Introduction: Leon Louw is an internationally recognized economic, political and environmental analyst known for his accurate forecasts. He has spoken in 30 countries and consulted to a dozen governments and many leading corporations. He played a key role as initiator and architect of many constitutional reforms. In October 2006 Leon also released "Habits of Highly Effective Countries, Lessons for South Africa" (and adaptations for various other countries), in which he asks and answers the question, "What must a given country change to be more like winners and less like losers?" In answer to that, he has helped create and run The Free Market Foundation where he has been Executive Director since 1978 and has had a significant impact on policy-making in South Africa. He is a well-known public speaker and co-author of "South Africa: The Solution" and "Let the People Govern."
Daily Bell: Thanks for sitting down with us. Give us some background on yourself and how you became involved with the Free Market Foundation.
Leon Louw: The Free Market Foundation is 40 years old. It was formed during the Apartheid years for pro-market and anti-Apartheid activism and policy analysis. It focused on mostly economic and business policy issues. I was then a lawyer from the late '60s, and an anti-Apartheid activist. I was a radical communist revolutionary mainly because that's what opponents of apartheid were presumed to be. I became converted to capitalism mainly by the literature of Ayn Rand and Robert Heinlein, and discovered people like Hayek and Friedman, and Mises and Rothbard, and eventually become a purist libertarian.
People often say that's a big change, from being communist to a libertarian, but as a communist I was for the withering of the state and I still am. I just don't want to kill people before it happens.
The Free Market Foundation was formed by business people who regarded Apartheid as a form of what they called 'creeping communism', and socialism is what Apartheid was. It was an advanced form of socialism for blacks, the elimination of class, with virtually no personal freedom or ownership. Where white South Africans remained as free as any people on Earth, black South Africans lived under pure socialism. That's when I became an activist. I was detained by the police, and I was working underground with the Anti-Apartheid movement around the world. In that role, and due to our best-seller South Africa: The Solution, my wife and co-author and I were nominated three times for the Nobel Peace Prize. Strangely enough, I still do much of the same work, still working against laws that discriminate viciously against black South Africans, and equally evil new laws against whites. The only thing that has changed is the color of the skin of the oppressors.
Daily Bell: Can you give us some background on the Foundation itself and its history?
Leon Louw: Yes, the Foundation is a classical liberal think tank. That is to say we do mainly research and publications. We have over 4,000 documents, books, monographs, etc. downloadable on our website. We are networked with economic policy, pro-market institutes around the world, of which there are over 100, and jointly with them we bring out influential publications such as the Economic Freedom of the World Index and the International Property Rights Index. We are somewhat different from other classical liberal think tanks, whether they be the libertarian CATO Institute or the conservative Heritage Foundation or in between like the Heartland Institute. We differ from them in that we don't only do research and publications, academic and scholarly work, but we also are activists on the ground. For instance, we bring legal actions against the government, we work with poor communities to try to get title to their land; we get dust on our boots with peasants and when we work with laborers we get oil on our boots, and we are involved with people who think tanks don't normally get involved with – in other words, "the poor" and the unemployed. We work with them against government intervention, which we think they're a victim of. In our view, virtually everything that goes wrong – almost everything – is due to government intervention
For example, this so-called "financial crisis." We point out there isn't actually such a thing as a financial crisis or "meltdown," at least not globally. Only 15 out of the 220 countries and territories listed by the World Bank contracted last year, so the so-called crisis is no more than a slower global growth rate. It is a crisis for people who hold US government backed financial derivatives and it's a sovereign debt crisis. In other words, it's a few governments who have a crisis. We've spent a lot of time analyzing this so-called crisis, analyzing its causes and origins. We also analyze such issues as land titling, land tenure, unemployment and generally, personal liberty. We often get involved in orthodox battles for think tanks such as the assault on liberty in the name of climate change.
We might, for example, defend people who run pyramid schemes or people who deal drugs or prostitution or whatever. We just fight for the personal freedom of people and we do that especially for the poor. Of course, we are concerned about everyone, including "the rich" and big business. We got heavily involved in fighting for Wal-Mart's right to move into South Africa. Often we work as consultants for rich people but most of our work is for the poor. Even though we are the Free Market Foundation in South Africa, we often work in other countries as well, for instance, Zimbabwe, suffering under despot Robert Mugabe, and in freer countries like Botswana, which is one of the freer economies in the world and has had the highest sustained growth rates in the last 30 years, and others in the Southern African region, like Tanzania, which is reforming towards free markets and growing, and Kenya, which is reforming away from free markets and contracting. So we are very busy trying to promote free markets and personal liberty by its most fundamental and consistent definition.
Daily Bell: Tell us about some of the other founders and leaders of the Foundation.
Leon Louw: The two founders of the Foundation, the ones who put up the seed money 40 years ago, were at the time the two wealthiest South Africans: First, the late Anton Rupert who created the Rembrandt Group, one of the biggest companies in the world, in jewelry, tobacco and liquor, in particular, and secondly, the late Harry Oppenheimer, who was the head of what was then the biggest mining company in the world, Anglo American Corporation. They founded us and then, having done that, they left us to our own devices and we had to go off and get other money. We had a Board of Patrons, made up of very prominent South Africans of all races, during the 1970s. The people now who run it include my colleague, Temba Nolutshungu, who was himself a revolutionary, organizer of the armed struggle in the southwestern region of South Africa. He is my Co-Director and runs the Parliamentary office in Cape Town; I am in Johannesburg. (For those who don't know, they're about 1,000 miles apart.) My other Co-Director, Eustace Davie, was an auditor and an accountant and comes from a more conservative background, also a convert of Ayn Rand.
