State Capacity Should Not Be Interventionist
South Africans have been subjected to the rationale of state interventionism for decades, if not centuries.
In South Africa most political parties concur on the necessity of a capable state. This state capacity often translates to state intervention in the economy, which can have negative consequences. Typically, this results in high unemployment and low economic growth, rather than justified intervention aimed at protecting life, liberty, and property.
South Africans have been subjected to the rationale of state interventionism for decades, if not centuries. From the era of the National Party and the forms of interventionism it championed to the contemporary ANC-inspired version, the notion that the economy requires some form of direction is a distinctly South African concept.
The National Party's interventionism is well-documented and rightfully condemned whenever it is mentioned. However, modern-day interventionism does not receive the same level of disdain, despite producing results that are substantively similar to those of the condemned past. Intervention in economic affairs ultimately leads to serfdom.
Interventionism can be broadly defined as the state's use of force to influence the economic behaviour of citizens within a specific jurisdiction. The force employed by the state takes the form of legislation, which prescribes how economic agents should behave in various situations. Failure to comply may result in the confiscation of property through fines or the restriction of liberty through imprisonment.
Examples of state intervention include legislative requirements for the establishment of various businesses, where failure to meet these requirements would render the business illegal. Legislative instruments such as minimum wage laws, various labour protections that override the agreements made by the contracting parties, and the use of taxation to influence certain behaviours – such as the sugar tax – are among many others.
Making a principled argument to South Africans about the pitfalls of state intervention in the economic affairs of individuals is often met with the retort that no country operates without some form of intervention, thereby justifying our own. However, this absolutist perspective overlooks the complexities of varying degrees of intervention.
According to data from the Fraser Institute’s Economic Freedom of the World Index, economies with less state intervention tend to be more prosperous. This indicates that jurisdictions with greater state intervention are generally poorer than those with less.
However, in South Africa it appears that some members of our political elite believe that the country simply needs more intervention. This perspective persists despite data and evidence to the contrary. Nevertheless, the principle of respecting individuals' agency to make their own decisions is fundamental to any just, rights-based society.
Instead of seeking additional State-Owned Enterprises (SOEs) or state banks, the solution should involve creating an environment where ordinary citizens can establish their own businesses and support one another. The government should instead focus on protecting life, liberty, and property.
Instead of acting as an economic referee or a third party to employment contracts that override the wishes of the parties involved or competing with its citizens through SOEs) the state can focus on its traditional role: protecting the liberties enjoyed by its citizens.
The state achieves this by not acting as an economic agent but rather serving as a channel through which individuals whose rights to life, liberty, and property have been violated can seek redress.
This is achieved by establishing an impeccable justice system that enforces contracts and adjudicates disputes, along with a security apparatus that penalises those who violate the rights of others. Initiatives such as the Free Market Foundation’s (FMF) Section 12 project exemplify how the state can possess the necessary capacity.
Instead of stretching resources thin by sanctioning non-harmful behaviour, the state can define crimes in a manner that limits them to actions that genuinely harm others. This approach would allow the state to redirect resources currently allocated to poorly defined crimes that do not cause harm toward addressing actions that do inflict harm, such as murder, theft, and rape.
The state should, as far as possible, bring the power of the security apparatus and the criminal justice system closer to the people. Given the informal nature of a significant portion of economic activity in South Africa, it would be advantageous to establish a contract enforcement mechanism and a security apparatus that are directly accountable to the community, rather than to politicians in Pretoria or Cape Town.
The state should be empowered to protect life, liberty, and property in the same manner as outlined in the FMF's Section 12 initiative, rather than through the economic and social engineering of state empowerment, where interventionism becomes normalized.
Instead of having the capacity to intervene in the economic lives of citizens or to compete with their businesses through SOEs, the South African government needs the ability to protect the life, liberty, and property of South Africans who are shaping their own economic futures.
We must understand state capacity in the manner outlined if we ever wish to escape the path of serfdom on which we currently find ourselves.
Zakhele Mthembu, BA Law LLB (Wits), is Policy Officer at the Free Market Foundation.
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