Wasteful Regulation

It’s breathtaking. Twenty years ago India typified the world’s worst destitution, which is why we were told as kids to finish our food “because of the starving masses in India”. On my visit last month I saw breathtaking prosperity.

I returned from a country that is lifting a billion people, spectacularly, from poverty to prosperity by liberalising and privatising, to my beloved country, which liberalised and privatised more modestly and slowly during the first years of transition from apartheid. The ANC’s modest reforms gave us modest growth. I returned from a country inspired by its success, to a country reversing its success in favour of “a greater role for government”. I returned from a country decentralising power to enhance democracy and efficiency to a country compromising democracy and efficiency by centralising power.

Why? Maybe because of our powerful vested interests that benefit from power and patronage. But India also has them. Perhaps it is influential people, who don’t understand basic economics, and are unaware of the overwhelming evidence from the world’s experience that liberalisation, privatisation and devolution are the only policies that bring about rapid progress, especially poverty alleviation. But India has them. We have strong unions influenced by radical ideologues and academia whose short-term self-interest coincides with increased government spending. So does India.

Alan Drury was right to call us “A Very Strange Society”. We had a supposedly pro-market pre-transition regime that reduced economic freedom, for which we paid dearly with a generation of stagnation and conflict, followed by a supposedly anti-market government, which increased economic freedom, for which it and our beloved country has been rewarded with relative peace and prosperity. Why, after such success, would the ANC flirt with seizing defeat from the jaws of victory?

The National Environmental Waste Bill [B39-2007] is an example of what not to do if you want democracy, prosperity and a clean, safe, sustainable environment. The simple fact is that a better environment and superior waste management coincide with more wealth. And there’s more wealth in freer markets. In other words, sustainably improved environments and superior waste management coincide with less, not more regulation of the kind envisaged in this Bill.

Parliament is being asked to implement central planning and regulatory excess of the kind that should have died with the Soviet Empire. It is being asked to:

Strip provinces and local governments of autonomy and diversity.

Intensify regulation and impose costs far exceeding benefits.

Create a stifling and potentially corrupt bureaucratic empire.

Divert scarce fiscal resources from worthier causes.

All of which has to be paid for by consumers. Why then would consumer bodies and other well-meaning people endorse it? It‘s easy to forget that there are no free lunches - all benefits have costs. Regulatory costs almost always exceed benefits. Costs superficially imposed on suppliers are passed onto consumers. More regulation means less prosperity, which means consumers have less wealth with which to consume. Less wealth means suppliers have less capital with which to serve and employ consumers.

There are aspects of the Bill that are of dubious constitutionality. Unfortunately, SA does not have rigorous screening for constitutionality of proposed legislation. Bills are drafted by departmental law advisors and consultants, few of whom are conversant with constitutional law, and many or most of whom lack the highly specialised knowledge of law in general and statutory drafting in particular necessary to draft good law. When it is arguably too late to influence them materially, bills pass through the State Law Advisor’s office, which has no power to veto unconstitutional provisions.

Provisions that are technically constitutional may nonetheless violate principles of “grass roots” democracy, such as “subsidiarity”, according to which power should be centralised only when it cannot feasibly be exercised by lower tiers of government. The Bill does what bills do increasingly as they did under apartheid. It divests the legislature of its legislative function by delegating its law-making function to the executive, where laws are not made democratically, but by administrative, often self-serving, decree, which violates the separation of powers component of the rule of law.

With increased law-making and adjudication powers, the legislature and judiciary are being stripped of their core functions, and the executive, like the apartheid regime’s executive, is becoming a omnipotent branch of government where laws are made, implemented, interpreted and enforced without essential checks and balances against the abuse or excessive accumulation of power.

Good law is certain law, that is, law under which everyone can know in advance, with relative ease and certainty, what their rights and obligations are. This Bill creates extreme arbitrary powers, discretion and uncertainty. In some cases guilt will be decided retroactively by executive fiat.

Section 19 of the Bill, for instance, empowers the Minister to decree which waste management activities are, in his view, likely to be environmentally adverse, but there are no specified objectives, and no objective criteria according to which the power must be exercised.

Chapter 5 envisages cumbersome, costly and arbitrary licensing (gate-keeping), as opposed to registration for anyone who satisfies specified criteria. This will cause our beloved country to slip further down the internationally important “doing business” index.

Section 69 has a long list of Ministerial powers without specified objectives or criteria, and Section 68 provides for massive penalties (R5m to R10m or 5 to 10 years imprisonment, or both) for a host of offences that people in good faith may not have known they were committing. There are vague provisions such as a prohibition on disposal of waste in a manner that will “pollute the environment”. Given the vagueness, how would people know when they are committing an offence?

There is a very simple way to minimise bad law and maximise justice: subject government to its own laws. The addition of a single clause to the effect that the law will apply equally to all government departments and agencies, and all politicians and officials, will have the bill’s protagonists scurrying for cover and begging for revisions to make it more reasonable and feasible.

If government departments and officials were compelled to obtain the same waste management licences to which the Bill seeks to subject the private sector, required to undertake the same complex assessments, and personally pay the massive fines or go to jail for technical transgressions, they would propose something much more consistent with common sense, common law, the constitution and sustainable environmentally-friendly development.

Author: Leon Louw is the Executive Director of the Free Market Foundation. This article may be republished without prior consent but with acknowledgement to the author. The views expressed in the article are the author’s and are not necessarily shared by the members of the Foundation.

FMF Feature Article/4 December 2007 - Policy Bulletin/ 7 July 2009