Meet Leon Louw of the FMF; Marxist turned Free Marketeer: The Alec Hogg Show

In episode six of the Alec Hogg Show, Alec speaks to Leon Louw of the Free Market Foundation. Louw emerged from a conservative Afrikaner background to become involved in the anti-apartheid struggle. For 50 years, he’s provided a clear voice of rationality in a country where economic policies have been shaped by political rather than wealth-creating agendas.

Leon Louw is the executive director of the Free Market Foundation, a position he’s held for 45 years. Can that be true?

Yes, actually more. Nearly 50.

That’s extraordinary. And you’ve stuck with it. You’ve been boxing the free market story against overwhelming odds in South Africa and you’re still at it.

Yes, indeed. Still just as passionate and still, well, even more convinced than I was in those days, that it’s the solution because since then, overwhelming empirical evidence has become available. It’s no longer actually subject to informed debate.

Born in Krugersdorp in 1948 to a conservative Afrikaner family, and yet here you are speaking perfect English, married to an English girl, having gone to Wits as a Engelse Kommunis. How did you go from Krugersdorp to, well, on the other side, I suppose, of the spectrum to what might have been expected?

It was when I went to Wits University and I became disenchanted with apartheid, and in those days of the 1960s, if you were anti-apartheid it meant you were a communist. So, I just found myself in with the communists and reading the communist literature. I moved to what one might call the left. That, of course, made me a traitor to my roots at a very early age and there I stayed until I was converted by, not reading the great philosophers, but by an incident that happened on the street outside my office when I was a young legal clerk.

I came out of my office one day to deliver some documents as a young legal clerk and I saw an elderly black street vendor lady outside. She used to sell fruit: bananas, oranges, apples, and things; tomatoes. And I saw her get up and run away around the corner – a woman of probably 70, 75 – as fast as she could and I didn’t understand why. And then I saw a police car. In those days, it was called the traffic department – now Metro Police – pull up and one policeman got out and chased her around the corner, and the other ran up and kicked her basket of fruit and money across the road. And then the other one returned with her, arrested, bundled her into the back of the vehicle, took her off to what was then called the traffic department – now called the Metro Police Department. I went there; I couldn’t stand it. I was completely outraged and affronted. Confronted them, arranged for her release, not that it helped very much because she’d lost her, probably, sole wealth in the world, and there I met – who became a lifelong friend – Lawrence Mavundla, who was a young trade unionist in the mine workers union in those days. Also on the left, and/or your Marxist, communist, socialist; and like me, observing what was happening to street traders and informal business, became also a classical liberal as he is today. He’s today chairman of the Free Market Foundation.

I then pondered; I thought, but hold on a sec, if I’m a communist, I don’t want her to be free to trade. It should be banned. Yet, this was such an outrageous, offensive thing to see and it just went against every sinew in my body and that caused me to ponder. And then I thought, well, she’s doing no harm. She should be free to trade with any willing, bypassing consumer. And then I thought, well, you know, is the same true of a bank? Is the same true of Microsoft to multinationals? And I thought, well, why not? Why shouldn’t everyone enjoy precisely the same freedom of enterprise as she should? Granny Moyo happened to be another woman I knew; she was thrown into the back of a police van. They cracked her skull and she died. They killed her. So, she was killed because she was a street vendor. Harmless human being. She was probably closer to 80 and treated like that.

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So, that made me decide that freedom to trade, freedom to be enterprising must be a fundamental human right just like any other freedom – freedom of expression, freedom of association, freedom of consenting adults to engage in whatever activities they wished, etc. So, economic freedom is just another freedom. The same as all the others. That then made me give up Marxism and think, no Marxism is wrong because it would forbid Granny Moyo; it would forbid informal traders, backyard mechanics, people to do ballet lessons from their home, etc., etc. Any form of enterprise is banned under Communism and Marxism, and she persuaded me, that experience persuaded me it’s obviously wrong.

