Finding a way to reinvigorate economic dynamism in a context of high inequality is a daunting challenge under any circumstances. But in South Africa, this search increasingly is being made even harder by an addiction to framing policy choices in polarizing ways — short-circuiting rather than building momentum for forward movement.
It doesn’t have to be this way.
As I argue in a companion blog post (“”from reconciliation, to recrimination, to…??”), the search for ways to turn things around is bedeviled by the country’s apartheid history – directly by the country’s continuing stark inequality (examined comparatively in an ESID working paper co-authored with Alan Hirsch and Ingrid Woolard), and indirectly by ways of communicating that undermine the search for creative responses to crisis.
One might have hoped that South Africa could draw on the spirit of its democratic ‘miracle’ of 1994 to address the country’s rising crisis of economic hopelessness. Instead, the opposite seems to be happening — a dysfunctional policy discourse is giving zombie-like life to deeply habitual and deeply destructive approaches to engagement.
Harvard economist, Dani Rodrik points to the possibility of an alternative way forward. He famously distinguishes between the function and the form of economic policymaking. According to Rodrik:
“First-order economic principles do not map into unique policy packages. There is no unique correspondence between the functions that good institutions [and policies] perform and the form that such institutions [and policies] take. Reformers have substantial room for creatively packaging these principles into designs that are sensitive to local constraints and take advantage of local opportunities.
Here is one example of how, notwithstanding Rodrik’s dictum, South Africa’s current economic policy discourse quickly degenerates into dispiriting polarization:
- Providers of investment resources and entrepreneurial energy (rightly) argue that it makes no sense for them to invest if they lack confidence that they will be able to benefit economically from successful investments – and high-mindedly frame their arguments in terms of the sanctity of law (and thus of property rights).
- Historically disadvantaged, but newly-politically-influential groups (rightly) recognize that, absent broader initiatives to transform the economy, the benefits of increased investment will flow disproportionately to established elites, bypassing them. Conditioned by decades of struggle, respond skeptically and suspiciously to high-minded, superiority-tinged recourse to the ‘sanctity of law’.
In this dialogue of the deaf, the result is stalemate and continuing economic decline. Indeed, even during the minerals boom of 2000-2008, mining investment in South Africa was flat, in large part because of contestation and recrimination along the lines laid out above.
And here’s another example:
- Many economists and businesses (rightly) argue (vociferously, and with great certainty) that wage settlements above ‘market clearing’ levels and other labour market rigidities inhibit employment creation. But they do not add that (in ‘economist-speak’) the rate of employment creation subsequent to liberalization depends on the elasticity of demand for labor — and that the structural rigidities of South Africa’s minerals-energy complex imply that over the short-to-medium-term, the elasticity of demand (and hence employment creation) is likely to be low.
- Meanwhile, employers and workers argue (loudly) over their annual agreements. Worker organizations embrace the rhetoric of revolutionary struggle — even in the face of evidence (summarized in our ESID paper) that unionized, employed workers have become a labour aristocracy, largely embedded within the top third of the distribution. Employers, on the other hand, ignore the implications for employees of South Africa’s distributional cliff of inequality– namely the reality that prevailing labor-market rigidities are what protects their employees from sliding rapidly from relative comfort to near destitution.
The result, again, is continued polarization and stalemate, limited job creation – and deepening pessimism as to South Africa’s economic future.
How labor markets operate, how economic power is distributed, and how property rights are protected are indeed central to South Africa’s economic performance. But might there be other ways forward than a pre-occupation with zero-sum alternatives which fuel old, destructive way of speaking and (not) listening?
As the companion blog post details, Elinor Ostrom, 2009 winner of the Nobel Prize in economics, offers an alternative. Her lifelong work focused on the challenge of how to achieve results by co-equals working collaboratively – fully cognizant of (and committed to managing constructively) the tensions between their private purposes and collective ends.
Here are five potential entry points for Ostrom-style multistakeholder collaboration in support of job creation and investment – focusing on possibilities at regional, sectoral and meso levels (where the prospects are perhaps better of moving beyond the ugly polarization of headline-level discourses). Each is ‘low hanging fruit’, in the sense that many of the foundations for implementation already are in place:
- Social compacts around job creation, at sub-regional and sectoral level – a major push for an employment-oriented special economic zone in, say, the Eastern Cape (where the Coega industrial development zone already provides the requisite infrasutrctural platform) underpinned by negotiated agreement among stakeholders to do what it takes to create a large number (500,000 say) of new jobs.
- A reinvigoration of labour-skills upgrading – where a multi-stakholder governance structure was established in the latter 1990s (in the form of Sectoral Training Authorities), but with weak follow-through on the part of both private sector and government actors. The result has been a consolidation within government of policymaking and implementation for ‘further education and training’ – but (in part because of the absence of sustained private sector involvement) continuing disappointing outcomes.
- A determined effort to strengthen participatory governance in basic education. A strong role for School Governing Bodies formally is laid out in the South African Schools Act — but it was included there to protect elite (former Model-C) schools, not as a platform for inclusive governance more broadly. Yet research from other parts of the world (and some striking examples within South Africa) suggests that — with pro-active support — SGBs can play a powerful, constructive role.
- A reinvigoration of sector-level broad-based black economic empowerment (BBEEE) initiatives. These were negotiated sectorally in the early 2000s, then consolidated using a balanced BBBEE scorecard (which focused broadly on transformation vis-à-vis ownership, management, skills and enterprise development). But with little collective commitment – and no collective mechanisms for ongoing monitoring, conflict-resolution and enforcement – they have receded into the background, and the fires of contentious BEE debates continue to burn.
- Strengthened support (including via fiscal resources) from business elites for the expansion of successful public employment programmes for unskilled adults – these both provide employment, and support the provision of local infrastructure and services, especially in low-income areas.
Each initiative comprises a constructive step in the direction of building a genuinely inclusive economy. And each requires sustained co-operation among diverse stakeholders for its successful implementation (perhaps less directly so in the case of public employment; I include it because its embrace requires established elites to recognize that South Africa’s job creation and inclusion crisis goes beyond anything that can be met through familiar market-based solutions).
To be sure, these five initiatives are hardly sufficient to resolve South Africa’s vast, continuing challenges of exclusion and inequality. Even so, taken together, their successful implementation could be a game changer – a signal of the renewed willingness of South Africa’s diverse citizenry to turn away from polarization and recrimination, and rediscover the power of joint, co-operative problem-solving….. and thereby renew the possibility of looking to the future with hope, rather than recrimination and despair.