Business Day 17 JULY 2018 – 05:06
We are putting faith in an elected governing party — whose policies are incompatible with how the global economy is reinventing
The dangers of SA’s party-boss-friendly structures are amplified by high levels of mineral wealth, poverty, inequality and historical racial discord, says the writer.
Can the cause of SA’s political and economic decay be traced to voting conventions? Tremendous power accrues to party bosses when MPs are not directly accountable to voters in local jurisdictions. That the 1990s transition was not explicit regarding redistribution obligations greatly complicated SA’s troubled politics-meets-economics roundabout. Over-prioritising redistribution has sacrificed adequate growth.
For many years the IMF, World Bank, OECD and credit agencies advocated that SA’s economy be fundamentally restructured. SA could compete and thrive on the global stage if appropriate policies were adopted. Instead, policy choices overemphasising redistribution retard growth through undermining competitiveness and exports.
Why would diluting the power of party bosses by directly electing MPs sharply improve SA’s growth trajectory? Former president Jacob Zuma answered that question when he manipulated his party’s leadership to install a massive patronage machine. Restricting the independence of MPs provokes opportunism and groupthink.
Prospects of SA’s future generations have been nailed to a twisted cross. Morally justified reparation expectations cannot align with demands and opportunities of the global economy.
The dangers of SA’s party-boss-friendly structures are amplified by high levels of mineral wealth, poverty, inequality and historical racial discord. Nor does SA have a competitor nation or a true regional rival. Rather, SA is physically, politically and economically isolated in a highly integrated world economy. There are thus few checks when governing party bosses manufacture false perceptions.
SA’s negotiated transition ups the stakes. A few years of heroic shifts led to two decades of meandering politics. Whites shifted from Mandela as terrorist to Mandela as saviour. Blacks pivoted from being routinely oppressed to putting faith in an elected governing party — whose policies are incompatible with how the global economy is reinventing. Politically popular yet economically perilous misperceptions are now entrenched among policy makers.
SA cannot noticeably increase the number of jobs through black SMEs taking domestic market share from larger and better-resourced companies, particularly not in a low-growth environment. Yet this is a core policy pillar. Nor does SA have sufficient purchasing power to meaningfully reduce poverty. Nonetheless, policies prioritise redistribution to such an extent that meaningful export growth — the common trait in successful emerging economies — is precluded. Without workable plans and policies to surge exporting, efforts to sharply spur fixed investment will disappoint.
Another fantasy is that SA escaped the worst of the 2008 global financial crisis through policy-making prowess. SA avoided the downdraft by being peripheral to the global economy. SA’s economic stance rarely emphasises innovation or cost competitiveness. Instead it remains overly reliant on commodity exports to pay for imports, with foreign investors expected to fund shortfalls. Philosophers agree that there can be no moral obligation to do that which is not possible. Excessively prioritising redistribution makes broad prosperity ever more elusive. Yet party slates discourage the emergence of truth-speaking maverick MPs.
Prospects of SA’s future generations have been nailed to a twisted cross. Morally justified reparation expectations cannot align with demands and opportunities of the global economy.
“The greatest good for the greatest number” is a defining principle of welfare economics. The global unemployment rate is as low as has ever been recorded. The world is not going to change what works to accommodate SA.
The global economy resoundingly exceeded the UN’s millennium poverty alleviation goals and the target now is to globally eradicate extreme poverty by 2030. Yet in resource-endowed SA poverty has been rising from a destabilising level reflecting a decade of zero per capita income growth. Today about 60% of South Africans are poor while the IMF projects marginal per capita income growth to 2023.
This country’s complexity and isolation demand far greater adaptiveness. As history and geography are immutable, SA must find the political verve to accelerate commercially inspired domestic and international integration. While completing such a structural shift will have to wait until the 2024 election, now is the time for SA’s political parties to commit to changing the Constitution to achieve greater accountability through local constituencies directly electing MPs. This political step is necessary if universal voting rights are to deliver broad prosperity by mid-century. The corresponding economic shift is to replace counterproductive forms of redistribution with export-focused collaborations.
Published in Business Day