What economic policies are pro-growth? In recent weeks, a heated debate has been raging in South Africa over the pros and cons of a basic income grant. Underlying this debate are some radically different views as to the relationship between growth and inclusion. The debate revolves less around whether accelerated growth is a necessary part of any hopeful way forward for South Africa – on that there is broad agreement – and more around questions of what it will take to kickstart growth and, indeed, whether growth plus the existing package of social policies can adequately address the challenge of inclusion.
Having spent the better part of four decades wrestling with this conundrum, I couldn’t resist adding my two-cents-worth to the debate, in a piece published earlier this month in The Conversation. This blog piece reproduces part of that piece – and also locates the argument in a broader context.
“…the inadequacy of prevailing economic ideas to effectively address the structural problems that the South African economy faces – a mismatch between what South Africa produces, and what the country’s factor endowments are. South Africa’s production structure largely is biased towards skill-intensive sectors, while the labor force largely is unskilled…..”
“[A crucial challenge] is to stimulate labor-intensive production…..This is structural transformation in reverse – low-skill activities tend to be non-tradeable, and generally have lower total factor productivity… It requires an industrial policy that promotes productive employment of a very different kind, the kinds of things we don’t normally associate with industrial competitiveness: relatively low-productivity activities; small and medium enterprises; perhaps informal activities that are mostly service-oriented. This takes us into such new terrain that it is not entirely clear how to proceed….. we don’t know a lot about how to do it…..”.
Rodrik usefully locates South Africa’s challenge within the context of the contemporary globalized economy. However, the dilemma confronting South Africa hardly is new. As Jonny Steinberg put it in a recent article in Business Day:
“South Africa’s labour markets have been unable to provide work for the able-bodied for two generations now. There is no reason to believe they will provide work for all…..”
Three decades ago, I wrote a piece (the first in the World Bank’s informal working paper series on the South Africa economy) that laid out the dilemma, and explored the possibility of addressing it via the promotion of labor-intensive, light manufacturing. (Actually, my pre-occupation with the dilemma dates back to a SALDRU working paper I wrote in 1981). As I put it the 1992 piece:
“South African manufacturing increasingly has failed to generate jobs, with virtually no increase in employment between 1976 and 1988. This failure cannot simply be attributed to a poor overall growth performance….. Indeed, between 1976 and 1981 manufacturing growth was associated almost entirely with an increase in capital input, with the capital-labor ratio increasing by almost 75% and virtually no growth in employment….”
The working paper went on to propose:
“…. a strategy for fostering labor-intensive, export-oriented growth….[focused on]…. the upmarket segments of labor-demanding activities….. Policy initiatives may be an important source of encouragement for South Africa’s private sector to invest in the acquisition of competitive capability in labor-rather than capital-intensive sectors of industry.”
Those ideas failed to gain traction at the time I championed them – and indeed, as Rodrik implies, confront an even less propitious global environment in the 2020s. Steinberg describes vividly the contemporary challenge:
“We could go on pretending that we live in the 1960s, and that our welfare system really is for the frail. Or we could say the days of full employment are just around the corner. But that takes us into dubious ethical terrain. Like Vladimir and Estragon, we can keep waiting for Godot while generations of South Africans live and die.”
“Two principal tasks or functions [that] must be accomplished in the course of the growth process. The first is the unbalancing function, the entrepreneurial function, the accumulation function…… Increasing social and income inequalities are an important part of this picture.”
Once hope has curdled into anger and despair, renewing growth will depend on :
the ‘equlibrating’ distributive, or reform function… to correct some of these imbalances, to improve the welfare and position of groups that have been neglected or squeezed, and at redistribution of wealth and income in general.”
Viewed from this perspective, employment subsidies, basic income grants and other social interventions to address poverty and improve prospects for upward mobility all become part of an (extended) pro-growth policy. These don’t come free. They will require both a move away from pro-austerity fiscal policies, and (in time) some tax increases on higher-income earners – with the latter dependent for their legitimacy on the likely effectiveness with which the public sector implements the social agenda. (For more on this last, see a second recent article in The Conversation – also elaborated in THIS upcoming companion blog piece).
South Africa, along with many other countries, is struggling to renew hope in the wake of a difficult downward spiral. This struggle is the focus of our new, co-authored paper, to be launched on April 7th at a virtual event featuring Trudi Makhaya (economic adviser to President Ramaphosa) and Harvard’s Dani Rodrik. (Here’s a link to the event.)
