By Shawn Hagedorn -Jan 9, 2021 In the Daily Friend
East Asians have shown that massive poverty can be eradicated in half the average human’s lifespan. Yet most South Africans are poor and this looks set to persist for generations. Solutions elude us because our national dialogue resembles a Jenga tower of misconceptions tilting against intense global trends.
Humans are the dominant species because we can organise in huge numbers through shared values inspiring social cohesion. However, values unchecked by objective reasoning breed mayhem. How many wars have been fanned by nationalist or religious zealotry?
The absence of a workable growth plan should surprise no one. A history of racial oppression mixed with bountiful resource endowments, pervasive patronage, horrific education outcomes and rampant poverty combines the incentives and setting to manipulate the national discourse into a wobbly stack of misperceptions atop conflicting values. Given its liberation movement pedigree, it was always in the electoral interests of the African National Congress (ANC) to frame issues around values. Its governance shortcomings have both reflected and reinforced this bias.
The ANC’s electoral dominance traces to its success at framing issues around injustice narratives. Thus redistribution is its policy centrepiece despite this being irreconcilable with precisely what is required to meaningfully reduce inequality, sustained high growth. Now a debt crisis looms.
Unity through equitable redistribution served as an emotive salve to ease us through the 1990s transition. This made sense politically and morally – but only if it was adroitly balanced by a potent growth strategy. Instead, delusions begot delusions. Political parties and movements unite around values whereas objective analysis is crucial to create a growth-supportive environment and to manage trade-offs.
Economic sovereignty was also an aspiration of the prior regime. Reliance on extraction based exporting alongside some import substitution is an alluring path for the rulers of a resource endowed nation.
The poor also want to believe this approach is viable though it’s never produced broad prosperity. Rather, the most potent of trends, the march of technology-inspired innovation, globalisation and responsible environmental stewardship, discredit such thinking. Only now that a sovereign debt default seems quite plausible are perceptions of South Africa being an inherently wealthy country finally being reassessed.
There are no viable growth strategies under consideration. This can’t change without purging the misperceptions that block seeing South Africa’s challenges and opportunities within a global context. All high growth emerging nations have managed such epiphanies. South Africa is less fortunate in that many Asian countries could, with relative ease, pivot to mimic neighbouring nations achieving high growth through intense global integration.
The ANC isn’t about to promote objective policy debating as its electoral success draws upon inflaming emotions around injustices. It is possible that corporate CEOs could lead the effort to instil real-world realities into our national debates. This is not likely however as they must focus on advancing their companies’ interests which are vulnerable to legislative reprisals.
Also, if our business leaders had a plan to achieve broad prosperity we would have heard it by now. Instead, many have endorsed spending billions on infrastructure to rebuild the economy notwithstanding the absence of a workable growth strategy to prioritise such massive expenditures relative to the means available.
Many Asian nations sustain high growth through value-added exporting to affluent markets. They import or develop the know-how to transform raw materials imported mostly from stagnating under developed countries predominantly in the Middle East or global south. Whether the value-adding process is manufacturing in East Asia or services from South Asia is very much a secondary factor.
Given how the economic world order has evolved, achieving broad prosperity requires competing to add value in global supply chain niches. Policies which prioritise redistribution while seeking economic sovereignty through exporting raw materials and import substitution are antithetical to sustaining high growth.
Such fundamental factors don’t feature in our policy debates because we are conditioned to bow our heads at the mention of “inequality”. Conversely, many countries have shared similar poverty-eradication playbooks. High poverty nations simply cannot reduce inequality without reducing poverty. This requires sustaining high growth, which in today’s rapidly evolving, intensely integrated global economy, hinges on export competitiveness.
The pandemic has surged the global economy’s adoption of digital options. Manufacturing and resource extraction will remain important but the wealth creating potential of these sectors is declining swiftly.
While offices are far from dead, the pandemic has spotlighted how technology has made work-from-home a viable option for many. South Africa can’t compete at creating airline hubs with Middle East nations positioned at the intersection of Asia, Africa and Europe. Likewise, Middle Eastern cities shouldn’t be competitive with South Africa’s inherently more attractive environments for geographically untethered workers. If South Africa was well managed with fewer avoidable risks and off-putting regulations, such as BEE, it could compete successfully with Middle Eastern locations for many office and Work-From-Home jobs.
Like many other nations, we can pummel unemployment, poverty and inequality by competing globally through carving out various niches. Success begins with each of us helping to deftly extract misperceptions from our teetering political discourse. Only then can we set a solid foundation to build upon.