The 2024 Economic Freedom of the World (EFW) report highlights the undeniable link between economic freedom and prosperity. Countries with higher economic freedom enjoy significantly higher GDP, longer life expectancy, and better income distribution. In contrast, South Africa struggles with restrictive policies such as Black Economic Empowerment (BEE) and labour market regulations that hinder growth. Embracing free market principles is essential for unlocking South Africa’s potential, boosting business confidence, and creating more job opportunities.
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By Eustace Davie*
The free market is the only way to create human prosperity. State control, on the other hand, produces nothing but poverty and stagnation. This is the undeniable truth. We have the proof. The 2024 Economic Freedom of the World (EFW) report makes this point crystal clear, providing data that leave no room for doubt.
What is Economic Freedom?
Economic freedom means that individuals have the fundamental right to control their labour and property. It allows people to:
- Freely trade internationally
- Secure private property
- Access sound money
- Contract their labour as they see fit
- Operate businesses and make economic decisions without government interference
Economic freedom enables individuals to make choices that fuel innovation, boost productivity, and improve personal well-being. As the EFW report shows, countries with high levels of economic freedom are wealthier, with:
- A per capita GDP of $52,877 in the top 25% of economically free nations (nearly 1 million Rand), compared to just $6,968 in the bottom 25%, and $6,006 for South Africa.
- The poorest 10% in the freest countries earning eight times more than their counterparts in the least free nations, while the poorest 10% in South Africa earn significantly less.
- Life expectancy of 80.5 years in the freest countries, versus 64.9 years in the least free, and 66.5 years in South Africa.
South Africa’s Struggles with Economic Freedom
South Africa, ranked 81st in the 2024 EFW report with a score of 6.65, is a country hampered by restrictive policies that choke its potential for growth. While it has made some progress in trade and property rights, the ongoing threat of expropriation without compensation continues to undermine business confidence. Additionally, Black Economic Empowerment (BEE) regulations have added further barriers for businesses, discouraging investment and complicating entrepreneurship. Minimum wage laws, collective bargaining, and hiring restrictions keep the official unemployment rate high, hovering around 33%. Instead of encouraging businesses to hire and expand, these regulations make it harder for companies to grow and adapt, limiting job opportunities, especially for unskilled workers.
South Africa’s failure to reform its labour market is compounded by the rigid demands of Black Economic Empowerment (BEE) policies, which, together with other burdens imposed through government interference, are holding the country back from achieving the prosperity that economic freedom could bring. The solution is clear: remove these restrictions, abolish BEE, embrace free market principles, and unleash the power of individuals who control their labour and property.
The Free Market: The Only Path to Prosperity
The data from the EFW report speak for themselves. The top 20 countries, including Hong Kong, Singapore, and Switzerland, are among the wealthiest, most stable, and happiest nations in the world. What they share in common is economic freedom: low taxes, minimal regulation, strong property rights, and flexible labour markets. These nations have created environments where individuals are free to use their skills, invest in their ideas, and reap the rewards of their efforts.
The Economic Freedom of the World report, first published in 1996, provides long-term data extending back to 1970, offering undeniable evidence of the consistent benefits of economic freedom. The evidence is clear: countries that adopt free market policies show sustained improvements in prosperity, while those that increase state control experience economic decline. This historical data confirms that economic freedom is not merely a theory, but a proven, reliable foundation for long-term prosperity. The patterns revealed by the data are crucial in demonstrating that economic freedom is the only viable path to lasting human well-being.
Conversely, countries that embrace state control and regulation, such as Venezuela (ranked 165th with a score of 3.02) and Zimbabwe (ranked 164th with a score of 3.53), remain mired in poverty and misery. The lesson is clear: economic freedom is the only proven way to create widespread prosperity. As Thomas Sowell observed, “There are no solutions, only trade-offs.” Countries must trade state control for free market policies if they want to see real growth.
‘Truth is incontrovertible. Panic may resent it. Ignorance may deride it. Malice may distort it. But there it is.’ – Winston Churchill
South Africa’s Path Forward
The evidence is incontrovertible and the proof is unfalsifiable; for South Africa, the path forward is clear. The country must embrace more economic freedom if it is to break out of stagnation and poverty. Reducing government intervention in areas like trade, property rights, and labour markets, and removing race-based laws such as BEE, will create a more dynamic environment where businesses can thrive, jobs are created, and investment flows. These reforms will not only drive economic growth but also improve quality of life, personal well-being, and opportunities for all citizens. South Africa has immense potential, but it will only be realised by shifting away from state control and embracing the free market.
Read also:
- Equality of rights vs. equality of results: Why freedom and fairness clash – James Peron
- Deputy Trade Minister Andrew Whitfield: AGOA renewal, slashing red tape and SA’s economic revival
- ANC faces welfare strain amid election challenges and economic troubles
*Eustace Davie is a Director of the Free Market Foundation and author of Unchain the child.