Then we have some quite prominent people in the black African community, for example, the man who was the president of NAFCO, the biggest black business organization, Dr. Sam Motsuenyane, now 90, who is still the honorary president of the Free Market Foundation. He's considered the doyen of black business in South Africa. He founded the first black-owned bank, called African Bank. Interestingly, even Winnie Mandela, considered far left, has worked closely with us over the years, particularly because of our struggle for the rights of black people. Quite often we ended up having libertarians or objectivists collaborating with people on the left.
We never had difficulty working with people who are against a common enemy for a common objective; we obviously would part ways on many other issues. We took the view that if we only worked with people who agreed with us on almost everything we would not be very effective so we have always cooperated for practical purposes, to be effective, with anyone who shares our view on a given issue. For example, right now we work with the very left wing South African trade union movement in order to bring about the conversion to full ownership of land occupied by black South Africans. Most black South Africans still live on land they do not and cannot lawfully own, which is a highly oppressive and racist relic of Apartheid. We sometimes take controversial views and don't apologize for that.
Daily Bell: Is the Foundation based on Austrian economics? Are you a supporter of Austrian economics?
Leon Louw: Yes, yes, yes. We are all very much Austrian; I often say I am more Hayekian than Hayek. The book that had the greatest influence on me was Mises' book, Human Action. That was the book that converted me and clinched the deal. I am an extreme Austrian myself; my colleagues are Austrian, as are all people who work full-time for the Foundation.
Daily Bell: Are free-market economics and thinkers popular in South Africa?
Leon Louw: Well, we've had a strange roller coaster ride. During the early, deep Apartheid years, the '70s and '80s, we were treated in a very hostile way by the government. We were bugged and monitored and then towards the end of Apartheid, when reforms were taking place, the government started being our friend and was supposedly in favor of free-market principals. It did indeed take South Africa away from the high levels of central planning and power toward a freer economy. When democracy came and the left wing African National Congress (ANC) government took over, we were out in the cold again. Then it soon started moving toward free-market principals – and most people think by virtue of our influence on them. We became their friends suddenly and their own left wing think tank, National Institute for Economic Policy (NIEP), was out in the cold and I don't even know if it still exists. But they set up their own counterpart to us – in other words, a socialist economic think tank – and it's essentially vanished, if it still exists at all.
So at the moment we have a strange state of affairs within the governing party, the ANC. There's a huge internal ideological war between ultra radicals who want to nationalize – communists and socialists in the classical, traditional and discredited sense of those words – on one hand, and people who are more conservative and classical liberal on the other. So we have very strong friends, high up in government, literally to the presidency, at the moment, who call us to help them and advise them and strategize with them; we meet almost weekly. Then on the other side we have the ones who hate and detest us and regard us as enemies. It's all very strange. When you are talking about the government, you are no longer talking about anything cohesive; you are now talking about opposing tendencies or factions within the government and we are very close to the more pro-market faction and complete adversaries of the anti-market madmen who are on the ascendency.
The future of the party will be decided at its 100th anniversary congress in December next year, and then we will know which side of these two titans fighting now over power has won. We are working very hard right now to help the pro-market moderates gain ascendancy over the anti-market radicals so at the moment we are friends with half and enemies of half.
Daily Bell: Give us some background on South Africa and how it became the country it is today.
Leon Louw: It has this interesting racial past where there has been a minority of white South Africans and a majority of black South Africans, and then two other groups, people we call colored, meaning people with mixed blood, and what we call Indian or Asian, people from Southwest Asia. The vast majority, about 75-80%, are the black African community. The history was white control and domination in a state of affairs that was essentially capitalism before whites, and socialism before blacks.
Then there was a broad anti-Apartheid movement and struggle, and we were part of that. When victory came over Apartheid in 1994 there was a democratic election. All previous elections were democratic but confined to whites. South Africa strangely enough has a democratic history with the rule of law and many other values that serve us well to this day, but the exclusion of the majority of the population from those freedoms leaves a lasting legacy of racial resentment and an appetite for getting even. Obviously, there are some some blacks in all of the parties but overwhelmingly black South Africans vote for the ANC and white South Africans for the Democratic Alliance (DA), which now also receives the most colored and Indian votes.
Having become the wealthiest country economically by far in all of Africa while under white rule, South Africa stagnated for the last two decades since Apartheid ended, mainly because of intensifying and increasing government intervention. After 1994, when there was a degree of liberalization and privatization and the removal of restrictions on black South Africans, we started growing at modest rates of around 5%. Now we are growing at much lower rates, about 2%, mainly because there is a resurgence of government intervention.
So we are a good example of various studies done on growth, which show that freer economies grow faster than less free economies, on average. The Economic Freedom of the World Index, the World Banks Doing Business Index (which basically measures red tape and microeconomic regulation) and other indices all show that when countries get better scores they grow faster. We were no exception. We grew faster and things were better and jobs were created, and when we move down in those indices, as we now are, things get worse. This is typical of anywhere around the world regardless of which country you are in.
Countries, in my view, react to their domestic economic policies in much the same way. The evidence shows that prosperity is not a matter of destiny; it's a matter of choice. Governments choose policies that make their countries richer or poorer. People talk about the "unintended consequences" of government intervention, which is nonsense. There is no longer room for informed debate. They must now know what the consequences of their polices will be and must be presumed to intend negative consequences, which they generate in exchange for their hidden agendas. They want countries to be poor and there are all sorts of reasons why politicians and governments want that and why most of them choose policies that everyone must know are going to result in more poverty and stagnation. Since such policies are the norm, and since the same consequences always follow, we should stop talking about "unintended" consequences and consider the consequences of policies to be intended.