You’ve got, in your opinion, the answer – the more market approach. Yet, almost 50 years on, you’re still not getting those people who are sitting in portals of power to appreciate it. Is there another way, perhaps, that you can open eyes?

Well, the way that I use is to deal with real world people. For example, you know the story with street vendors and street traders, but at the moment, one of my big jobs is trying to get people living in shacks and shanty towns to be allowed to improve their own living standards.

Bizarre, though it may seem, the local government laws, the municipal bylaws, the property development and building codes, and the health and safety laws – I could trattle on about all the laws that make it effectively a criminal offence for a poor person to improve their own living standards.

They may not replace their tin shack with a brick and mortar structure which they would like to do. They may not get security of tenure. They might have their shack bulldozed down at any minute at the whim of some petty official. It’s interesting that the people, let’s call it on the left – I hate these terms, ‘the left’ and ‘the right’; they get very confusing because the difference between the far left and the far right is miniscule. They meet each other around a circle. But anyway, the people on the left like what we doing so work with us. We right now are in touch with a breakaway group from the EFF, who partly as a result of the work they saw us doing, concluded that government is the problem, not business. And they are now essentially libertarians; they used the word libertarian in their manifesto. That is how we reach them. We reach them by the demonstration effect. Come and have a look. Is this really what you want to be doing to people, to poor people, to ordinary human beings? We can’t persuade them that, you know, a capital formation is a good idea; or the price mechanism; or foreign trade in skills or whatever. But we can persuade them that the poor should be allowed to improve their own living standards. Almost nobody opposes that but nobody thinks about it because nobody is in their constituency.

It’s a long answer to a short question. Is there another way and the other way is to be practical. What are the real world consequences of a measure? What is the effect of, for example, having taxi licencing? What is the effect of having state-owned enterprise monopolies? What is the effect of not allowing competition? And if you take something like electricity – energy – everyone assumes there must be some big power generator like Eskom. Maybe there should be competitors; maybe there should be renewables, but nobody said, what about somebody who just runs a generator in a shanty town and sells electricity to neighbours? That’s what they do and then some inspector will pitch up and confiscate their generator because they’re selling and trading electricity illegally. So, you can get people to see the irrationality of controls when it impacts on the poor.

It seems to me, from what you’ve been saying, that you’re using your own experience, your own conversion away from an ideology to something more practical at a lower level. The splinter group from the EFF. The ownership of homes by people who otherwise would never have that opportunity. And that does seem to be a different approach.

We have a philosophy that we avoid saying what we are against. We occasionally are forced to, but we typically say what we are in favour of. So, if you take, for example, one of the very controversial issues and one of the very serious issues – the threat of expropriation without compensation – we rather talk about how to get black people to be landowners, rather than how to dispossess white landowners, or whether it’s a good or a bad idea. We just simply advocate policies that would bring about more demographic representivity in landownership, and if our Khaya Lam project succeeds, for example, there will be three times more black landowners than white landowners and the whole talk about expropriation without compensation will cease to be important. So long as the belief is and the debate is about expropriation without compensation, we will argue why it’s a bad idea, but mostly we argue what to do instead.

So, if you take, for example, the National Health Insurance (NHI) that the government wants to socialise all health – we do point out what the problems with it might be, but instead we argue for what should the health policy be, and the health policy shouldn’t be insurance. You see, they call it national health insurance, but ironically, it’s a prohibition of insurance. What the state should be doing is paying the premiums to insure people’s health with private health providers, then they will get better health at the same cost. And so what we do is we recommend better health policies. We recommend better land policies. We recommend better trade policies.

You know, if you want foreign investment what you must do is make it attractive and appealing, and how do you do that? You reduce the risks, danger, and cost of employing people. You reduce the risk, danger, and cost of building a factory. Owning a business. Starting a bank. Starting a small business. Foreigners, for example. All the xenophobia really arises not because there are Chinese or Senegalese or whoever trading, but because black South Africans are unemployed and poor. Now, if we can get full employment, then like other countries that have full employment, you welcome foreigners. You need them; you need their skills; and you need their human resources.