South Africa’s recent experience illustrates powerfully the fragility of hope. In the 1990s, the country was an iconic case of democratization. The subsequent collision between strong institutions and massive inequality makes its experience potentially of relevance not only for other middle-income countries, but also for many higher-income countries wrestling with a combination of a declining tolerance for high or rising inequality and institutions that seemed strong in the past but find their legitimacy increasingly being questioned.
In a benign scenario, ideas, institutions, and growth all reinforce a hopeful, virtuous spiral. Ideas offer hope, encouraging cooperation, the pursuit of opportunities for win-win gains. Institutions provide credibility that the bargains underpinning cooperation will be monitored and enforced. Together, ideas and institutions provide credible commitment, fueling economic growth. However, the benign scenario does not reckon with the ways in which persistent high inequality, accompanied by unresolved tensions between the distribution of economic and political power can both put pressure on institutions and catalyze a lurch from hope to anger. The consequence can be a cascading set of pressures, and an accelerating downward spiral. Turnaround calls for going beyond ‘with the grain’ approaches, and embracing a far-reaching vision and strategy of renewal.
The new paper, “South Africa: When Strong Institutions and Massive Inequalities Collide”, co-authored with Alan Hirsch, Vinothan Naidoo and Musa Nxele has been published by the Carnegie Endowment for International Peace, in collaboration with the University of Cape Town’s Nelson Mandela School of Public Governance. It will be launched on April 7th at 10am (US East Coast time), at an open virtual event to be co-hosted by the CEIP’s Tom Carothers and Zainab Usman, and Faizel Ismail of the Mandela School, with Trudi Makhaya and Dani Rodrik as discussants. A modified version of the paper’s executive summary follows below
For South Africa’s first fifteen years of democracy, the combination of a shared willingness among stakeholders to believe in the power of cooperation and effective institutions that helped make promises of co-operation seem credible enabled the country to move beyond counterproductive conflict and pursue win-win outcomes. Growth began to accelerate, providing the fiscal means for addressing absolute poverty (as per Table 1), and offering some new opportunities for expanding the middle class. There were, however, some stark limitations in what was achieved. The poorest four deciles remain largely unemployed or underemployed, and mostly live in rural areas (designated during the apartheid era as “reserves” or “homelands”) and informal settlements around towns or cities.
Table 1. Some gains in reducing poverty, 1996-2011
Absolute poverty, with daily hunger
Access to: – electricity
– piped water
Secondary school enrollment
Access to social grants (old age, child support, disability)
South Africa’s political settlement was built around four distinct sub-bargains:
A deal between the established (overwhelmingly white) economic elite and the country’s new political leadership. This included commitments to sustain the rule of law (including protection of private property), and to gradual ongoing economic transformation (including an elaborate program to support black economic empowerment, BEE).
A deal among the new political elites within the majority political party, the African National Congress (ANC). The ANC is a broad tent encompassing many ideological proclivities; degrees of public-spiritedness; and regional, ethnic, and economic interests. Its implicit promise was that its formal structures, plus the structures of government, would channel this diversity toward a shared national purpose.
A promise of upward mobility. One aspect was a commitment to protect the interests of new (predominantly black) middle class insiders. Another aspect was a promise that a combination of education, job creation, and an end to racial discrimination would open up readily accessible opportunities for those on the cusp of middle-class status.
A promise to reduce extreme poverty. A post-minority-rule redirection of public resources and services would benefit the whole population.
All of these sub-bargains except for the last one, which was pursued at least into the 2010s, were built on shaky foundations. Many BEE transactions straddled the boundary between rules-based and more personalized deal-making; who should participate in BEE initiatives became part of the ANC’s inter-elite conflict. Adapting to a transformed political order created new pressures for the public sector. Had South Africa been able to enjoy a combination of visionary leadership and East Asian rates of rapid economic growth for a sustained period, the expansion of opportunity throughout society might have trumped the limitations of the aspirational commitments. In reality, the country only briefly reached an annual rate of 5 percent from 2005 to 2008.
In 2009 Jacob Zuma became president, having won a bitterly contested struggle for ANC leadership. He inherited an economy that, though buffeted by the 2007/2008 financial crisis, seemingly was fundamentally sound. Indeed, in the initial years of Zuma’s presidency—which included the wildly successful, celebratory atmosphere of South Africa’s June 2010 hosting of the soccer World Cup—it seemed likely that the country would continue its positive trajectory and might even begin a new phase of renewal.