Daily Bell: What are the problems facing South Africa today?
Leon Louw: The biggest problem facing South Africa today is the radicalization of black youth because the unemployment rate amongst black youth is about 50%. They are becoming desperate and they are calling for socialism, communism and nationalization of big business in the absurd hope that any change must be an improvement. We have a very controversial black youth leader, Julius Malema, who is very popular, very prominent and very dangerous. He could be South Africa's Gaddafi, Amin or Mugabe. This is by far the biggest issue right now. The country is in a major crisis ideologically, and it could go either way. We are at a tipping point or a crossroads where it looks like the country could go down the road of destructive radicalism or towards prosperity with free market liberalism. We are trying to bring about the latter.
What happens here is very important because all of Africa tends to follow South Africa's lead. The continent is facing a cathartic battle between moderates and radicals, between liberals and socialism. Here "liberal" has the classical European capitalist meaning. South Africa is currently a very fascinating place and a dangerous place, but the Chinese word for crisis is a combination of two symbols, one meaning danger and one meaning opportunity. The danger brings the opportunity. If the ideological war is won against the radicals, who are on the ascendancy now, then it will be a historic victory for capitalism, our version of the Cold War, and that will serve South African for decades to come.
Daily Bell: Are there any parties willing to grapple with these problems?
Leon Louw: Yes, I think they all are. The main opposition, the Democratic Alliance, is more pro-market, capitalist, classical liberal, and there are some within the governing party there certainly grappling with these issues. This ideological battle in South Africa is coming to a head at the moment, as it did toward the end of the Apartheid era; it's now just as intense within all of the parties. Various other parties, such as United Democratic Front and the Freedom Front, tend towards being pro-market.
All of the parties, despite their differences with each other and with us, work with us and constantly seek counsel from us, but in all the parties we also have enemies and critics. The main issues in South Africa are racial: affirmative action, the transfer of wealth from whites to blacks, black advancement and so on, called "transformation..
Daily Bell: Does South Africa have a version of the US Libertarian Party?
Leon Louw: No. We have a libertarian movement, which is not nearly as visible to the general public as the American Libertarian Party, nor do we have someone like Ron Paul. The most prominent libertarian force in South Africa is ourselves, the Free Market Foundation.
Besides us there are people who run libertarian websites, newsletters and conferences, but nothing on the scale, prominence or visibility of the US libertarian movement. In a way, though, I think we get more coverage in the sense that people like me and a few other libertarians who are very popular as radio and TV commentators, and many of our articles are published in the mainstream press. Although we don't have a formal party, and we are a very small number of people, our voices, our views tend to get more coverage than those of libertarians in most countries.
Daily Bell: Where is the economy headed in South Africa?
Leon Louw: People talk about the "high road" or the "low road" (prosperity or poverty), and most people are binary; they think of things as all good or all bad. Humans seem to be scripted that way; everything is reduced to one of two. Of course, the real world is more complex. We have what I call the "muddling along scenario," the winding road or the messy path. In other words, I suspect we will continue along much as we are now at a modest growth rate of 2 or 3% with this ideological battle taking place. If there is a victory at the conference next year then the country will be headed either rapidly downhill, with socialist and communist influences, or quite positively uphill, under pro-market policies. I suspect we will either be seeing zero growth in two years or we will be seeing impressive growth rates of 6% or 7%. So the next year we are not headed anywhere,and after that it will be about which ideology gains victory.
Daily Bell: Who is responsible for the country's evident economic mismanagement, which is similar in many ways to the West's and the EU and America in particular?
Leon Louw: The responsibility rests with the leaders of the governing party, who have tried to be all things to all people in recent years, and been masters of none. Specifically, they have not followed an identifiable policy paradigm. They have been unwilling to take a stand one way or the other philosophically, to be pro- or anti-market, or pro- or anti-personal freedom, or even pro- or anti- our constitution. They try to appeal to what they themselves call a "broad church"; that is to say to people across the entire ideological, philosophical, racial, political and religious spectra. The result of that unwillingness or inability to choose a clear paradigm, a clear philosophy or a set of values, has been to have plunged the country into crisis.
A cabinet meeting in South Africa is a fascinating phenomenon. It could have the Minister of Transport saying, "I think we should privatize and deregulate," and they all vote yes, and then the Minister of Health saying, "I think we should nationalize and regulate health care," and they all vote yes. Next, the minister of Agriculture might say, "I think we should free the markets and get rid of all the government control boards," and they all vote yes again. After that the Minister of Education says, "I think we should all have centrally planned uniform state owned and controlled education," and once again, they all vote yes. They seem to agree to anything any department proposes and literally flip-flop from one vote to the next, from one extreme ideological position to another with no identifiable set of principles or values. No one ever says, "Wait. Doesn't this vote contradict our previous vote?" A South African cabinet meeting must be one of the most surreal experiences on the planet. Maybe not. Maybe it's typical, just another example of how governments are in most countries.
Daily Bell: Do black people have more opportunity now?
