I recently participated in a radio debate on what does Lockdown 1 regulations mean for the country’s already flatlined economy. The debate became the usual mantra of how the Ramaphosa Presidency had dropped the ball in getting the economy back on track and lacked decisiveness leadership in the way the lockdown regulations were implemented as a staggered approach. It was with bemusement that I listened to comparisons with ‘developed’ economies showing some form of resilience in attempting to get economic activity back on track and being more or less aligned visionaries in how to deal with the dire consequences of the Pandemic.
Perhaps what caught my attention more than anything else was the view that the only way that the South African economy could find a modicum of traction is if we get back to full capacity in opening the market to international travel, push manufacturing at full speed and getting economic activity to return to some level of normalcy. As I was listening to the argument being made about whether imported transmissions would be less of a threat than community based infections, or that South Africa does not have the luxury of time to get the economy to move faster than before, I began to wonder if anyone of us really understands the art of economic policy-making and what are the real economic costs of the Pandemic to the future of South Africa and, inextricably, the global economy. Cynically I left the debate more confused than before about which business models and economic frameworks should be applied in, at least, getting our economy back on track since it seemed that no matter what economic school of thought was used to consider how the South African economy can be resuscitated, economists are as much in disagreement as I am baffled.
Despite these trepidations there was an intrinsic issue that somehow got overshadowed by the default position that the neo-liberal economic framework remains a priori. Using the latter as a point of departure, the compelling question that remains an overwhelming concern is whether the economic quagmire that currently confronts South Africa (and more broadly the global economy) is inherently because there was not enough of the invisible hand of the market or it is precisely because there was too much of the invisible hand of the market that has led us to the present-day predicament of the muffled trickle-down effect. Of course, It would be unfair to lay all the blame on the ‘invisible hand’, though in the contemporary context of economic uncertainty and social justice struggles it remains significant to consider whether it can be business as usual under a ‘new economic normal’ and is it enough to just tweak a model that finds itself in a systemic crisis.
Who is right?
The challenge with the current discourse regarding when ‘to open the economy or to take a cautious approach in opening up the economy’ is that neither the proponents nor the dissenters can say with any real actuality that we can remain insulated from a second, third or fourth wave of the Pandemic and hence a more imminent and stringent second phase of lockdown measures. Both schools of thought tend to speak past each other and focus on parochial conditions as driving factors in substantiating their argument. And neither can they be accused of being wrong because inherent in both views is that we will remain vulnerable to the risks of transmission based on our behavior.
For advocates of opening up the economy the overarching raison d’ etat is that poverty, economic vulnerability and impoverished livelihoods will become more endemic causing more strain to the social development and welfare of the state. Of course the losses incurred by business whether small or big cannot be ignored.
On the other hand, those who take a more watchful perspective are equally concerned that a unfettered opening up of the economy will exacerbate an already fragile set of socio-economic conditions, leading to more pressure on the state whether it is production days lost to the direct and indirect effects of the transmission, burdening an already over-extended state capacity, that the middle class will become as vulnerable as the poor and the indigent and, more worrisome than anything, is that the multiplier effect remains entrenched in anything and everything we do.
Therefore in considering the merits of both schools of thought, it is hard not to be reminded of the chicken and egg question. But, perhaps the paradox is not so much about which school of thought should take precedence. Rather it is in axiom that we are doomed if we do and we are doomed if we don’t due to the complex nature of the South African economy being a dual one that is primarily labour intensive in character and that the shift towards the fourth industrial revolution will entail what Danny Rodrik defines as the Paradox of Globalisation or put more succinctly those that will get left behind.
Unfortunately for South Africa following the conventional wisdom of economic policy making and playing to the theatre of an orthodox free market system only proved to be as valuable as it was for its historical moment. And now we see the price that had to be paid for not being creative and innovative in the choices that could have been made in adapting and implementing some of the recommendations made by the Macro Economic Research Group (MERG) that was formed in the early 1990s. Established to advise on economic planning based on the pivot of ‘growth through redistribution’ the focus of the Group was underpinned by a developmentalist economic programme that was aimed at alleviating social exclusion, enhancing prosperity for all and enabling access to at least a decent life supported by a sustainable material livelihood.
The Paradox of a New Economic Normal
So it is bewildering to listen to economic pundits and even at times those in government talk about South Africa’s economic recovery as if the past historical context existed in a vacuum or did not exist at all. This got me thinking of a persuasive article that I read by Habib and Padayachee called ‘Economic Policy and Power Relations in South Africa’s Transition to Democracy’ published in World Development (2000: Vol. 28 No. 2).