However, a hopeful scenario was overtaken by a combination of events, deep-seated ongoing challenges caused by South Africa’s continuing extreme inequality, and Jacob Zuma’s approach to leadership. The events comprised a change in presidential leadership and South Africa’s undisciplined and uncoordinated response to the global financial crisis, which short-circuited a virtuous circle of an economy and society on the mend. Subsequent to the global crisis, South Africa failed to build momentum and (contrary to other MICs) stagnated, signaling that the global shock is not sufficient to account for the subsequent reversal.
The deep-seated ongoing challenge was the country’s persistent inequality. As Table 2 details, as of the mid-2010s less than a quarter of the total population, including essentially all white South Africans, enjoyed a standard of living that was middle class or better. More than all other middle-income countries, South Africans are either affluent or poor, with limited opportunities to move up the economic ladder. There was ample reason for the majority of South Africans to feel that, notwithstanding the promises of mutual benefit, the deck remained stacked against them. This increased the vulnerability of South Africa’s political settlement.
Table 2. South Africa’s 2014 Population Distribution, by Ethnicity and Class
Source: Schotte, Zizzamia and Leibbrandt (SALDRU, 2017)
Over the course of his nine years in office, Jacob Zuma governed in an increasingly personalized way, with increasing recourse to polarizing rhetoric. When Zuma took office, many who backed him hoped that he would bring an inclusive, coalition-building, popular touch to leadership—a contrast to Mbeki’s remote, technocratic, and somewhat imperious style. In the event, Zuma proved to be a cunning, ruthless, and charismatic tactician.
The paper describes in detail three successive turns that set in motion what looked to be an accelerating downward spiral of decline:
Rising pressure on institutions, sparked by the continuing ambiguities and unresolved tensions in the bargains between economic and political elites, and among the various influential sub-groups within the ANC itself.
A rising tide of disillusion when per capita income growth entered and remained in negative territory. Zero-sum contestation over public positions and resources at the national, provincial and local levels became acute. Those on the cusp of the formal economy found themselves unable to consolidate middle-class status; unemployment steadily increased.
An ideational turn toward anger, catalyzed by both genuine grievance and political opportunism. In the face of thwarted opportunity, an increasing number of South Africa’s population came to see the privilege enjoyed by the mostly white economic elite—and the tide of apparent corruption that seemed to be the only way that new elites could share in that privilege—as a provocation. In turn, opportunistic ethno-populist political entrepreneurs sought to use the disillusion to strengthen their position within inter-elite political struggles.
All the elements seemed to be in place for a fourth turn – a rapidly accelerating cumulative slide, with weakened economic performance, institutional decay, anger and ethno-populism feeding on one another. The December 2017 election of Cyril Ramaphosa as leader of the ANC and his subsequent accession to the country’s presidency signaled a pause to this slide. However, three years later, President Ramaphosa has not been able to move decisively beyond a promise to “stop the rot” and offer a renewed positive vision. Hard hit also by the Covid-19 pandemic, the country is not out of the woods.
What has been missing so far has been a vision capable of renewing hope across South African society. The path of least resistance for established elites would be to return to “the basics,” reembracing the trajectory of the Mandela and Mbeki presidencies. However, for reasons detailed in the paper, such a muddling-through scenario is unlikely to have the broad-based political support needed for it to be sustainable over the medium term.
The paper suggests a credible promise of upward mobility for a wide spectrum of society as the centerpiece of a next-generation inclusive development strategy for South Africa. In the first fifteen or so years of democracy, the elimination of racial barriers and the country’s accelerating growth were sufficient to usher in a season of hope. However, once the low-hanging fruit of the opportunity opened up by the end of apartheid’s racial privileges was gone, the limited economic prospects of those outside the elite became evident. A credible promise of upward mobility would offer a vision of hope and possibility for better lives across society as a whole, renewing perceptions as to the legitimacy of the social and economic order. (The paper details some aspects of a strategy along these lines.)
South Africa’s experience suggests four potentially useful propositions for the many countries struggling to maintain a positive social, political, and economic trajectory in the face of a declining tolerance for high or rising inequality.
The trajectory of change is a knife-edge. There is the potential to set in motion virtuous circles of positive interactions among ideas, institutions, and economic growth. At the same time, there is a substantial risk that unaddressed distributional imbalances can set in motion a cumulative downward spiral of decline.