Leon Louw: Yes. Obviously, the abolition of Apartheid led to the liberation of black South Africans from much that was holding them backand they obviously have benefitted from that. However, as with the advancement of black Americans once they were equal at law and before affirmative action, there are self-serving activists who deny this. Most black radicals keep saying, despite the objective facts, that things have been getting worse for blacks. Their agenda is, of course, to justify more government imposed redistribution, more power and nationalization. Few people realize the perverse implication of their view, namely that Apartheid was good for blacks! To say that things got worse for blacks after we got rid of a system that oppressed them is a very bizarre state of affairs but is nevertheless quite a common position for black South Africans to adopt without realizing the absurdity of their position. Here, the black left and white right agree. Both see blacks as incapable of benefitting from emancipation.
Anyway, the reality, if you look at the objective data, is impressive black advancement. The definitive research was done by one of our economists, herself black, Vivian Atud. She has done the most sophisticated research on this issue and she shows that black South Africans have advanced in every way you look at it. There are more black homeowners and vehicle owners, more black mobile phone owners, they participate in more medical and pension schemes, they have more insurance policies and own more business. Any way you look at it, there's been quite spectacular progress by black South Africans. Just as in the United States black radicals tried to argue that things were getting worse for blacks than they actually were, so it is here. Black leaders, like all leaders with their own agendas, distort truth. You had in the United States the Jesse Jacksons of the world arguing that things were worse for blacks when they have most liberty and you had the Thomas Sowells arguing that things are better for blacks and that blacks benefit most from being free. Jesse Jackson is extraordinarily racist and racially demeaning for someone who supposedly believes in racial equality.
Daily Bell: Can South Africa REALLY be turned around? Can it become freer?
Leon Louw: Yes. It was getting freer by every objective measurement for the first decade after transition to democracy. That includes the World Economic Forum's Competitive Index, Transparency International's Corruption Perceptions Index, World Bank's Doing Business Index, Freedom House's Freedom Index, Heritage's Economic Freedom Index, Fraser's Economic Freedom of the World Index and so on. All of these indices show that we were getting freer after Apartheid ended in 1994. And all of them show South Africa getting less free from about 2006. This reversal is extremely ominous.
The question always, in every country, is which forces are going to dominate – the forces for freedom or the forces against freedom? At the moment, the enemies of freedom are on the ascendancy and are more influential in South Africa, and the forces for liberty are strategizing to try and arrest this adverse trend. It's not possible to say now which will prevail; it's pretty much 50/50. Anyone who predicts which way it will go would be very bold and foolhardy. It really is open cards at this stage, but I do think with many of these cathartic moments it is a great opportunity for freedom, as it is a great opportunity for the enemies of freedom.
By the way, I prefer the word "liberty" to "freedom"; freedom to me is too ambiguous. You can be free from cancer, free from poverty, free to kill and so on. Socialists, fascists and communists say they are for "freedom," but they could not use "liberty" to describe what they are for.
Daily Bell: Is it still inherently a racist country?
Leon Louw: Yes. It went through a decade of surprising racial harmony and unfortunately, has now become a country where racism and racial tension is intensifying. You find more and more white people who are willing to make racist statements about blacks, and more laws passed by the black government that discriminate shamelessly against whites.
There is a growing demand amongst black youth to redistribute wealth from the white to black South Africans and for the government to have welfare and affirmative action for blacks at the expense of whites, and what we call "black economic empowerment" (BEE) programs. Racism is definitely on the rise and very dangerous. That is behind the clash of ideologies. Typically, people on the left are thought of as not being racist but at the moment it's very clear cut that on the left is where you find the most blatant racists. Ayn Rand put it well when she said that socialists are, by definition, racists because they think of people as groups rather than as individuals. It's inherently socialistic to think that everyone of a certain color has a common set of interests and preferences.
Daily Bell: Is racism inverted now?
Leon Louw: You may call it inverted or reverse racism but my view is that such terms are themselves racist. I just think of people. For me skin color has always been as irrelevant as hair color or eye color. I just see people who are racists. I see black racists as no different from white racists. They're just racists, not "reverse" racists.
Racism tends to be either on the rise within all racial groups or to decline in all racial groups. I think that's true here as it is in other countries. So, for example, if you get anti-Semitism on the rise in Europe, the chances are you get within the Jewish community a corresponding hostility towards other people. We also see that in Israel over the Palestinian question – racism (or prejudice) both ways.
I think racial policies and attitudes are on the rise in all groups in South Africa. I don't think one can say it's more extreme amongst blacks than whites because if there's more racism from blacks, which there is, whites respond with their own brand of "reverse" racism.
Having said that, I don't like it when people express empirical truths that are merely their opinions. The preceding comments are my personal impressions. I don't know of empirical research on this, though I suspect there is. What I am saying is that I think research will probably show that increasing racism or other prejudice by one group generates countervailing racism and prejudice in the other. One of the most influential thinkers in my life is Thomas Sowell, who happens to be a black American. He is especially critical of people who assert supposed facts without reliable sources. I hope he never gets to know that I've just committed this cardinal sin!
Daily Bell: Is South Africa headed toward a Zimbabwe-style collapse?
Leon Louw: Not yet. There is not much in common as far as race is concerned between Zimbabwe and South Africa. I did say that next year in December we will see which ideology gains control over the governing party. Some analysts think it more likely the governing party will break up. There is a remote risk of a Zimbabwe type scenario if radicals prevail, but it seems presently to be unlikely that even they will be as monstrous as Mugabe. We should never forget that Mugabe's real victims were, as measured by numbers and degree of damage, blacks. By far the worst victims of bad policies here are also blacks. Racist policies in both countries should not be confused with bad policies regardless of race.
