised reforms, thereby ending much of its good work.

He cites concerns that libertarian ‘austerity’ reduces the wealth that government spending supposedly adds, whereas government spending subtracts wealth. Before a government gives, it must take. It takes taxes and capital (‘debt’). The difference between the seen and unseen economic consequences is that layoffs, rather than new jobs, are seen. Government jobs generally consume wealth and destroy private jobs. Government spending on X is taken from Y, minus the cost of administration. Wealth left in the hands of people who create wealth does more for prosperity than wealth allocated by bureaucracies.

The proven libertarian solution for unemployment is labour liberalisation; the right to work. Jobs are never ‘created’, they exist. So long as there are unsatisfied needs, there are vacancies that would be filled if governments got out of the way. Labour laws oppress the unemployed and criminalise destitute people willing to work for less than minimum wages concocted by armchair elites. Labour laws are the opposite of what the term implies. Instead of being for labour, they criminalise it.

The cliché that accompanies restrictive labour laws is fake concern about ‘exploitation’. Worse than being ‘exploited’ is not being exploited. The choice is not between a high or low wage, but a low and no wage. Ask job-seekers at intersections if they will work for less than the minimum wage, and ask why their right to work is criminalised.

One of our most anti-liberty myths is that the government promotes competition, whereas it bans it. The Competition Commission (CompCom) pretends to control competitors whereas it controls consumers. It forces consumers to buy from suppliers against whom they vote, if free, with their rands. When consumers ‘vote’ for, say Takealot or Uber, the CompCom denounces supposed ‘market dominance’. What they mean is that they hate success, especially the kind consumers love. It says: compete but do not win. It replaces consumer sovereignty with oppressor sovereignty. ‘Collusion’ is no more than a disparaging term to justify pro-consumer cooperation, partnerships and joint ventures.

Libertarian economies are a permanent consumer democracy. Consumers, instead of bureaucrats, decide who should prosper.

A common myth built into our language is that governments control ‘things’, like interest rates, land or liquor. All controls are people controls. Building codes, for instance, do not control buildings, but people who use buildings. You never see ‘building inspectors’ chasing delinquent houses down the road. What they do is criminalise people who improve their own lives at their own expense. It is a criminal offence for shack dwellers to replace a shack with decent homes. Far from ‘safety’ standards prescribing safety and comfort, they ban it for the poor.

The most libertarian economies are in China. China’s seven special economic zones (SEZs) are the freest and therefore most libertarian and prosperous on earth. For decades, starting with apartheid ‘homelands, the government has failed to create successful ‘special zones’. After visiting China, our government concluded bizarrely that SEZs prosper because of their name, so they called our failed industrial development zones (IDZs) ‘SEZs’. Since there is nothing special about them, they continue failing.

What would a South African libertarian government do? Mercifully, the world’s experience shows that merely small shifts in a libertarian direction yield rapid results. Slightly freer economies take off. A local libertarian government need not be pure. It could implement a few policies determined by socio-economic impact assessments (SEIAs), for which we have a specialised government department.

SEIAs might suggest starting with labour law and slashing ‘red tape’. Red tape reduction is promised in every state of the nation address (SONA), as it will be again this year. As before, it will be tabled beside legislation that does the opposite and the annual contradiction will go unnoticed. A libertarian government would do what SONAs promise. Taxes and debt would be slashed so as to leave wealth where it multiplies rather than it transferring it to where it divides.

Such silly apartheid relics as failed SOEs and exchange controls would be consigned to history’s trash heap. The government would change from stifling predator to facilitating protector, thus ensuring liberty and prosperity for all.