Fixing our economy is going badly because it isn’t just damaged. The underlying structure ensures decline. That this largely traces to enrichment of the politically connected makes raising awareness harder and essential.
The world economy’s primary growth drivers have become innovation and global integration. Believing this can be ignored reflects the perception that we can pursue economic sovereignty. This outdated belief is central to maintaining the fiction that prioritising redistribution ahead of growth is a viable option.
The common denominator among the many countries that have pummelled poverty in recent years is growing both value-added exports and household savings. Our policies presume domestic consumption can spur adequate growth, despite most households being poor and with few saving meaningfully. Instead, reliance on prohibitively expensive debt is the norm.
Geographic and historic perspectives help explain the manipulation of our national dialogue to ignore how 21st century societies develop very differently from those of earlier eras. No country is more physically distant than South Africa from the world’s largest and most dynamic economies. Few countries have such stark societal disparities with still fresh historical roots.
For millennia, wealth and power were concentrated by elites controlling land, with most people being peasants. Whether the elites were labelled nobles, chiefs or shoguns, the societal structures were all variants of feudalism. Life was mostly about survival. Progress and social mobility were the stuff of fairy tales.
Having the masses accept subsistence and subservient existences appeals greatly to our political elites, as they believe this leaves more of the country’s inherent wealth to be shared among themselves. This is delusional and immoral.
Tremendous wealth
The industrial era overwhelmed traditional societies as tremendous wealth was created by linking factories and intercontinental shipping. That factories needed raw materials provoked the colonial era, with fortunes being made through controlling natural resource deposits. I recall reading a magazine’s summary of the wealthiest people in the late 1970s and noticing that they got rich mostly through real estate, oil exploration, or inheritance.
Today’s richest people are nerds and they have gotten richer still as the pandemic has vaulted us further into a digitised future. Farmland’s long-standing starring role has been fading for about two hundred years, whereas natural resources’ prominence was much briefer and its waning much more recent.
Focusing on inequality routinely misleads. Average people in today’s many affluent countries enjoy a higher quality of life than the top one percent who controlled most of the world’s mid-19th century wealth. Back then, maybe a handful of countries could be considered democratic versus over a hundred today. Development paths mixed injustices with setbacks, yet massive economic gains spurred comparable political progress.
In South Africa, majority rule was long elusive and when it finally arrived the electorate supported redressing past inequities through prioritising redistribution. This approach significantly benefited the vast majority who were poor and poorly educated. Yet prioritising redistribution was always destined to leave most of them poor. That that understanding is not part of the national discourse is a serious omission. Meanwhile, leading emerging nations, employing policies and practices opposite to South Africa’s, have seen plunging poverty at an astounding rate.
Resource endowments
South Africa’s natural resource endowments are considerable but they could never provide more than a down payment for building a dynamic economy. Instead, our political elites desire a feudal structure – akin to ‘big man’ politics – whereby political and economic power is clustered in their hands. Such biases align well with their Marxist-Lenninist rhetoric, while many older voters seem conditioned to accept the role of a peasant. The Zuma era’s adding a thick layer of patronage further entrenched low productivity biases while greatly expanding dependency on the state.
The pandemic has now demonstrated that we have one of the world’s worst managed and least resilient economies. Nor do we even have workable growth plans under consideration. This traces directly to our political-economic disconnects.
Political cover for enriching cronies comes from constantly campaigning against inequality. Yet the policies and practices which lead to our ruling elites dining sumptuously condemn most South Africans to lifelong poverty. While the poor are stymied by hardships, our leading voices still demur from tackling the ANC’s inequality hypocrisy.
This would best be accomplished by offering a potent growth plan. That this hasn’t happened links back to a reluctance to take on the politics of inequality alongside inadequate appreciation of today’s economic development fundamentals. Strategies that aren’t centred around adding value to exports through greater global integration were unworkable before the pandemic and they are far less feasible now.
Societies with massive poverty need the commonsense to recognise that a high prevalence of poverty can be expressed, mathematically and politically, as inequality. Our national debates are still too tightly constrained by the past to challenge how inequality is exploited to enrich the politically connected. The pandemic hasn’t changed this and the next stop on this slow-speed train wreck is a sovereign debt default.
Equally misconstrued
At the family level, our economic fundamentals are equally misconstrued. Too few working-age family members are well-skilled or fully employed, and excessive reliance on prohibitively expensive debt precludes wealth building. Our economy’s lack of resilience is further reflected in many South Africans living hand-to-mouth. Ten million funeral policies demonstrates that most South African families aren’t accumulating wealth.
Our economic debates are distorted by presumptions that are irreconcilable with globally dictated success factors. If we stop kidding ourselves, solutions will be less elusive.
The views of the writer are not necessarily the views of the Daily Friend or the IRR
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