We are implementing an ambitious and creative program – rap songs, newspaper ads and radio jingles − promoting economic freedom. Frankly, even if the radicals win and prevail, I don't think they will be as mad as the Mugabe regime in Zimbabwe. They'll certainly do some silly things and erode liberty and things will get worse for blacks especially, but I don't think there's much risk of anything quite as insane as the Zimbabwe scenario.
Daily Bell: Are more white people leaving South Africa these days?
Leon Louw: Yes, a lot are, and the most conspicuous community that is leaving South Africa is Jews, and in particular young Jewish people. My impression is that many or most have emigrated. We have two big groups of whites, English speaking and Afrikaans speaking, who are 60% of white South Africans. Many English have left to New Zealand, Australia or Canada to the point where there are now significant South African communities in those countries. So yes, there is considerable emigration and there is as well in the other two groups, coloreds and Indians.
There is also increasing emigration of blacks with higher education. We have a classic "brain drain" happening. South Africans are doing what their ancestors did − moving to what they consider greener pastures − and that is a significant problem. Nobody knows how many have left and the government runs a campaign abroad to try to get South Africans to "come home." It's the usual stupid thing governments do. They adopt policies that chase people away and then waste money trying to get them back. Their left hand doesn't seem to know what their other left hand is doing.
This is typical. Governments all over the world work against themselves; they have policies that have one consequence followed by policies to reverse the consequences of earlier policies. The US financial crisis is a good example, where the government can't make up its mind if it wants sub-prime housing and toxic mortgages, which it promotes feverishly, and then they try to combat the over-indebtedness they created by increased regulation the next day.
Daily Bell: What are the big industries in South Africa? Are any of them prospering?
Leon Louw: Yes, we are a small economy by world standards but we have some of the world's most sophisticated multinationals. For example, South African Breweries bought Miller's in the US and Foster's in Australia; it's now one of the biggest brewing companies in the world. We have a large modern stock exchange and one of the world's biggest pulp and paper companies. We're like Brazil and India with, on one hand, a very sophisticated first world economy and, on the other hand, a very backward third world economy with illiterate or semi-literate people living in a subsistence economy.
Daily Bell: Why did South Africa get in the shape it's in? Is it partially the fault of the British?
Leon Louw: No. I am not one who thinks colonial powers do harm. On the contrary, I think quite the opposite. It is obvious that colonialism has been to the conspicuous benefit of most colonies, at least ones colonized by capitalistic countries. Countries colonized by them generally out-performed places that weren't. The world's longest independent country, according to the World Book of Records, is Ethiopia and it's one of the poorest countries. Countries around it that were colonized were and are more successful.
People tend to forget that the United States was a colony, as were Australia, New Zealand, Norway and Iceland. Most rich countries were at some time or another colonized. So some of the world's most prominent and prosperous countries were colonies. There is no objective evidence to suggest that colonization is bad for a colony. On the contrary, the reason you colonize is to expand your economy and to do business there, which is mutually beneficial. So no, I don't think the British are to blame for anything. Most British influence is good − the rule of law, the belief in capitalism and in democracy, and so on. What makes countries winners or losers has very little to do with their past and more to do with their present, that is, with the policies they have now.
Daily Bell: Is there a power elite that runs the world in your opinion? Are they trying to make South Africa poor?
Leon Louw: (Laughing) I am fascinated by conspiracy theories and I tend to read quite a lot about them, but I am not convinced yet by any of them. I was once convinced by some popular ones, but the more I think about it, the more I doubt conspiracy theories, such as the idea that a power elite run the world. Such theories are seductive because they tend to be a convenient and easy ways to explain complex phenomenon. When things are complex and difficult to understand, a conspiracy theory is a convenient and satisfying way to say, "There. We can lay the matter to rest. We have a perfect explanation," instead of continuing to grapple with complexity. And so it is with everything from Kennedy's assassination to 9/11 to the power elite.
I'm inclined to think conspiracies are also natural and automatic. People with common interests collaborate; they get together and promote their interests. Now, we can call that "conspiracy" or we can call it "spontaneous order." If we are Austrians we need to understand power, also as a spontaneous order, as an Austrian school phenomenon. That is to say power takes on many forms and shapes, and people who might be considered, for example, to be the "power elite." They, like the rest of us, are collaborators in some contexts and rivals in others. They all have some harmony of interests and some conflicts of interests.
It's not as if the so-called power elite are a bunch of people who agree on things that matter. They disagree and they're bitter rivals on Monday and they are collaborating for their interests on Tuesday. And most of them are ideological and philosophical whores in the sense that (that's probably an insult to a prostitute, but anyway) they have no particular set of values or principals other than they will, like most people, do whatever it is that promotes their interests. I think we need to understand the world to be much more complex and these theories seem to me to be far too simplistic.
Daily Bell: Is this elite behind plans to turn Africa into an African Union similar to the European Union?
Leon Louw: There may well be a putative group of elites trying to control South Africa. If so, we can take comfort in how unsuccessful they have been because the African Union started about the same time as the European Union, yet there is nothing resembling a union in Africa. It still has the most internally closed borders of any region on earth. If there is a power elite trying to turn Africa into a European Union, it must be considered a monumental failure. In my view, there is nothing like it on the horizon. Let's remember there was a time when Kaddafi was considered to be the future president of a united Africa, which at the time was laughable and now even more laughable. So I think there are power elites who work to promote their interests and they work with anyone they can, such as business leaders, politicians and religious leaders. I think they are trying to gain more power, status and wealth, but in Africa they're a failure.
