Good laws make a good economy
A student put this question to me after I had spoken at the University
of the Witwatersrand, two weeks ago, about the importance of
respecting and defending our Constitution. He said:
"When people are living in poverty, they aren't interested in
constitutions. They are interested in houses and jobs and services.
Constitutions and laws have no significance for them."
This is a profound question, and I want to address it in full. But let
me give a brief answer first. You cannot eat the law but you cannot
have proper food for everybody unless there is law. You cannot live in
the Constitution but you will never have good housing for all unless
there is a good Constitution. Jobs and services for the poor will
never come unless there is the rule of the law.
The rule of the law protects everyone but especially the poor and the
weak. In the jungle, the weak must always submit to the strong. The
dominant lion walks wherever he wants and everyone else must get out
of his way. That is the law of the jungle. In constitutional human
society, the weak have the same rights as the strong. When the traffic
light is red, the billionaire in his BMW must stop; when the light is
green, the beggar on his bicycle may pass through. That is the rule of
the law.
The Constitution protects all of our liberties and guarantees equal
rights for all, weak and strong, rich and poor. The rule of the law is
not some sort of ornament, not an embellishment on our civilisation:
it is the bedrock of our civilization. Without the rule of law, we
could never have developed our commerce, science, technology and art.
Without it, we would not have brick houses or clean running water in
our homes or sewage works or electricity or flour mills and bakeries.
The point is this: You cannot have a good economy without good law.
Without a good economy and a large revenue base, you cannot have a
social safety net that protects people from extreme poverty and offers
people opportunities to lift themselves out of indigence. In other
words, without respect for the Constitution, we will not be able to
tackle poverty.
If you compare the successful economies of the world with the
unsuccessful, you will find there is one striking difference between
them. It is not whether they are big or small: the USA is big and
rich; the Soviet Union was big and poor; Luxembourg is small and rich;
Albania was small and poor. It is not whether they have rich natural
resources or not: Switzerland, Japan and Singapore have few natural
resources and are rich; Nigeria, the Argentine and the Soviet Union
had massive natural resources and were poor. It is not whether they
were colonised or not: Britain, the USA, Korea and Botswana were all
colonies and all have prospered; Zimbabwe and the Congo were colonies
and are in poverty. It does not depend on continent or nationality.
Even the much vaunted work ethic is a limited indicator of economic
success: Germans are famous for their work ethic but when Germany was
divided East and West, the West flourished and the East stagnated. You
can see the same between South Ko
rea and North Korea: with identical people, the South produced a
dynamic modern economy and the North produced destitution and famine.
The crucial difference is that the successful economies have good laws
and the unsuccessful do not. That is the fundamental distinction. If a
poor country asks what one thing it should do to become prosperous,
that one thing is to adopt good law and implement it. The laws of
communist East Germany and North Korea were oppressive and crushed
human enterprise; the laws of West Germany and South Korea encouraged
enterprise.
Take the most basic human requirement, usually the greatest concern of
the very poor: food. It is a striking fact that there has never been a
famine in a full democracy. In the last Century there were terrible
famines in the Soviet Union and China, countries with vast reaches of
rich, arable land, but never a famine in democracies like Belgium and
Japan with little arable land. The reason is that the democracies had
good laws that allowed farmers, bakers and shops to provide food for
the people while improving their own lives. The laws gave property
rights to the farmers, enforced purchase contracts between the miller
and the baker, gave the shops lawful right to buy food at the best
price to them, prevented monopolies, encouraged competition and
ensured that all were motivated because they had the incentive of
keeping the profits of their labours. In the process, they create jobs
and food security. By contrast, in the Soviet Union and China the law
prohibited enterprise and
confiscated production. So nobody wanted to produce food and people
died of starvation.
Good law should be simple, clear, universal, certain, clean, honest
and quick. Suppose you are thinking of building a factory in Soweto to
manufacture blankets. If you know it takes three legal transactions
and two months to set yourself up, and if you are certain of full
property rights over your premises and your machinery, you are likely
to go into business. If it takes two hundred transactions and five
years to start it up, if you know you will need to bribe various
officials on the way (because the more red tape, the greater the
corruption) and if there is a chance that your property might be
expropriated, you are unlikely to go into business. In that case more
poor people will shiver in the cold.
South Africa has staggering mineral resources. We have the world's
biggest reserves of chrome, gold, manganese, platinum group minerals
and vanadium. We have vast amounts of coal, iron, nickel, titanium,
uranium, zinc and zirconium. We have among the world's best miners and
mining technology. Yet the global commodity boom of the last six years
has to a considerable extent passed us by. Why, with our minerals and
expertise, have we not benefited fully from this boom? Why has it not
provided more jobs than it should have? The answer is simply the law.
The Mineral and Petroleum Resources Development Act (which came into
effect in 2004) made mining companies uncertain about their mineral
rights. They were not sure whether it was worth their while investing
in new mines. So, often they didn't. During a minerals boom around the
world, South Africa lost 20 000 jobs in mining. I invite the student
who asked that question to look at the miner who has lost his job and
can no longer fee
d and house his family. That miner is a victim of bad law. Good law
would have given him (and many more) a job and his family food and
shelter.
I mentioned the benefits of brick houses, clean running water, good
sanitation and electricity. But millions of our people do not enjoy
these benefits. They suffer in shacks of plastic and corrugated iron;
they suffer the bucket system and paraffin stoves that could easily
fall over, explode and burn their families. They endure hideous
unemployment. They go hungry. They are terrorised by violent crime.
They have no security whatsoever. How do we deal with this situation?
The answer is by the law. They must be given property rights – which
the Expropriation Bill seeks to diminish – so that they can own the
land they live on. This will give them surety for raising capital and
starting their own businesses and give assurance to Eskom and the
municipalities that they can pay for electricity, water and
sanitation. Our oppressive labour laws must be reformed so that the
poor and the jobless can enter our formal economy. And they must be
protected from crime.
Crime crushes and deforms all South African society. But it crushes
the poor most. In the townships and rural areas, people live in
humiliating fear of the violent criminal. And again the answer is the
rule of the law. The entire criminal justice system must be
strengthened and cleansed. The police must be honest, effective and
respected. The state prosecutors must be confident and competent. The
courts must be fair, efficient and speedy.
Without any regulation, there is anarchy. With too much regulation
there is stagnation. Good law will provide the minimum regulation
required to facilitate economic enterprise. It will reduce the costs
of doing business. It will put profits on the boardroom tables of our
big corporations and food on the tables of the poor. It will provide
housing for the homeless.
The most important things that humans have done in all history is to
make and obey laws. Without the rule of the law, there could have been
no civilisation. Ultimately it is the rule of the law that feeds and
clothes and houses us. This is what every South African must remember
as the ANC attacks our Constitution and undermines the rule of law.
Best Wishes
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