The 7 Economic Pillars of the EFF with Ivo Vegter

“The Seven Economic Pillars of the Economic Freedom Fighters.” That is the title of a report written for the Institute for Race Relations (IRR). In this interview with BizNews, the author of that report, Ivo Vegter, says he did the report because he was concerned about the one-dimensional analysis that one often gets of the EFF, and decided to analyse in detail why EFF policies are either bad policies or why they are good ideals, but won’t work. Vegter dissects the achievability – and the consequences – of expropriation of land without compensation; nationalisation; building state and government capacity; free education, healthcare, housing and sanitation; massive protected industrial development; massive development of the African economy; and an open, accountable and corrupt-free government.

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Relevant timestamps from the interview

00:00 – Introductions
00:30 – Background
01:50 – Pillar 1: Expropriation of land without compensation
05:29 – Pillar 2: Nationalisation
09:56 – Pillar 3: Building state and government capacity
12:36 – Pillar 4: Providing free education, healthcare, housing and sanitation
15:23 – Pillar 5: Massive protected industrial development
19:14 – Pillar 6: Massive development of the African economy
20:49 – Pillar 7: Open, accountable and corruption-free government
21:58 – Ends

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Highlights from the interview ___STEADY_PAYWALL___

Expropriation of land without compensation:

“…you could make a reasonable case for restitution, but not for wholesale redistribution. That would be unjust. The financial sector would be a major victim of this. They have a great deal of debt secured by private property. Basically, turning those assets or destroying those assets, which is exactly what they would do, would have massive consequences for the financial sector and would institute a crisis…the likes of which Africa has never seen…that’s why the whole notion of land expropriation like this is really dangerous.

“The IRR, by contrast, has…a growth strategy…It considers secure property rights to be the cornerstone of the revitalised agriculture sector that can employ more people, produce more food, expand into Africa and increase export earnings. “

Nationalisation:

“…the EFF doesn’t want tenders, they believe tenders to be the source of corruption. So all of that would have to be brought in-house, in government. And essentially it would extend the state control over the entire economy.

“Now, Julius Malema, the EFF leader, was heavily influenced by and very admiring of the late revolutionary leader of Venezuela, Hugo Chavez. And he has modeled much of his party’s economic ideas on those of Chavez.

“So it’s really sufficient to demonstrate the catastrophic consequences of Chavismo in Venezuela, where fully three quarters of the country’s annual GDP has been destroyed, 20% of its population has fled.

“According to the UN High Commission of Refugees, that’s the largest exodus in Latin America’s recent history and one of the largest displacement crises in the world. This is the model that the EFF would have South Africa follow.

“Nationalization in Venezuela aimed to increase state control and redistribute wealth, which is exactly what the EFF’s goals are. But it led to inefficiencies, a decline in productivity and economic instability.”

Building state and government capacity:

“…the whole thing is really premised on this idea that they can build this grand cash-flush, competent, non-corrupt state.

“Experience everywhere around the world, even in the best-run countries, suggests that the service provision of the civil service lags far behind the service provision of the private sector…Why would a public servant care about the quality of the service they perform?…Why would they want to innovate to improve the service they perform? If they can check the box, then that’s all that matters, really.

“So motivation really is at the core of the distinction between the public and the private sector. And EFF proposes the government should wield dictatorial control over the private sector and establish this fleet of new state-owned enterprises as if the present fleet of state-owned enterprises are not warning enough against doing so.”

Free education, healthcare, housing and sanitation:

“That sounds great in principle. I’m not sure that all of that should be free because ultimately someone has to pay for it. But in South Africa, we face reality. There are a lot of people that cannot afford health care, education, housing. So in essence, there’s nothing really wrong with this ideal.

“But we run into the same problem here again. These services are going to be free, but they’re also going to be high quality. Now, if they’re going to be free, then how is the state going to produce the surplus that they need to produce these high quality services? You know, it’s an expensive wish list, but they’re going to have no means of actually paying for it.

“And this is the problem with these wish lists. There’s no reason to believe that an EFF government or any other government will be able to deliver on the promise of high quality services that are also affordable to the masses.

“By contrast, the IRR’s proposal on most of these things is a voucher system, which is a means of subsidising the poor so that they can afford education and health care and housing and so on, but still maintaining the private sector competition to actually provide these things. So people can decide where they want to spend their money. They can withhold their money and their patronage from companies and schools and so on that do not perform, and rather go to companies and schools and organisations that do perform. And this doesn’t throw the baby out with the bath water the way the EFF wants to do.”

Massive protected industrial development:

“…this is a favourite, funny enough, of the left and the right…They want the state to basically direct industrial planning.

“Protectionism has been tried many times and found wanting. It dampens trade, makes international trade more expensive, so it raises the prices of domestic goods. Ultimately, industrial planning on this scale fails because of the economic calculation problem.

“The successes that the EFF will point to, like South Korea and Singapore and China to some extent…they relied heavily on opening up markets, permitting free enterprise and attracting private sector investments, which is not what the EFF is proposing to do.

“So again, we have noble ideals that simply won’t work and will have very negative consequences if executed in a state-led way that the EFF wants to do.

“…the IRR stands for free enterprise and open trade…the IRR doesn’t promote race-based affirmative action. They promote an incentivising strategy of economic empowerment for the disadvantaged, which doesn’t use race as a proxy for disadvantage. So again, if the EFF turned to the IRR’s policy proposals, they might actually achieve some of their goals.”

Massive development of the African economy:

“…they want Transnet to go and develop the rest of the rest of Africa, build railways and do it and not only build railways, but I quote, leave massive footprints concerning skills transfer the development of the communities where investments happen, the payment of tax, reinvestment, corporate social investment, safety standards, compliance with labour laws and regulations and the fundamental economic development of these countries.

“…this is almost like colonialism again which is a bit strange for an organisation that is firmly rooted in anti-colonial thought…But this is the same Transnet that is broke. It can’t even run South Africa’s ports and railways. Where the state…is going to generate the cash surpluses to invest in Africa, that’s anyone’s guess.

“And besides, Africa doesn’t suffer from a lack of investment capital. There’s plenty of investment capital to go around. It suffers from self-inflicted constraints imposed by socialism, corruption, and violent conflict. That triple curse, socialism, corruption, and war. If that curse can be lifted from the African continent, it will absolutely thrive.”

Open, accountable and corrupt free government:

“No one can argue with that. So I was very disappointed when I started reading about what they want to do about this and how they’re going to achieve this and find absolutely no proposals. There’s no practical way of actually achieving this.

“There’s a litany of socialist countries, especially in Latin America and Africa that have degenerated into cesspits of corruption…in which a small wealthy elite rules over an impoverished population.

The more power a government has, the more power there is to corrupt. An EFF government would have all the power. It would be a totalitarian state. By concentrating all power in the state, the EFF will create a potential monster against which citizens have no protection.”

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