If, for some weird reason, they are trying to keep it poor and backward they have failed again, because black South Africa now has the world's highest sustained economic growth rate. There are many high growth countries in Africa and they are moving towards free-market democracies. I suppose conspiracy theorists will say the power elite used to want Africa poor and now want it rich. All that means to me is that no matter what happens, we can blame it on conspiracy. The biggest shift of any country in the world from being un-free to free is Ghana. Ghana is now averaging a growing rate of over 10%. So if these elites were trying to make Africa poor, they have failed; if they were trying to make Africa rich, they have succeeded in a few countries and the region as a whole, but are failing in most. So what would be their agenda for Africa?
If they want to enrich themselves personally they would want the whole world to be rich, so I think if the world is really run by some rich bankers and entrepreneurs, by global capitalists, I am not sure we should lament that fact. Maybe we should be delighted; it's a hell of a lot better than the world being run by politicians and bureaucrats! I hope these power and business elites triumph over political elites and manage to control the politicians instead of politicians controlling them.
So as I said, Africa was the most socialistic, the most poverty stricken and most backward part of the world for decades, and is now becoming much freer and prosperous, or at least many of the countries are. If that's what the power elites are doing I am delighted because they are getting politicians out of the way. The power of politicians and the damage politicians always do is declining in Africa. It's increasing in South Africa, but declining in Africa as a whole, where free markets and liberty are on the ascendancy. Liberty, of course, is declining in the West according to all the indices I mentioned earlier. The West is getting distressingly less free, especially once free countries like America. When I greet Americans visiting South Africa I say aptly, "Welcome to the land of the previously potentially free from the land of the previously free."
I think the world is incredibly complex and I don't claim to understand it, but the best I can come up with is some sort of Austrian School spontaneous order concept in which people's fortunes rise and fall; the rich of the world, the biggest corporations in the world come and go − over half on the Fortune 500 list two decades ago no longer even exist. So I think the world needs to be understood as a complex process with people's influence, power and wealth rising and falling, with people collaborating and fighting, depending on how they see their ad hoc interests. The world is a messy path, muddling along in a largely unpredictable, confusing and convoluted way.
Daily Bell: Gaddafi wanted a gold dinar standard for Africa. Was this one reason why he was deposed?
Leon Louw: I don't think so, no. My understanding of it, and I am not a political analyst and know very little about Libya other than what I have picked up from the media, is that it was an internal, largely spontaneous disdain for his oppression of his own people. Now, here is someone with a huge amount of wealth and one of the biggest oil reserves in the world, but that wealth was used to mistreat and victimize the citizens, especially political adversaries. I understand it was a genuine civil uprising against an oppressor, at least at first. I don't think other African leaders helped the uprising. On the contrary, Gaddafi was known to give large amounts of money to politicians around Africa thus buying their loyalty.
That meant that most African leaders and governments were very reluctant to call for his downfall or oppose him because they had been beneficiaries of his rule, and he had befriended them by using the wealth of Libya to buy political friends and support in Africa. His agenda was to enrich African leaders so much that they would eventually appoint him the President of Africa. Well, we are nowhere near a united Africa and he never got anywhere near being appointed. So that was not the reason he was deposed; there was no support for him internally. He also bought many favors from Western leaders. There's lots of footage of them shaking hands and smiling with Gaddafi and even hugging hem. My impression is that it was a genuine insurrection against a tyrant.
Daily Bell: Is the Internet helping educate South Africans about how to build a peaceful and prosperous economy?
Leon Louw: Not at the moment. I think that the main contribution of the Internet in South Africa is to give prominence and visibility to enemies of liberty. But we certainly are intensifying our own influence through social media and the Internet. Our organization is making a difference and we have become the top search engine result for people investigating liberty, freedom and progress in South Africa. I think the Internet is a mixed blessing, like most things are. To some extent it's George Orwell's 1984 and enables governments to monitor everything and everyone, but mercifully, governments are incredibly inefficient and so they are very bad at trying to be Big Brother. But on the other hand, the Internet, as we all know, promotes a great deal of liberty and freedom and dissemination of the freedom message − as for example, your website. It certainly is a huge force for liberty and counteracts use of the internet by enemies of liberty. These two opposing forces are in a titanic Internet war. The more I know the more humble I get about what I knew before. I think Facebook, for instance, is one of the greatest developments in world history and is a true paradigm phenomenon simply because of the number of Facebook accounts. The amount of time spent on Facebook − say an hour or two a day − means people are not doing other things like going to the gym, reading a book, going to a restaurant or watching TV.
So as to the social, economic and political implications, it seems that these social media platforms are truly astounding and what they mean for planet earth heaven alone knows. It appears to me that more of the Internet is pro- than anti-liberty, and it seems to have more benefits for freedom than for government. I see government – and I hope I don't shock you too much – as a glorified crime syndicate.
Everything a government does if done by a private person would be considered a crime. The only thing that stops it from being a crime is that it is government. Self-appointed authority.
I think the Internet and Facebook is very much the enemy. I saw a clip the other night of William Hague at a conference in Britain, and he was talking about how governments are worried about the power of the Internet and social media. They are very worried and they should be. I think this is largely and primarily a pro-liberty development, and the evidence for that is how neurotic governments are − and they should be.
Daily Bell: If you were the president of South Africa, what changes would you make immediately if you could pick three top ones?