Ideas matter—a hopeful vision of change, when combined with a “good enough” responsiveness to distributional concerns, can be sufficient to launch a positive trajectory.
Both ideas and institutions can be shields against adversity—but only up to a point. Hopeful ideas can evoke positive agency and help mobilize for collective action. Institutions can function as shock absorbers. However, both need reinforcement, including ongoing attention to festering imbalances.
Initiating a new cycle of renewal requires a set of ideas and actions which address in a “good enough” way the imbalances which had resulted in derailment.
Leadership needs to risk of mobilizing new coalitions capable of overcoming the vested interests that stymie inclusive change. Can South Africa’s leadership—and can leadership in other countries, where a similar sense of disillusion has taken hold—summon the necessary boldness to rise to this challenge?
For the authors’ presentation, and Trudi Makhaya and Dani Rodrik’s perspectives on the paper, join the co-sponsored Carnegie and Mandela School event, on April 7th or view the session (via this link) at some later time
Bureaucracies, we have learned, are embedded in politics. How, then, to strengthen public services in messy democracies? In settings where public hierarchies are weak, can participatory governance provide an alternative entry point? Recent results from a research project I have been leading on the politics and governance of basic education in South Africa suggest an intriguing answer. (The research is part of a broader, global initiative sponsored by the University of Manchester-based Effective States and Inclusive Development (ESID) programme.)
South Africa’s Eastern Cape province provides an ideal setting for exploring these questions. As the ESID approach (laid out here) underscores, two sets of variables that have a powerful influence on bureaucracies are: (i) the inherited institutional legacy, and (ii) how elites interact with one another. On both counts, as the ESID working paper, The governance of education in the Eastern Cape, by Zukiswa Kota, Monica Hendricks, Eric Matambo and Vinothan Naidoo details, the Eastern Cape scores badly. The province’s bureaucracy is a patchwork, built largely around two patronage-riven structures inherited from the apartheid era. Electorally, the ANC was dominant – but in practice it comprised an overall umbrella under which inter-elite conflict was endemic.
The combination of elite fragmentation and a personalized bureaucratic legacy left the Eastern Cape’s Department of Education (ECDoE) bedevilled by divergent and competing regional interests, organisational cultures, and patronage ties. The national government tried to intervene, and for a few years it temporarily took over administration of the ECDoE. But this did not stem the crisis. Provincial politics proved too powerful. After a few years, intervention was scaled back, having had only limited impact on the crisis.
This brings us to the question of whether, in weak governance settings, participatory governance could be an alternative entry point. The 1996 South African Schools Act delegates authority both to provinces and to school governing bodies (SGBs) in which the majority of positions are held by parents. In principle, this governance framework creates the potential for horizontal governance to serve as at least a partial institutional substitute for weaknesses in hierarchies. To explore this possibility, in a second ESID working paper (School governance in a fragmented political and bureaucratic environment), Lawule Shumane and I explored in depth how governance played out over time in four schools in the Eastern Cape’s Butterworth district. In two of the four cases, participatory school-level governance turned out to provide a useful platform for pushing back against bureaucratic dysfunction.
In the first case, the school-level institutional culture was one where all stakeholders – teachers, the SGB, the extended community – felt included. This inclusive culture provided a powerful platform for managing the recruitment of teachers (and, when the time came for leadership succession, of the school principal) in a way that assured a continuing commitment to the educational mission of the school. One interviewee illustrated how this participatory culture operated with the example of how new staff are inducted into the school’s organisational culture:
“The principal will call newly appointed staff to a meeting and introduce them to everyone. At this meeting the principal will welcome the new staff member to the team and inform them on school culture…. he will often say ‘Mr. or Ms. so and so, at this school we are a family and if we have problems we deal with them openly. If there is unrest, we will know it is you because it has never happened before’.”
The second case is more ambiguous. The principal who set in motion the school’s long decline was appointed in the late 1980s, and remained in the post for over two decades. In the latter-1990s she purchased and moved to a home in a coastal town 100 kilometres away. From then on, using one pretext or another, she was, for much of the time an absentee principal. This continued for about a decade (!!!). The school went into a downward spiral, with the number of students falling from close to 1,000 in the early 1990s, to a low of 341 in 2011.