So, what we do is we simply try to point out that what you must do is raise living standards; make people rich, get people employed, and then the xenophobia will cease to be such an issue.

So, instead of combating xenophobia, we promote welfare and well-being. We try to always say, what would we do to achieve the objective of a policy? The objective of a policy is, for example, to have a functioning airline industry. Well, how do you get that? You don’t get it by endlessly running two failed state-owned enterprises.

Leon Louw on SAA

Feels like decades that you’ve been saying the same thing and no one’s been listening.

One can sometimes claim credit. When we started on the issue, Southern African Airways (SAA) had about 98% of the market. There were a few private routes run by people like Comair but it was pretty much 100% monopoly. When we had open skies, as we think, as a result partly of our work, private airlines entered and the SAA market share fell to below a quarter. So, we have effectively had three quarters privatisation and it just tumbled and tumbled and tumbled as a result of private operators being allowed. So, South African Airways has virtually disappeared. You know, they might rescue some kind of token state airline just so it makes them feel proud. It’s a psychological issue, not an economic or transport issue. So, my view is SAA should be run by a psychologist, not a business manager because it doesn’t serve any business purpose. It serves an emotional, psychological purpose.

What about the crisis that we’re coming out of? Is this an opportunity to relook everything and an opportunity for your clarity of thought to be absorbed in areas where in the past it wasn’t?

The crisis is firstly deeper than people realise. The damage to the South African economy of the lockdown has been spectacular, and international data suggests that it will end up killing many more people than Covid would have killed. We should have gone the route of Taiwan or New Zealand or Sweden instead, who didn’t destroy their economies. Ours is utterly devastated.

Now, that might be a blessing in disguise in that the government is now desperate to find a way to try and reverse the damage, to try and generate some growth. There’s talks about structural reform and pro-growth policies, and the Treasury and Minister Tito Mboweni have come out with some policies that are very pro-market. We are certainly trying to say to the government, there’s one way and one way only to pull us out of this deep ditch, which is to take a bold leap towards free market policies. There is no other way; no other way has ever worked. That has always worked and never failed, so this is a proven solution.

Read also: South African economy on life support as companies fight recession, Covid

We like to think the government is now desperate enough to look at that and stop being silly. They’ve just kept running, you know, year after year – State of the Nation address, ministers, budget speeches. They promise reduced red tape. They promise pro-market policies. They promise pro-market reforms. While in parliament, during their speech, there are bills that are aimed at doing the opposite. They talk the talk… maybe this will shake them up and get them to start walking the walk.

From your perspective, your approach is very different to, say, the confrontational approach that one sees in many areas of politics, and you’ve stayed away from politics. But you do have a disciple who’s going very strongly into politics right now. I mean, the Free Market Foundation and Herman Mashaba. His approach is somewhat different to your, I suppose, more diplomatic, more cerebral way of looking at things when you’re trying to convince people. Do you think Herman’s got much of a chance of making an impact?

Yes, he’s a remarkable person and I think he will make an impact regardless of the level of support he gets. It’s very difficult at this stage to say – there are no opinion surveys that give us much of a clue. So, now that he is in politics, his party is promoting the right policies, but others have, too, by the way. If you look at the economic policies of the UDM, the IFP, the DA – they are all pretty much pro-market policies, and his is even more pro-market. And we work with and assist all political parties – even those, you’ve now gathered –  the EFF. We work with the EFF in the Ekurhuleni Delmore shanty town.

So, we are politically agnostic, politically neutral. We don’t really care who the politicians are. We care about what the policies are and we try and get all politicians to adopt good policies, and we don’t, in that case, discriminate.

What does, of course, happen is that the Herman Mashabas of the world will maintain a closer relationship with us. They come to us. They ask us to look at their policies and we do that. We do for them whatever we can to help. So, we do have working relationships, more with some parties than others, but that is their choice, not ours.

