Rekindling hope – the missing elixir to fix South Africa’s economy

hope imageThe world over, political and economic agendas that fail to offer hope to the “middle” of society have turned out to be recipes for downward spirals of ethno-populism. More than other middle-income countries, South Africa’s citizens remain either affluent or poor, with little in-between.  As of 2015, only a quarter of the country’s citizens enjoyed a level of living that could be described as stably “middle class” or better. Half of the population remained chronically poor, dependent on safety nets for survival. And the quarter in-between – who, in a thriving society, would be carriers of hope from the middle to the bottom of society – struggle, mostly in vain, to stay out of reach of destitution.

My recent piece, syndicated in The Conversation as per this link,  explored how this can be turned around. See below for the pre-publication version, which includes somewhat more detail on the three suggested ‘guideposts’ for turnaround.

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South Africa’s election season is underway,  but the discourse is stuck in a time warp. We need to look beyond the familiar nostrums that have held sway for much of South Africa’s first two decades of democracy.

In his February, 2019 State of the Nation speech, President Ramaphosa followed the classic fix-the-business-environment formula for job creation,  setting a target to move South Africa’s performance up from 82nd to the top 50 in the World Bank’s ease of Doing Business ratings within the next three years. The rhetoric from the opposition Democratic Alliance is similar.  The populist Economic Freedom Front’s vision for jobs seems to be to emulate Venezuela.

Indeed, South Africa urgently needs to get its economy moving again. But as two great twentieth century economists John Maynard Keynes and Albert Hirschman teach us,  economic momentum is not created by focusing on the myriad pinpricks about which business continually complains.  Rather, the way to reinvigorate the economy is to rekindle hope across society.

As Keynes explained, in his magisterial analysis of  the drivers of private investment (written in the depths of the 1930s great depression):

“Our knowledge of the future is fluctuating vague and uncertain.  Being based on so flimsy a foundation, [private investment] is subject to sudden and violent changes. New fears and hopes will, without warning, take charge of human conduct…..”

Thus:

“Most of our decisions to do something positive can only be taken as the result of animal spirits—a spontaneous urge to action rather than inaction…rather than mathematical expectations”

The great scholar of twentieth century Latin American development,  Albert Hirschman, built on Keynes’ insights  in a way which speaks directly to South Africa’s challenges.   He conceived of the development process as a cycle:

“Two principal tasks or functions  must be accomplished. The first is the unbalancing, entrepreneurial function…… Increasing social and income inequalities are an important part of this picture…..In time, pressures will arise to correct some of these imbalances…..This is the ‘equlibrating’ distributive, or reform function….”.

South Africa’s GEAR (Growth, Employment and Redistribution) strategy, adopted in 1996,  marked the start of an entrepreneurial  phase.  Growth reached  an average rate of over five percent per annum between 2004 and 2008, better than for any period since the 1960s.  Even so, as a recent study documented,  as of 2015  only a quarter of the country’s citizens enjoyed a level of living that could be described as stably ‘middle class’ or better.

Half of the population remained chronically poor,  dependent on safety nets for survival. And the quarter in-between (who, in a thriving society, would be carriers of hope from the middle to the bottom of society) struggle, mostly in vain, to stay out of reach of destitution. More than other middle-income countries, South Africa’s  citizens remain either affluent or poor, with little in-between. Against that backdrop, it hardly is surprising that  by the early 2010s South Africa saw the emergence of a vituperative political discourse characterized by assaults on “white monopoly capital” on the one hand and a preoccupation with institutional decay and state capture on the other.

Hirschman witnessed a parallel erosion of optimism in Latin America:  a military coup in Brazil in 1967; a massacre of students on the streets of Mexico City in 1971; the bloody assault on Chile’s presidential palace in 1973, which resulted in the death of elected president Salvador Allende and the coming to power of General Augusto Pinochet.   In a  1973 article, musing on this reversal, he  suggested that tolerance for inequality…

“… is like a credit that falls due at a certain date. It is extended in the expectation that eventually the disparities will narrow again. But if the expectation…. does not occur, there is bound to be trouble and, perhaps, disaster…… Nonrealization of the expectation that my turn will soon come will at some point result in my ‘becoming furious’ that is, in my turning into an enemy of the established order…No particular outward event sets off this dramatic turnaround… Rulers are not necessarily given any advance notice about [the tunnel effect’s]  decay and exhaustion…”.

The Hirschman development cycle points to the way out of the downward spiral – embrace the ‘reform function’ as the way to revitalize hope. This is more easily said than done:

While the performance of the entrepreneurial and reform functions (in some proper sequence) may be ‘objectively’ essential for the growth process, their protagonists are more often than not determined adversaries….. When reformers enter the stage they may well be full of invective against the entrepreneurial groups, who will return the compliment….”.

What might a turnaround look like in South Africa’s current conjuncture? Here are three guideposts.

  • Don’t confuse a re-embrace of the ‘entrepreneurial function’ with reform.

In early 2018,  with the recall by the ANC of President Jacob Zuma and the accession to the presidency of Cyril Ramaphosa, South Africa seemingly reversed course. Notwithstanding continuing infighting within the ANC, the country has witnessed an ongoing removal from positions of authority within government of many who had been deeply complicit in state capture and associated institutional decay.  But institutional turnaround is not enough.

The world over, political and economic agendas which fail to offer hope to the ‘middle’ of society have turned out to be recipes for downward spirals of ethno-populism. Thus:

  • Give priority to responding pro-actively to the concerns of the quarter or so of the population stranded in South Africa’s twilight zone between middle class stability and abject poverty.

Hirschman’s cycle underscores that  renewal comes  from a revitalization of hope among those who were stranded at the threshold of the earlier, unbalanced process – lured, but then disappointed, by unrealized promises.  This segment of society is both crucial politically in its own right – and can be a transmission belt of hope among the poorest half of South Africa’s population that upward mobility is possible. Thus:

  • Do what it takes to strengthen ladders of upward mobility.

To citizens stranded in the disappointed middle,  election season sounds like just another replay of empty promises.  Jobs? Better institutions?  They’ve heard it all before.  A genuine, visible – and, crucially, well-financed —  commitment from across society to invest in ladders of opportunity and inclusion would offer a tangible basis for hope, especially for young people.

As I’ve explored here  and here, the weaknesses in South Africa’s ladders of opportunity are different – and the challenges more readily addressable –  than those  usually emphasized in South Africa’s blame-centric political culture.  Visible gains in the affordability and efficacy of ladders of opportunity and inclusion have the potential to  unlock the most crucial ingredient of all –  a renewed sense of agency among South Africa’s citizens, of hope that, working together, we indeed have it in our power to build a future with a real prospect of a better life for all.

 

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