In 2009, frustration at the principal’s continuing absence finally boiled over. A group of parents and some SGB members met, and jointly reached the view that a new principal was needed. The ECDoE district office was not supportive. In response, the parent community blockaded the school, preventing the principal from entering. The district office kept her on as a displaced teacher, reporting to the district office, until her retirement in 2010. The SGB subsequently selected as principal an internal candidate who had shown a commitment to try and make the school work during the grim period in its history. All, including the broader community, worked together to try and turn things around. Between 2011 and 2015 the number of pupils in the school rose from 347 to 547.
To be sure, these intriguing cases do not imply that horizontal governance is a panacea in the face of bureaucratic dysfunction. Two of Levy-Shumane’s case study schools seemed trapped in a low-level equilibrium of capture, centred around the principal and teaching staff in the short term, with the collusion of the school governing body and the broader community, reproduced via a captured process of principal selection – and with low morale, absenteeism by students and teachers and crumbling infrastructure the all-too-common consequences. More broadly, systematic analyses show that the impact of efforts the world over to strengthen participatory governance of schools has been mixed.
But the Eastern Cape school-level case studies offer a key insight into why evaluations yield mixed results – and what might be a way to improve the outcomes. The key differentiator among the cases is not ‘capacity’. Rather, the influence of horizontal governance on performance (for good or ill) depended on the relative influence of developmental and predatory stakeholders. Parents know whether teachers show up, and whether they bring honest effort to their work. What matters for the efficacy of participatory, school-level governance is power.
This is where active citizenship can come in. The crucial task for initiatives aimed at strengthening horizontal governance is to help empower developmental actors within SGBs, parents and the broader community – helping to build networks that link SGBs with one another as a way of sharing learning as to ‘good practices’, and potentially providing mutual support in the face of predatory pressures.
Support for school-level governance is no panacea. Children indeed gain when teachers improve their skills, and when schools are better resourced. However, trying to get these things by changing how bureaucracies work is, at best, a slow process. Bureaucracies are embedded in politics; far-reaching improvements depend on very specific, and very difficult-to-achieve, political conditions. But there also is abundant evidence that a non-hierarchical entry point for improving educational outcomes has real potential to achieve gains – not always-and-everywhere, but in some schools, some of the time. Perhaps it is time to complement ongoing efforts to strengthen hierarchy with something different.
Some new reflections on public sector governance — as part of a broader series of recent reflections on how South Africa’s discourses on public sector governance and economic policy could become more inclusive. The growing effort to transcend the sourness of current debates requires a transformation of both the intent and the content of discourse. I thought it would be useful to consolidate my three sets of reflections into a single post.
Discourses on public sector governance, in South Africa and elsewhere, illustrate powerfully the insight of behavioral psychologists that ‘framing’ matters. If our framing is inconsistent with the way things actually are, we are doomed to disappointment and unhappiness. But frame in a way that responds to reality, and opportunities abound for active, worthwhile engagement.
South Africa’s daily headlines and frustrations dispirit – from electricity blackouts, to corruption in the procurement of railway engines (including allegations that the engines purchased did not match the specifications of South Africa’s railway system); to reports that neglect of maintenance could lead to the collapse of water utilities in over half the country’s utilities; and that teaching jobs can be bought (including via threats of violence to ensure that a desired position becomes vacant).
Notwithstanding the evident challenges, might pessimism about the performance of South Africa’s public sector be overdone? Without wishing away the challenges, might there be alternative ways of framing that point towards creative entry points for strengthening public sector performance?
To answer these questions, it is helpful to disentangle two arguments that often are conflated:
that a predatory political leadership can provoke a downward spiral into disaster; and
that good governance is necessary for development.
The first argument is straightforward — and, as recent dark prophecies emphasize, all too plausible for South Africa. (I will return to it at the end of this post.) But the broader ‘good governance’ argument does not withstand scrutiny — either empirically or conceptually.
Consider first South Africa’s empirical track record. Aggregate indicators indeed show that government effectiveness in South Africa rates well below high-income countries, with substantial decline between 1996 and 2014. Even so, as shown in the accompanying table of South Africa’s comparative governance relative to other middle-income countries, as of 2014 South Africa’s government effectiveness rated at the high-end for relevant comparators — on a par with Mexico and Turkey, and well above Brazil and Thailand. In a recent paper for the DFID-funded and University of Manchester led Effective States and Inclusive Development (ESID) research programme, Alan Hirsch, Ingrid Woolard and I documented major gains between 1994 and 2010 in the provision of public services to the poorest 40 percent of the country’s population. And, to further confound the drumbeat of daily headlines, here are some recent examples of public sector effectiveness:
The successful procurement from independent power providers of well over 5,000MW of renewable (wind and solar) electricity generation capacity between 2011 and 2013, an investment of over US$15 billion, with very large declines in unit prices over four rounds of competitive bidding (e.g. for solar, from from $0.35c/kilowatt hour in the first round to under 8c/kwh in round four) – transforming South Africa from a laggard to a leader globally.