You also have a history with Winnie Mandela. How do you think she would have viewed – if she’d been a young woman today – what’s going on in South Africa? And from what you know of her, would she have been sided towards the approach that you’re taking now?

Well, our relationship with Winnie, and later on with Nelson Mandela, but particularly with Winnie, was very close. We were house friends. Our daughter and her granddaughter, Zoleka, used to visit and stay with each other. Our daughter, in her Soweto home and Zoleka with us. Winnie, Frances and I were involved in creating the first Montessori primary school in South Africa, where Winnie brought large numbers of kids in her red Kombi bus from Soweto every day. And we worked with the football team, you know, making furniture and painting walls and so on. And it was the first truly integrated school in South Africa during the 1980s already, when it was technically and theoretically illegal. As Winnie said, we didn’t fight apartheid, we just ignored it. We became very friendly. She wrote a eulogy foreword for our book ‘South Africa: The Solution’, and was certainly in our corner. When the comrades tried to persuade her to withdraw the foreword, she said it’s time they know what I think, meaning supporting our ideas.

We remained in contact for years after that, but not as closely, and she was very distraught by what was happening. It unfortunately pushed her further towards the radical left. She fell for this rhetoric that the ANC after Zuma – we tumbled back into more government control – and the people on the radical left say that liberal policies of the ANC are failing, whereas the ANC does not have liberal policies. And so she, I guess, wasn’t really looking at what was, in fact, happening, and went along with the radical rhetoric.

SA – what’s next?

And if you then have a look into the future of South Africa – you also know Cyril Ramaphosa pretty well – are you seeing that there would be a sympathetic ear towards more free market policies now that the crisis is here and now that new solutions have to be sought?

Yes, I’m modestly optimistic. Tito Mboweni and the Ramaphosa faction within the ANC is definitely pro-market, and if it prevails and if it can get an upper hand, then we should see more market-friendly policies. The inclination is in the right direction, whether they’ve got the right advisors and whether they are well-informed is not yet clear. We are certainly doing our best to feed economic reform policies through to them that will actually work.

Read also: Meet Nick Hudson of PANDA, actuary, philosopher, disruptor: The Alec Hogg Show

You are apolitical, as you’ve explained. You work with everyone across the spectrum, but your wife did stand as a politician. Did that cause any upheaval in the household?

No, not at all. She created and ran and was quite successful with the federal party. There were some shenanigans in what happened with the voting, and there were threats of court cases because basically these smaller parties, the most of all was the PAC, were raided and eventually the votes were not counted but were calculated. There was this line that the computer systems had broken down which was rubbish. My friend was in charge of that and he said it was a simple database. It can’t break down and that was just a fib.

So, they lied and then they sat behind closed doors and basically negotiated a mathematically-perfect outcome. But anyway, the federal party would have had something like two or three members of parliament had the counting been done properly. It carried on and then later on, she joined the Democratic Party, became a Johannesburg city councillor. That was what she did and we ran the Free Market Foundation.

We didn’t have any household tensions about that. In fact, we have more now about things like, you know, is Covid serious or not. Is CNN better than Fox News, or whatever? But no, there were no tensions then. I was happy for her to run the federal party. I was not personally involved, but most of my friends were.

What about those two questions – the either/or? CNN, Fox News or, is Covid serious or not? Where do you stand on that?

Well, on Covid, I am of the view that there should be absolutely no lockdown. Should never have been, what I would call, ‘Level 0’, and there should always have been a voluntary approach, or something like the Taiwanese which has been spectacularly successful, where all they did was track people who were found to be infected; track people who they had contact with, and get them all to go into 18 days of quarantine. Apparently pretty much voluntarily. There were theoretical penalties for people who broke the quarantine and apparently less than 1% ever did so, according to their minister of health. They’ve reduced the Covid to essentially zero. They are now one of the so-called ‘safe’ countries. New Zealand just blocked the borders and basically also had a policy of voluntary social distancing and isolation, as did Sweden, and these are the great success stories and there are others. That’s what we should have done.