Leon Louw: By far the first and most important thing I would do is convert to full, unambiguous, private ownership, freely tradable and mortgageable, all land occupied by black South Africans. That would result in about a trillion rands worth of land − a trillion rand is something like $150Billion US dollars − and would come into the hands of the black South Africans. It would unleash all the dead capital, which is land people have that they may not use economically. It would be a gigantic boost to the economy and would have a tremendously powerful effect on relations if blacks become land owners. They would become economically empowered and they would be hugely less inclined to want to seize the wealth of white and drag South Africa down ideological and philosophical paths.
Secondly, I would do a massive giveaway of state assets. It is interesting that in the sovereign debt crisis of Europe, insolvency with many governments like Greece, Italy, the USA and Spain, they are saying the simple thing you do is sell assets, in other words, privatize. That's their solution to the debt crisis. In South Africa, this is also a solution to the racial inequalities, which is what the government should do – give away vast quantities of government owned assets, from hospitals to railways. Every black South African should just get shares in these vast state assets. That would be my next big one or if people are uncomfortable with that, just sell them and pay down taxes.
Point three would be the great liberalization. I would critically review all the current laws and regulations, subject them to regulator impact analysis and keep only those which pass a genuinely objective taste to the effect that benefits are likely to exceed costs. We can analyze the past quite effectively. A giant systematic review of all systematic government measures and this should happen everywhere. It is very easy to do an assessment to see whether benefits have been exceeding costs and regulation, and that should be done according to a fixed and simple objective formula. You can scrap vast quantities of policies and laws and bureaucracies that are generating net disadvantages for society.
And item four is a more philosophical one, which I think every country should do and that would be a proper enforcement of the rule of law. Now, the rule of law is a rule people use but very few people understand. It means that all laws should be universally applicable; in other words, no law or policy can have the effect of benefitting some at the expense of others.
I will give you an example: the taxi licensing system that they have in Vancouver, Canada. The government gives licenses to some and not to others. That is a violation of the rule of law. This is in breach of the rule of law and quite possibly in Canada in breach of the constitution. But that aside, the next principal of the rule of law is no discretionary power or objective rules.
In other words, people being ruled by law not by man. The rule of law is the rule attached to the rule of man. And discretionary power is the rule of man, so we should get rid of all discretionary power and replace it with objective rules and criteria. The principal of the rule of law is legal certainty. People should know what their lives and duties are. The rule of law has those three components. Now, the rule of law is not itself liberty or freedom, but as Hayek said, it is more likely to have freedom. If governments can no longer use laws and policies to swing things in their favor, if they have to work according to the rule of law, freedom is much more likely. Those are my four top actions for South Africa and any country.
Daily Bell: What about South Africa's central bank. Is that part of the problem?
Leon Louw: Yes, it is as it has been behaving and not increasing the money supply at excessive rates. My own view is there should be no central banks. I see no purpose for them. Countries have their own currencies not as a matter of economics but as a natural psychology because it makes them feel good, makes them feel sovereign.
So since central banks serve a psychological rather than an economic purpose, my view is they should be run by psychologists not by bankers. The South African central bank is much like the others, largely private shareholders and a high level of government control. But it's done what others do, given us a currency, called the South African Rand. It's been a weakfish currency − it's slipped over the years against dominant currencies like the euro and the dollar but it's not particularly serious. It hasn't been the subject of considerable manipulation like, for example, the United States and quantitative easing, which really means printing money to help the government out of the mess it created. We have not had that problem in South Africa.
It's been more responsible than most but we still should not have a central bank. We should be using some other currency, perhaps the Euro or the dollar, the way Zimbabwe now does but preferably it should be free banking. People should use any currency of their choice. I don't mind central banks as long as they are not protected by legislation and people are free to choose a government currency or a private currency. That's how money should work. Central banks should be abolished. They're an emotional phenomenon rather than economic. It's like countries having national airlines − it's emotional not economic.
Daily Bell: Is the price inflation in South Africa solvable without getting rid of the central bank?
Leon Louw: Yes. I don't think that inflation would go away without central banks; we would have a continuing mixture of inflation and deflation. I think it would be more stable but I don't think the alternative to a central bank is a perfect world, with a perfect currency; it's just less imperfect. Inflation in South Africa now is modest, about 5% right now. That's 5% too high in my view. What's going to happen with the Euro and the dollar right now heaven only knows, since they created all this new currency, which at the moment has been lent right back to the central bank by bankers collecting interest on it. I am more optimistic about the rand than the future of the dollar right now.
So again, we shouldn't have central banks. If you do they do what they are supposed to do, which is print money for the government. It's like you having a printing machine in your kitchen and me saying don't print too many dollars. It does not take a rocket scientist to figure out what will happen before long. It's a bad idea to give politicians machines to make money − or whomever owns them, private or government. A central bank is only bad because of the legal tender law. If people were free to use whatever currency they wished, the better currency would triumph. If you have legal tender laws then bad currencies tend to triumph over good ones. All you really want is a free market in the use of money. No − I am in favor of free choice for everything. I am also in favor for choice of what money people use. I am not going to predict what money that would be like convertible gold backed money, bindery metal money with silver, platinum or bit coins on the Internet, or a commercial bank or central bank money, un-backed money.
You would have to be pretty bold to predict what free people with free money and acting freely with each other would choose. I do believe if I had to make a prediction, if there was freedom of choice with currency, I think central banks would continue to exist, at least in the major economies, like the US dollar. I think people would choose freely to use the US dollar, but a choice in free currency will have the result in free banking, will have the result that national banks will be under much greater pressure to maintain the stable venue of currency, not to inflate and not use currency as it's now happening in the United States and Europe for political purposes. So if people have freedom and freedom of choice then you don't have to worry about central banks. What we should focus on is freedom of choice and getting rid of controls over individual lives. Then we wouldn't care about national airlines and central banks − we would have freedom of choice and liberty.