Ongoing gains in the outcomes of basic education in some provinces (e.g. the Free State), and persistent examples of high-performing public schools even in provinces (such as the Eastern Cape) where the broader environment for educational performance remains weak.
High-quality, proactive regional economic development strategies in both of South Africa’s two leading regional economic hubs – the Western Cape and Gauteng. And
Why, given these results, is the tone of the discourse so unrelievedly negative? Part of the reason is that most South Africans (whether of the political left or right) implicitly conceive of the public sector in top-down, hierarchical terms. Good leaders get the policies right, and then direct the bureaucracy to deliver. Viewed through this lens, all is either won or lost at the top of the hierarchy – ‘a fish rots from the head down’ in the reigning metaphor.
More broadly, the ‘good governance’ paradigm implicitly frames public performance as ‘all’ or ‘nothing’, with little scope for shades of gray. However, as recent landmark contributions by Francis Fukuyama and Douglass North underscore, this pre-occupation with good governance is inconsistent both with the evidence of how results are achieved in many developing countries, and with the historical record of all contemporary high-income countries. (Note, though, that as I explore in an accompanying blog post it can, for some, have a paradoxical ideological function — a seeming embrace of ‘good governance’ can, for those on the political right, offer a marvelous opportunity for ‘crocodile tears’, for seeming to wish that government can do better, but then sorrowfully concluding that it cannot.)
Letting go of a narrowly, top-down framing of how the public sector works opens up space for identifying potential entry points for positive action that can help build a thriving, inclusive society. Developing democracies can indeed thrive – but, as a review of the track record over the past fifteen years underscores, almost everywhere the process looks very different from a ‘best practice’ vision of how hierarchy is supposed to work . Rather, in these messy settings results often come via ‘islands of effectiveness’.
Islands of effectiveness emerge when stakeholders take the initiative: from public entrepreneurs within government going to the limits of their formal mandates, and sometimes beyond, in their efforts to make a difference in peoples’ lives; from multistakeholder partnerships capable of trumping predatory pressures . (Working with the Grainexplores these processes in depth.) As a landmark study shows, this combination of public entrepreneurship and multistakeholder partnership was key to the gradual, cumulative transformation of the patronage-driven American bureaucracy of the 1880s into (by the early 1920s) a more performance-driven organization. It also has underpinned many of the positive outcomes along the lines of the South African examples listed above.
There is, however, a crucial caveat. Predatory politics and islands of effectiveness can coexist for a while, but not over the long term. Robust coalitions can resist everyday predators, but they cannot indefinitely withstand all-pervasive predation emanating from the top of the political order. Combatting that kind of predation is, ultimately, the task of politics – of the choices political parties make as to their leaders, and of how citizens respond to those choices. It is a task for activists – but it is not the only task. Even in the midst of a messy politics, there is scope for supporting the emergence of initiatives that can make a difference in peoples lives, and for celebrating gains where they are made. Approaches that throw out the baby with the bathwater may or may not be sufficient to get rid of the bathwater – but they will almost surely kill the baby.
South Africans no longer bask in the glow of the country’s ‘miracle’ of reconciliation. Great leadership can enable a society to seemingly transcend its deeply-rooted deformations. But such leadership is rare — and in its absence what comes to the surface are the underlying ways in people in a society interact. Unsurprisingly, given the country’s brutal history, what has resurfaced in South Africa is profoundly discomfiting.
Two sets of inherited deformations make the depths of the country’s challenges almost unique among middle-income countries. The first is economic – the country’s stark inequality. In a recent working paper (click here to access) for the DFID-funded and University of Manchester led Effective States and Inclusive Development (ESID) research programme, Alan Hirsch, Ingrid Woolard and I contrasted South Africa’s income distribution with that of four other middle income countries (MICs) – Brazil, Mexico, Turkey and Thailand. Compared with the other countries, South Africa has an extraordinarily steep distributional cliff within the top third of the distribution. South Africa’s citizens are either affluent or poor, with little in between. As our ESID paper explores, the steepness of this cliff is the consequence of a combination of continued concentration of wealth and income in the hands of the beneficiaries of apartheid, and a post-apartheid economy that is failing to expand opportunities for its citizenry.