What we did was counter-productive, I think, in many ways. Firstly, we devastated the economy. That meant people who were destitute were trying to find ways of earning a living, increasing the likelihood of getting infected. And more importantly, countries with lower GDPs have lower life expectancies and higher mortality rates. In other words, poverty kills people, and poverty kills people more than the worst predictions about Covid.

Then, also, whether Covid really is as serious as you said. It’s obviously highly contagious but how deadly is it? I’m inclined towards more of a skeptical view and Frances is inclined towards more of a, what I would call, ‘a junkie view’ – that it is all it’s made out to be. Now, everyone says believe the science, but firstly, the scientists are divided as scientists ought to be. And secondly, scientists aren’t economists and they aren’t sociologists, and their scientific proposals ignore economic and social devastating impacts. The science of Covid is useful and interesting, but no solution, and anyone who says ‘follow the science’ does not understand science.

Leon Louw on PANDA

I had a fascinating discussion on this programme with Nick Hudson, who speaks very similarly to the line that you take, from PANDA. He said it’s philosophy. It’s the future of the world. How would you interpret that kind of a comment, given that philosophy is also one of your areas of great interest?

Yes, I’m familiar with PANDA’s position and I have sympathy with it.

I think that the most distressing thing for me of all has been the willingness of the public to accept a total elimination of all human rights. Every single human right. The right to associate, freedom of expression, freedom of speech, freedom of movement, freedom of lifestyle; every civil liberty, every right in our Bill of Rights was obliterated one day. One evening. Gone. Zero.

And that happened in many, many countries around the world. What is for me, by far, the most distressing thing, is that nobody seemed to care about that. Nobody seemed to say, hold on a sec, isn’t there something wrong with this? Isn’t there a better way? Is this really necessary? And we now have arbitrary decisions being made at the whim of politicians. They wake up in the morning, have a cup of coffee and say, well, let’s have the following adjustment to level two, or let’s go back to three, or let’s ban smoking, for example. One of the stupidest things of all was the banning of cigarettes – completely idiotic, as I say, as a lifelong non-smoker. But that immediately drives people into stress, into depression, making the thing worse.

And some politician simply did all of this at a whim without any talk of science, no socio-economic impact assessment, no knowledge of what the consequences would be. It’s completely outrageous, and what I share with PANDA is the concern of what this tells us about the state of human rights on planet Earth – that human rights can, at whimsical and flimsy excuses, be wiped out and obliterated, and the general public are acquiescent and uncritical. I find that terrifying, absolutely terrifying.

I really am worried about the future of liberty on Earth, which has been increasing for the last 50 years, and the world is becoming freer and freer, more democratic, more economically free, more civil liberties. In every sense, it has become freer. And all of a sudden we’ve turned a corner. We’ve had, not just a setback, but a gigantic falling off a cliff, back into acceptance of authoritarianism, discretionary power, whimsical policies, no requirement of evidence that the policy has desired effect. That is very, very distressing indeed. And I think every philosopher of political science ought to be really working on this and saying, what are the implications for planet Earth? What are the implications for South Africa of a single person to be able to wipe out every human right overnight? And nobody seems to have been concerned.

To listen to this remarkable interview, download the link here: The Alec Hogg Show: Meet clear-thinking Leon Louw, the Marxist turned Free Marketeer. Ep 6 (or find the interview on BizNews Radio on the BizNews home page). You can also subscribe to The Alec Hogg Show on Spotify here.

For more on Leon Louw:

SA’s catastrophic jobless rate warrants ‘institution of state of emergency’ – Leon Louw

Leon Louw on whether Buthelezi will teach his NBF Malema about economics

Leon Louw unpacks Davis judgment which lays into NDZ’s “irrational” lockdown regulations

FMF co-founder, Leon Louw’s telling tribute to Maponya

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