Daily Bell: Should South Africa go to a gold or silver standard?
Leon Louw: I think South Africa would be much better off with a currency board and a gold standard, or frankly, a currency board that supervises dollarization or Euro-ization.
But I don't think we should have a gold standard. I think we should have no standard. I don't see why we should because it's just another form of government control and I don't agree with that. People think we would be somehow have a free market with a gold standard. That is not true. It's just another government-imposed currency. I am for freedom of choice and if people choose to use the convertible currency before gold or platinum or anything else so be it. Give them complete freedom of choice. Hayek is correct − you would have neither central banks nor gold standard; we would have private banks, issuing currencies, which they do for nothing other than undertaking to maintain a stable value. That is what I think will happen in the modern electronic world with complete freedom of choice. So if you are asking am I for a gold standard, I presume you mean a government imposed gold standard. No, I am certainly against that.
Daily Bell: What additional endeavors are you involved in that you want to point out to our audience?
Leon Louw: We are working on an empirical study which is to see if poor or needy people benefit more from the free market or government programs, government welfare, government housing, government schools and education. How much does that cost and how much does it benefit intended beneficiaries compared with the free market, and how does the free market benefit them? Well, what it showed was that the free market is much better for the poor and generates more welfare through the markets than government programs. Government programs are bad twice over. Every dollar spent by a government is a dollar it has taken out of the economy so that means less jobs, less investment, less entrepreneurship, less growth. And what it passes back into the economy is tax and it is the process of taking the money and redistributing it.
The cost of government is taken away from beneficiaries of welfare. That's one job we are doing. The poor know this, which is quite interesting because the poor all over the world migrate only in one direction − from more socialistic countries to more capitalistic countries. You don't have Americans fleeing into Cuba or South Koreans seeking refuge in North Korea or West Germans going to East Germany.
So the poor know there's only one direction to go if you are poor − to a place where there is more economic freedom (bearing in mind that when they get to those places, they are illegal immigrants usually and don't get what benefit there is from the government). People will always move from where the government supposedly looks after them to where the government doesn't look after them. They know the best place to be is where you rely on the market rather than government. This is why Hayek said that "governments can do more for the people by doing less." And the people know that.
So, that's a big one we are working on by research. I am reminded of the old joke on that note, the three things you must never believe: Your cheque is in the post, I'll respect you in the morning and I've been sent by the government to help you. As I always say, when things are in the hands of the state they are in a hell of a state!
Daily Bell: What's most important to you that you would like our audience to be aware of and support?
Leon Louw: Well, one of the big things we are desperate for is funding. We really battle to raise funding here. It's important that people learn more about us. The best you can do philosophically is to constantly expose and criticize the lies and racism in South Africa and the importance of having a free market democracy. And around the world, I think the single most important thing we can all do is understand, explain and propagate the rule of law − I mean to properly understand and get beyond the cliché. Everyone says they are for the rule of law − Mugabe, Stalin, Gaddafi, everybody − but we really need to understand what the rule of law is in practice.
Daily Bell: What are the most important – seminal – works of yours and others about South Africa that you would encourage everyone to read? Where can they be found?
Leon Louw: We recently brought up two really excellent books. Ine was launched yesterday on job creation and unemployment called, JOBS, JOBS, JOBS. We think this is one of the better works that's been done covering all aspects of economics, law and politics. And then even better than that is one we brought up on nationalization and privatization, called Nationalization. It has been very popular and may even be the principal influence in preventing nationalization. There are many good publications on our website, www.freemarketfoundation.com. Another that I am very proud of is called Unchain the Child and another, about trade and trade unions, is Jobs for the Jobless.
I should mention one more thing. The National Freedom Network, which is centered at the Fraser Institute in Vancouver, now has a free download and software program, which we produced, called Economic Freedom of the World, at www.freetheworld.com. This software is very good and can be used for number crunching. You can find out the correlation between the increase in the money supply and inflation, or minimum wage and unemployment, for instance. You can figure out the correlation between anything. It's a phenomenal tool and few people have caught on to it. I think every economic student and every economist should have it and it's free. So that is on our website or the Fraser Institute in Canada.
Daily Bell: On behalf of all of our readers we thank you for sharing your views with us, and hope to hear from you again soon. And we encourage all readers to visit your website and consider learning more about your work.
Leon Louw: It has been my pleasure. Many thanks.
We will write a short feedback here as the interview itself is long enough. Some minor quibbles: Anyone who has read articles on this website knows that we offer the idea that money standards should arise spontaneously. Obviously, we don't agree with Mr. Louw (in one of his suggestions) that South Africa should adopt the euro or, God help them, the dollar.
Second, we referred to inflation, and Mr. Louw answered the question thinking we were speaking of "price inflation." We were referring to monetary inflation, which he claims is tame. Third, he he seems a bit more optimistic, generally, about South Africa than we are. We think socialism has made big inroads in South Africa and is a very stubborn "ism" to remove.
There were many other areas where Mr. Louw disagreed with us generally, and we will leave the reader to judge Mr. Louw's perspectives and our own (as enunciated regularly in previous articles, interviews, etc.). Certainly we thank him for such an extensive interview and find his belief in the free markets to be inspiring, along with the "human action" he is taking on their behalf. Good luck to you, Mr. Louw, to South Africa and to all her struggling people – black, white, brown and whatever other color or creed they may be.