The Political Economy of South Africa
by Fred E. Foldvary, Senior Editor
I was in South Africa from February 28 to March 6, 2005, for a conference on the enclosure and control of space. The presentations focused on the gated communities of South Africa. I had an opportunity to talk with people during and after the conference about the country's economy.
I visited the Museum of Apartheid, which presents the horrors inflicted on the non-white population by the supremacist nationalists. Many South Africans consider it a miracle that after the fall of the apartheid of white-folks supremacy, the country was blessed with leaders such as Nelson Mandela who fostered a constitution of reconciliation, equality, and human rights.
The economy of South Africa has much in its favor. There is a developed infrastructure of highways, cities, and communications. The educated people have mostly remained in the country. South Africa continues to profit from its mining, agriculture, and industry.
However, violent crime poses a threat everywhere. The relatively wealthier population, which includes those who enjoy a standard of living comparable to that of the USA or Western Europe, has had to wall itself off from theft and assault. In every residential area I was in, homes were protected all around by high walls and fences. Typically, above the wall there is an electrified fence. Almost all homes are also protected by 'armed response' security firms.
Many neighborhoods have also enclosed their space. If two-thirds of the residents approve, the residents form an neighborhood association, erect walls around it, and create controlled access. There is often a boom across a guarded entrance, and the identity of cars is recorded. Some wealthier communities are entirely private, in which case a non-member may enter only with permission.
The enclosures are controversial, since the streets remain public. Some South Africans think there should be compete freedom of movement, with no barriers to neighborhoods, while others claim they have a right to security. Both rights are in the constitution.
Why is there so much fear and crime in South Africa? Poverty and unemployment do not necessarily cause crime, but in the culture and historical context of South Africa, much of the violent crime is induced by poverty. The official unemployment rate is 40 percent.
The main cause of unemployment in South Africa is labor laws, backed by the labor unions, including minimum wage laws and laws restricting the dismissal of workers. Priced out of the market, many who had worked on farms came pouring into the cities. But in the cities too, the cost of unskilled labor was often higher than its contribution to output. Blocked from labor markets, desperate people resorted to crime.
Taxes on production contribute to the high unemployment. South Africa has an income tax and a value added tax. These reduce production and investment, and so decrease employment. The largest city, Johannesburg, benefitted from having the property tax be only on the land value, but new laws will make the property tax based on the total value, building and land, and will reduce construction and growth, further hampering the labor market.
If South Africa taxed land values and stopped taxing income, value added, and buildings, unemployment would fall and wages would rise. This tax shift, plus greater police protection from violent crime, would surely bring crime down. But such as shift is politically impossible in South Africa. The ruling party has wide support, and opposition to its policies is not welcome by many.
South Africans could bring on wider prosperity without waiting for the national government to change the law. Another approach would be to promote more private communities and replace governmental services with those provided by neighborhood associations. The financing of private communities is based on levies that are essentially site rentals. If most of South Africa was in private communities, the association levies could be used to provide worker dividends to employers, reducing their cost of labor, and so reducing unemployment and crime.
Cry, beloved South Africa, because you have created fiscal apartheid. You have separated labor and capital from its product. The wage is segregated, some going to government, some to the worker. There is land-rent apartheid, splitting the country into landed rent takers and the non-landed rent payers. The rentals generated by government works gets redistributed to privileged landowners, while only a little is used to pay for those works.
Fiscal apartheid is less visible than racial apartheid, but in the end, fiscal apartheid is as brutal and unjust. Just as Henry George forecast, there are new barbarians created when they are deprived of liberty and economic justice. Cry, o beloved South Africa, because just as Argentina cries from having descended from wealth to poverty, your gold and education will not save you from deterioration and destruction in the end if you persist in bad economic policy.
South Africa could implement a deeper equality and honoring of human rights by adopting true free trade. Let labor be proudly free, unshackled by taxation, minimum wage laws, and dismissal protections. Let industry be free of taxes and restrictions. Let the land truly belong to all South Africans by tapping its value for public revenue and citizen's dividends. Then the house walls could come tumbling down, because crime would only come from greed, not need.
-- Fred Foldvary
Copyright 2005 by Fred E. Foldvary. All rights reserved. No part of this material may be reproduced or transmitted in any form or by any means, electronic or mechanical, which includes but is not limited to facsimile transmission, photocopying, recording, rekeying, or using any information storage or retrieval system, without giving full credit to Fred Foldvary and The Progress Report.
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