The latest Economic Freedom of the World Report (co-published by the Free Market Foundation) makes interesting reading.   An argument is that capitalism is about free trade,  co-operation and ‘not using fraud, or force, or the threat of force against anyone or their property’.

Herman Mashaba is the new chairman of the Free Market Foundation and intends to play an active role in creating jobs and trying to alleviate the unemployment crisis in South Africa.

His article South Africa needs to swiftly become a freer capitalist economy first appeared in Business Day on 2 October and needs to be read.

Here are some extracts courtesy of Business Day.

IT IS widely known that I have become the chairman of the Free Market Foundation and that I describe myself as a strong believer in a capitalist economic system.

There are some people who believe that supporters of capitalism should be on the defensive.   I disagree.   Those who shout hardest that “capitalism has failed” are shouting so hard because their “noncapitalist” (socialist) policies have failed.

The root of the problem is that governments, through their central banks, have been printing money and debasing their countries’ currencies.

Through their excessive borrowing and spending, combined with the currency debasement, they created the financial crisis.   And it is becoming increasingly clear that the crisis is not one of capitalism but one of government failure.

There are some incorrect beliefs about the Foundation that I would like to dispel.   One of them is that, because big business funds us, we spend our time looking after their interests.   That is not so.   We do serve the interests of our supporters, but not so directly.   We concentrate on trying to make South Africa a better place for everyone to live in.   The fact that we promote capitalism, or free markets, or whatever you want to call a free economy, is in all of our funders’ interest as well as that of every person who lives in this country.   There are few organisations whose work has as broad a reach as that of the foundation.   We can rightly claim that we work for the benefit of all South Africans.

Another concern is the effect on small businesses, especially those operating in the townships, of licensing, zoning and other regulatory issues.

We have to look to small firms to employ most of the 7.5-million people who are without jobs.   For that to happen, small firms need to be regulated with a light hand, as they were in most countries, such as in Hong Kong in the 1960s, when there were large numbers of destitute people who needed jobs.

Unemployment worries me a great deal.   It makes no sense that there are so many unemployed people.   Common sense tells us that the only people who should be out of work are those who, for whatever reason, don’t want to or cannot work.

Why do we have this huge number of unemployed people?

Some academics tell us that it is because the people who have jobs have been given a high level of job security by the labour laws, such as laws against what is called “unjustified dismissal”.   Others tell us it is the minimum wage laws, or the red tape that goes with employing people, that are to blame.   In casual conversation, the labour laws are regularly mentioned as being the primary cause of unemployment.

It is the unemployed and their potential employers who need to be brought together to solve the unemployment problem.

Given our labour laws, how does an inexperienced, untrained person, without a matriculation certificate, and who will possibly take a year to become productive, get a job? Most matriculants struggle to get a job.   Even with a university degree, they have no guarantee they will find work.

The latest statistics (for the strict definition of unemployment) show that 3.2-million (71%) of the unemployed people in this country are between 15 and 34 years old.

Besides doing something about the labour laws, the government needs to give careful consideration to the rest of the economic environment in the country.

The National Development Plan is a good start but it needs to give specific attention to the way South Africa has fallen on many indices that measure what is happening in the economy, and especially the fall in the country’s economic-freedom ranking.

Between 2000 and 2010, South Africa has slipped from 41st to 85th in the Economic Freedom of the World study of the levels of economic freedom in 141 countries.

This deterioration in our level of economic freedom is reflected in the uncertainty that prevails in the country, the dominant role being played by the government in the economy, in the huge number of unemployed people, in the persistently high crime rates, and in the growing number of reports about corruption and administrative failure.

Economic growth, not legislation, will deliver full employment, “decent” jobs and higher wages.   For higher growth, we need large doses of capitalism — the voluntary-exchange variety of capitalism.   South Africa urgently needs a swift change of direction towards a free economy.