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The missing leitmotif
Date: 03 Dec 2009
The public debate on which economic policy South Africa should follow, is certainly not boring. But it can’t be any different given the widely divergent ideological points of departure of those taking part in the debate.
The relative uniformity of the dialogue during the Mbeki era has made room for a cacophony of voices all trying to outshout one another. The one-sidedness of debate during that era and the preference for those sharing the same views above critical voices were probably taken too far, but perhaps the new-found openness has likewise caused the pendulum to swing too far.
Is it too much to ask for someone to take the lead by establishing a central leitmotif so that the debate could be more ordered? Does leadership mean nothing more than giving everyone the opportunity to have their say and then trying to effect a compromise between the opposing parties? Isn’t leadership about someone taking the lead and showing the way, even if it means being unpopular? Compromises are often not the optimal solution – although they do help to keep the peace, they could mar policy effectiveness.
Leadership also implies resoluteness, a vision for the future. Getting stuck in the policy debate on ideas that originated more than 50 years ago, as if nothing has happened in the interim, is to deny the current reality and the ensuing economic path.
So, what should the leitmotif in the policy debate be?
It is widely recognised that the biggest challenge South Africa is facing is the dehumanising poverty among such a large section of its population. The problem of extreme inequalities is only a side-effect thereof. It is not the result of a large number of people finding themselves at the top end of the income distribution, but precisely because a much larger number are at the bottom end.
The solution to the inequalities in society therefore does not lie in measures to impede the movement of people into the top end, but to enable those at the bottom end to escape from their circumstances.
The solution to the problem of poverty is job creation, and in particular job creation in the formal sector of the economy. South Africa’s employment statistics want to suggest that job opportunities in the informal sector are of equal value, but this is an illusion. In this regard I sympathise with the wish for “decent jobs”, but what can be done if competing countries are quite happy to create “indecent jobs”?
Although economic growth is not the only requirement for job creation, without economic growth large-scale and sustainable job creation is impossible. In other words, the promotion of economic growth must unavoidably be the leitmotif for the economic policy debate in South Africa.
The search for a “new” growth model for South Africa is therefore spot on, but it assumes that there was an “old” growth model. It furthermore assumes that this “old” growth model was implemented fully and effectively, but did not work. I want to be so bold as to say that South Africa has never had a comprehensive growth model that has been applied in a consistent and dedicated manner.
Readers will probably immediately ask: But what about GEAR? And what about ASGISA? Well, as both names imply, in both cases it was about growth AND something else: employment and redistribution, and shared growth respectively. In other words, not one of the two strategies focused exclusively on growth, but interwove it with the issue of income and wealth distribution. Not that either of the two strategies was ever implemented fully.
By that I don’t want to imply that the distribution aspect is unimportant; in fact, that would be contrary to my earlier remarks about poverty and inequalities. However, the solution is not to define the rules of the game to manipulate the result, but to make it possible for everyone to participate in the game. And this is exactly why the problem of poverty and inequality will never be resolved until all people have access to the same quality education and training.
Accepting economic growth as the leitmotif means every policy decision must be tested against the criterion of whether it will promote economic growth; any measure that is detrimental to the growth potential of the economy must be eliminated.
If the nationalisation of the mines will not promote economic growth, it does not deserve to be an item on the agenda. If changing the Reserve Bank’s mandate will simply add more weight to the course of the business cycle in the implementation of monetary policy, without improving the long-term growth potential of the economy, it is a marginal issue that should be treated as such. If maintaining a permanent undervalued exchange rate is not viable, let us not waste time on debating it endlessly.
We should also not have any illusions about the search for a “new” growth model. We will not find it in academic theorising about it. Nor will we find it in simplistic comparisons with other countries that have achieved high growth rates.
In particular, to argue that because some countries in which the state has played a more active role in the economy have grown relatively fast, a more active role for the South African government will by implication achieve the same result, is naïve. Who is to say another factor, such as an exceptional work ethic, an entrepreneurial spirit, a willingness to make sacrifices, or an efficient education system, might not have played a deciding role, and that economic growth would not have been even higher if the government had not intervened in the economy?
So let us focus on the real issue, viz. how to unlock the inherent growth potential of the economy. However, before we start creating an elaborate policy framework, we need to get the basics right, including addressing the shortcomings in education, training and infrastructure. Even the most wonderful policies will be of little use if the opportunities created by them are inaccessible to the majority of people.
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