In his essay, The Parable of the Broken Window, the French political theorist, Frédéric Bastiat, stated that the difference between a good economist and a bad one is that a good economist sees that which is unseen, while a bad economist sees only that which is seen. The emergent nature of complex systems means that all too often, small changes in economic circumstances have effects which go far beyond their intended scope, creating latent negative effects which the policy makers never could have imagined. One can imagine then the plethora of unseen effects which the government’s national lockdown will have on the economy and society at large and it is not as if the ANC is always awake to analysing the consequences of its own policies.
The more we learn about the Covid-19 pandemic, the more that these unintended consequences becomes apparent to us, but perhaps most strikingly, the more we realise that we do not know. It is a spectacular example of the Dunning-Kruger effect visible in real time.
The decision by the government to implement a nationwide lockdown is having and will continue to have enormous consequences for the economy. The Institute of Race Relations (IRR) has continually emphasised this in its policy recommendations. South Africa’s economy was already in a bad position after a decade of populist policy-making and cuts in electricity. As a result, GDP growth prior to the pandemic was effectively capped at one percent which is not even sufficient for growth in real terms, when taking into account population growth. Estimates of the economic cost of the lockdown range from R13 billion to R20 billion per day. Even assuming just R13 billion per day, by today, the lockdown will have cost the country R442 billion. Five more days of a lockdown would put that economic cost at over R500 billion – more than the government entire stimulus package – and there is good reason to think that the stimulus package is worth far less than R500 billion.
This is to say nothing of the social and psychological effects which such a drastic cessation of production could have on the country. It is conceivable that social-fabric crimes may also increase during the period and South Africa’s already serious crime problem will be exacerbated as millions are left hungry.
Given the enormous costs, such a drastic lockdown should be justified with good and efficient results in slowing the spread of the virus, but arguably the lockdown has failed in this regard. Professor Alex van den Heever from Wits University has stated that in townships, the lockdown has been largely ineffective and has been, “equivalent to no intervention at all for millions of people.” On 28 April, riots erupted in Booysens, a suburb of Johannesburg, as food parcels did not arrive, leaving many hungry. Similar riots have broken out in Mitchells Plain in Cape Town, also due to a lack of food. The lockdown – meant to enforce social distancing – has instead created a situation where people are so desperate that they are driven to demonstrate publicly and, thus, any gains made by the lockdown are obliterated as large crowds of people take to the streets.
The distribution of food parcels has also been notoriously slow which has only exacerbated this problem. Worse still, there have already been multiple claims of corruption in the procurement and distribution of food parcels around the country. Unfortunately, food parcels represent yet another source of corruption for the government, either through inflated tenders awarded to politically connected firms or through their geographic distribution based on whether or not a ward voted ANC. A voucher system would mean a far better use of the state’s money and would avoid these issues of corruption and political patronage.
Another unintended consequence of the lockdown is the closure of schools. For many children from poorer backgrounds, school feeding schemes are the only source of food they get every day. With the lockdown causing a sudden loss of income for families and the cessation of school feeding schemes place extra financial and social pressure is put on the poorest in our society. Admittedly, the lockdown and other social distancing measures would likely be totally futile if schools continued to operate as children interact with one another and then return home to spread the virus to their respective households. However the suspension of schooling has also created the above-mentioned unintended consequences – consequences which must be dealt with one way or another.
Further still, when comparing South Africa’s lockdown regulations with those of the rest of the world, South Africa stands out as being one of the harshest. Unlike its counterparts in the rest of the world, food deliveries, hot cooked food, alcohol and cigarettes were all banned for the duration of the lockdown and all of the above were banned without any taking into account social distancing measure put in place by providers of those services. Some of these regulations also strike one as being bizarre, for example the ban of food deliveries which forces people to leave their homes to purchase food, thereby violating social distancing. Even during the most draconian lockdowns in China, food deliveries continued and were a lifeline to many – although anyone who has lived in China knows that that food deliveries (known as waimai) – are a very common part of life there. By contrast, South Africans are forced to queue up outside of supermarkets en masse while restaurants go broke.
Such an enormous shutdown of the economy in an already-poor country should therefore be justified as being both effective and necessary. Arguably, the lockdown in its current form has, up until now, achieved neither. It has also emboldened power-hungry politicians eager to police every aspect of their citizens’ lives by chipping away at civil liberties – something many in the press seem to have ignored.
The country has transitioned from Level 5 (full lockdown) to Level 4 restrictions today, but this transition does bring with it significant differences. Most businesses that are currently closed will remain closed and the above mentioned consequence of the lockdown will likely continue. What has been written in this article is just the tip of the iceberg and more can read in the IRR’s latest report written by Anthea Jeffery, available here
As an alternative, the IRR has recommended the following principles (taken from the above report):
First, all businesses must immediately be allowed to return to work, but must also shoulder the burden of safeguarding their staff, customers, and suppliers against the virus as far as is reasonably practicable.
Second, the country must for many months maintain social distancing – and, if necessary, self-isolation or quarantining – for the people most vulnerable to the virus.
Third, children must be kept out of school until September, as allowing their earlier return risks undoing whatever gains the lockdown has brought.
This framework is explained in more detail in the report. A central thesis which the IRR has repeatedly emphasised is this: it is foolish for the government to think that they can effectively decide what is an “essential service.” Because the economy is complex and inter-connected, many “essential services” rely on goods and services produced by “non-essential services” without which the operations of essential services become impossible. Thus, at some point, the designation of “essential” and “non-essential” services will be subjective and in South Africa, this subjective policy-making has yielded such ridiculous regulations as the ban on the sale of hot cooked food. Upon being asked for a reason for the ban on selling hot cooked food, minister Ebrahim Patel could not do so within the allotted time (1 day) and had to send legal advisors to request an extension of five hours to come up with a reason – hardly the sign of intelligent policy-making by competent individuals running a capable state.
At all times, the goal should be to get life back to normal when it is reasonably possible to do so. An ongoing lockdown – whether it is at level 5 or Level 4 – will be totally unsustainable for South African society. Slowing the spread of the virus to save lives is an admirable goal, but if it comes at the cost of lives in other ways, such a goal is pointless. A balance needs to be struck between the two, particularly in a country like South Africa, for this is not “lives vs livelihoods,” but rather “lives vs lives.”
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