The Magic of Freedom: Frans Rautenbach in Conversation

By Frans Rautenbach on May 9, 2018 in Articles

Here is the first of a series of YouTube discussion videos made by Greg Bakker on my book and related topics. The first is a general one, the Magic of Freedom:

The moral case for a free market in a society with past discrimination

South Africa Can Work – Video 2

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About the campaign

My son’s statement hit me like a fist in the gut.

It was early 2016. We were having dinner at a Mexican restaurant in Cape Town – my wife and I, and my sons, Stefan and Daniel, both students at the University of Cape Town. This was in the middle of the #FeesMustFall protest movement that was wracking South African campuses, and was the topic of conversation. At some juncture I made the point that the demands of the protesters were wrongly directed, in my view, against white people, and that the logical target of their ire should be the ANC government. Soon enough the discussion veered towards economics, and the government’s culpability in the whole problem, in particular its mismanagement of the economy. I reiterated my view, as I had done in the past, that a free market was the answer to our economic problems.

That’s when Stefan said it.

“I always used to believe your arguments. I no longer do. Trickle-down economics have been proved to fail.”

While I was still staggering under this blow, trying to suck wind back into my lungs, both my sons then calmly declared their intention to vote for the Economic Freedom Fighters (the EFF) in the upcoming municipal election. The EFF, for those readers who have been to Mars the last five years, is the political party of Julius Malema that has as its main policy plank the nationalisation of the economy.

Second blow to the gut.

During the ensuing discussion, my sons then accused me of believing in economic ideas – free-market policy – that were outdated and had been discredited. When I protested that I had been researching the topic for years, they replied: “You only read the stuff that confirms your prejudices”.

For the next twenty-four hours I reeled from the shock – not so much because my sons had a different opinion to me. Not because they were prepared to back their viewpoints in debate with me. If I had taught them anything, it was to investigate any argument critically and to express and defend any counter-positions as forcefully as they could.

My shock was about the fact that I had failed, despite many conversations over the years, ultimately to win them over to my viewpoint on how South Africa should work, using arguments which I had thought were powerful and convincing, reaching conclusions which I had believed were self-evident.

It also became clear during that and other discussions that our views on race and education differed dramatically. Besides economics, on these topics also we had almost diametrically opposed ideas. We had fundamentally opposing ideas about how to make South Africa work.

What if I had been wrong all along? What if I had completely missed the boat, and a whole world of policy change was passing me by in the night, the world inhabited by young people like my children?

I realised that any discussion with them about making South Africa work as it should, if it were to continue, would have to be prefaced by a carefully researched re-examination of my premises. I needed first to persuade myself again, or revise my own views completely, if I was to make any sense of all this in a discussion with them.

I believe in freedom. I deeply and passionately believe in values and policies giving the individual the greatest amount of freedom – both economic and personal – to achieve what he or she sets out to. Indeed, if this site could be summed up in one word, it would be freedom. I believe freedom is good for its own sake, but ultimately it is how people best achieve what they want for themselves. That means freedom from interference by other people, but fundamentally freedom from interference by the state. If our experiences in 2015 and 2016 in South Africa taught us anything, it is that a naïve entrustment of our lot to the government, without the choice to withdraw that mandate, potentially leads to national misery.

Over the last few years I have been researching and writing a book called South Africa Can Work. In it I express the view that South Africa can work, but with one important qualification, and that is: only if we all earn our keep.

The problem is that there is one, central fault line that runs through our society, and that is rent-seeking.

Rent-seeking is when someone gets an unearned benefit; something for nothing. It is perhaps best explained by these common-sense words ascribed to Dr Adrian Rogers, long ago in 1931:

“You cannot legislate the poor into freedom by legislating the wealthy out of freedom. What one person receives without working for, another person must work for without receiving. The government cannot give to anybody anything that the government does not first take from somebody else. When half of the people get the idea that they do not have to work because the other half is going to take care of them, and when the other half gets the idea that it does no good to work because somebody else is going to get what they work for, that my dear friend, is about the end of any nation. You cannot multiply wealth by dividing it.”

When I did my research for the book, there were two sets of figures that shocked me. The first is the percentage of entrepreneurs in the population, compared to a selection of African countries. The average of these countries is 15%; in South Africa it is 3.2%.

The second set of figures is our per capita GDP growth since 1994, compared to that of a group of 14 of our peers in terms of per capita GDP. Their average is 406%; in South Africa the equivalent figure is 62%.

We are so out of our depth here.

I am a labour lawyer. In 1993 I wrote a book in which I identified one form of rent-seeking, which was my own area of practice: labour law.

1995 was a good year for labour in this country. Unemployment was a “mere” 16%. Even so, at the time I warned that unless we changed our labour laws drastically, the relentless march towards ever-greater mass unemployment would just continue.

It seems no-one heard.

Since then unemployment has grown to 27%. Or let me rather put it this way: It has grown from 2.2 million then, to 5.9 million today – an increase of over 150%. Labour law is rent-seeking, because for one thing, workers get the right to strike, that is, refuse to work. In exchange for not working – for which they cannot be fired – they then get increases. To add insult to injury, for their wage increase they offer no increase in productivity.

In the book I present national and international evidence that the greater the percentage of trade union members in any industry, the lower the job growth is. Unions are expert rent-seekers.

A trade union, SADTU, has almost single-handedly destroyed our education system. The Global Competitiveness Report ranks our schools as 138th out of 140 countries. Without reforming education, we might as well turn off the lights and leave.

There are other forms of rent-seeking. They include stock- and property market investment fueled by monetary inflation, BEE, employment equity, free housing.

10 million people now receive handouts from the state by way of social grants. That is more than people in employment. That captures our national malaise right there: There are more people receiving alms from the state, than workers generating the wealth to pay them.

Since 2008 public service employment has grown by more than 500 000. Over the same period private-sector job growth, to all intents and purposes, stood still.

I believe the message of the title, South Africa can Work. But then a massive effort will be required to dismantle the structures of rent-seeking, and introduce a free market instead.

I started this website some years back with a view to addressing unemployment through labour law reform. Since then I have realised that the problems of our country and the solutions that are available for them, are all part of an integrated whole – that you cannot deal with unemployment without considering education, race problems, housing, corruption, crime, industrial unrest, democracy and entrepreneurship. So I got to work.

The ideas on this website will be spread – by way of publishing a book with the same title, conducting seminars and conferences with senior decision-makers and publication given to the contents. The aim is to change the legislative structures of rent-seeking, to free our people to earn their keep through education, employment and growth.

That is what South Africa can Work is all about.

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The Magic of Freedom: Frans Rautenbach in Conversation

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