Leave the economy to the people

As Pravin Gordhan made his brave way through his sombre budget last week, two dark shadows fell over him and our economy. The first is political intrigue against him by a powerful section of the ANC. His independence and rectitude angers them and they want to be rid of him.

The second is more profound. Like Trevor Manuel before him, he is doing his best to manage the national finances responsibly but is unable to deal with our biggest problems: catastrophic unemployment and the fact that a huge portion of our population is excluded from the formal economy.

Our unemployment rate is 35%. Over 50% of young black people are unemployed; many will never be employed.

It is the same throughout Africa. Too few people work in the formal economy. Yet in every African city you will find huge numbers of industrious people working long hours for a pittance in the informal economy. They would rather be working for a salary in the formal economy. But they cannot.

Why? And why are equivalent people in East Asia working in the formal economy, making themselves and their countries wealthy?

The answer is: Africa is cursed with over-large, parasitic governments who hate free enterprise and despise private business.

They want to control the economy. Huge, grossly overpaid public services try to stifle businesspeople with a labyrinth of bureaucracy. They make it fiendishly difficult to start a new business. Restrictive labour laws make it too expensive for a poor man to become an employer. And, of course, by legal and corrupt means, the ruling classes all seek fat rents for themselves and their families.

SA is the same, although not the worst. The proposed minimum wage will force more poor people out of our formal economy.

The remedy is to set the economy free by getting rid of stifling bureaucracy, ruinous labour laws and parasitic civil servants.

Two great heroes of the East Asian economic boom were Deng Xiaoping of Communist China and John Cowperthwaite of colonial Hong Kong.

Apart from upholding law and order and removing unnecessary restrictions, what did either great man do to stimulate the economy?

Nothing. They left the economy to the people.