Many countries around the world are grappling with high and rising inequality. Everywhere, finding solutions is daunting, In South Africa, however, inequality also interacts with a second challenge — a psychological one. I am using the term ‘psychological’ in a very specific way here — to point towards inherited patterns of thought, speech and interpersonal interaction. Steve Biko, putting it in the political language of the black consciousness movement, framed South Africa’s inherited legacy in this area as follows:
“In time we shall be in a position to bestow on South Africa the greatest possible gift – a more human face….. As a prelude, whites must be made to realize that they are only human, not superior. The same with blacks. They must also be made to realize that they are also human, not inferior…..”
In the initial glow of democratization, it might have seemed as if Biko’s vision of a ‘more human face’ was being realized. But two decades later, and in the absence of visionary leadership, South Africa’s twin deformations are feeding off one another to produce an extraordinarily sour, conflict-prone public discourse.
Prevailing policies reflect (as policies do in many places around the world) messy compromises among competing interests. Narrow, politically-connected interests are given special favor – and the result seems like something of a lowest common denominator. (The latter is especially likely given the current combination of relatively weak political leadership, and the reality that the governing African National Congress is itself an unruly coalition of divergent interests…..)
Critics of government lambast the policies and juxtapose them with their preferred alternatives – framing their discourses with claims of certainty as to the rightness of their views, and with a superior-sounding high-mindedness.
This framing is especially grating to those who confront the day-to-day necessities of wrestling with imperfect realities, and who know that the likely impact of alternative proposals is much more uncertain than protagonists claim. The criticism is all the more grating is that it comes disproportionately from white South Africans who enjoyed elite status during the apartheid years, and who frame their criticisms using seeming code words like ‘capacity’, ‘competence’ and ‘standards’……
Government and ruling party spokespeople respond with defensiveness and anger – with the latter both real (given the country’s history and interpersonal baggage), and also tactically useful as a way of deflecting attention away from some of the shortfalls in policy and implementation.
The result, at least in the short-run, is stalemate.
But with creeping economic decay confronted by rising social dissatisfaction, and fueled by an increasingly confrontational discourse, stalemate is not a sustainable equilibrium. One way or the other, stalemate WILL be broken. How? One possibility is a downward spiral of political disaster. Another is a deus ex machina of visionary new leadership. I prefer to focus on a third alternative, laid out in depth by Nobel-prize winner Elinor Ostrom.
For all of their sharp ideological disagreements, most of the current South African discourse operates out of a shared set of ‘top-down’ assumptions as to how policymaking and implementation works – politicians (taking a lead from voters) set goals; high-level technocrats help turn these general goals into detailed policy; the bureaucracy implements. Ostrom contrasts this hierarchical way of thinking with an effort 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. Building on decades of research, she identifies a set of necessary good practice design principles for collaborative governance to succeed.
Ostrom focuses narrowly on the governance of common pool resources such as fisheries, forests and irrigation systems. However, as I spell out in detail in my book Working with the Grain (published in 2014 by Oxford University Press) the applicability of her insights is far, far broader. They apply directly both to efforts (to be explored in an upcoming post) to improve public service provision, and efforts (explored in the complementary blog post accessible via this link) to accelerate private (as well as public) investment and job creation.
An Ostrom-style, working-with-the-grain vision points in a very different direction from South Africa’s usual policy discourse. Its point of departure is a recognition that for most developing democracies, the way forward is a messier one. Gains come, not from discovering some ‘magic bullet’ that will magically unlock seemingly intractable challenges, but rather through the accumulation of successes across many ‘islands of effectiveness’. And each island, depends for its success on stakeholders engaging in the hard work needed for collaboration to succeed.
This, in turn, calls for taking seriously Steve Biko’s dictum – that genuine co-operation requires us all to learn how to engage with one another as absolute equals in rights and dignity. Considered alone, each individual success may seem quite modest. But taken together, the cumulative consequences of achieving concrete development ‘wins’ – and achieving them in a way that builds on the founding spirit of South Africa’s democracy — can be far-reaching.
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.
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.