In their argument Habib and Padayachee highlighted the following critical issues that has informed the economic landscape in our country today:
That the shift in the ruling party’s, the African National Congress (ANC), economic posturing ‘was as a result of the ANC’s perception of the balance of economic and political power at both the global and local level’ (pg. 245).
That a critical ‘feature of the economic policy formulation process in [the] early phase of South Africa’s transition to democracy [that] is worthy of mention [was] namely the total disjuncture between the economic and political negotiations machinery of the ANC led-alliance’ (pg. 250).
That the transition and performance of the economy from the Reconstruction and Development Prgogramme (RDP) to the adoption of the neoliberal policy of Growth Employment and Redistribution (GEAR) was varied and patchy at least and created winners and losers.
That the narrow of group of insiders comprised of ‘conglomerate (white) business, the aspirant black bourgeoisie and black professionals, which saw white capital [become beneficiaries] from tax concessions, the lowering levels of inflation,’[taking advantage of ‘liberalized exchange controls’, and ‘the opening up of new export markets in Africa and Asia. For the aspiring black bourgeoisie class [they benefited from] the privatization of public enterprises, the voluntary assets swaps from domestic white companies and from the partnerships established with foreign investors [while] black professionals benefited from more opening up of employment practices as companies scamble[d] to fulfill affirmation actions quotas’ (pg. 258).
That the insiders constituted a ‘minority of the population while ‘the outsiders’, the vast majority of the population who are mainly black are mainly excluded from economic benefits of the transition’ (pg. 258-259).
Perhaps the most profound point that Habib and Padayachee leave readers with are the words of Emma Makhaza speaking at the 1998 poverty hearings hosted by a group of civil society organisations:
I am having seven children and nothing to depend on. I am making bricks and sometimes it rains and then I can’t do it. And I collect food and take it to people. I fetch wood and collect cans of cold drink and sell them. When I am without food then I go next door and if they don’t have then the children will have empty stomachs and I cry. Yesterday I left with my children fast asleep because they will ask what are we going to eat. I am very thin because when I bought a bucket of mielie meal, I won’t eat at all of I am thinking of the children. They say: Mum you are going to die (The People’s Voices, 1998, pg. 17 cited in Habib and Padayachee pg. 259).
The stark reality of the world that Emma Makhaza occupied in 1998 has become the contemporary wrenching existence of most South Africans defined by their underclass status. More than two decades later, and while it remains unclear what has become of Emma Makhaza, the graphic circumstances that characterised her daily struggles is the normal for many living on the fringes of the democratic transition. It is with this in mind that it cannot be that a new economic normal can continue to be the business of business is business. The contradictions in assuming that the same model can contribute to efforts in either lifting people of poverty or alleviating economic marginalization, enabling conditions for inclusion, and providing a ‘better life for all’ has become what the esteemed Susan Strange described as casino capitalism.
Unfortunately, the structural conditions of our country are such that that even where there are attempts to reorient the approach towards a ‘caring economy’, this does not erase the historical legacy that has been dealt to the majority of South Africa’s dispossessed. For Emma Makhaza’s children they have become what could be described as a reflective interpretation of Prof. Guy Standing analysis of the “Precariat’ class.
In South Africa this majority of the class structure are born in the post 1994 period, live in continual deprivation, have watched their parents work grueling hours in often degrading conditions who make inordinate sacrifices with little to show, endure the systemic risks of structural based violence, face the ever present dangers of being caught in the cross-hairs of gangsterism and drug trafficking all the while bearing the brunt of an undignified life. It is this millennial generation of ‘born frees’ who have watched their parents’ adulterated suffering that are neither defined by their loyalty to an anti-apartheid that has not changed their material future nor are they willing to wait any longer for the trickle-down effect, especially when there is not even a drip of water out of the taps or respectable sanitation.
As the month of September comes to an end, so too does our celebration of the diverse heritage that underlines this land. A heritage that should be bestowed to future generations is one of a dignified life. In the current circumstances of South Africa’s economic crossroads it may be bold to follow less of an imported model of economic policy making. Instead and just like the intervention in limiting the rate of imported infections it could be the right time to revisit the documentation and reports of the MERG panel to gauge how the balance of power between the state and the market (including domestic and global capital actors) could be reconfigured in light of the fact that these are uncertain economic times. As much as the trust deficit with government will have a significant impact in defining whether there can be real traction for a ruling party that finds itself in its own existential crisis to pursue a recalibration of the national economic framework, neither can the business community claim any kudos given that their own viability is caught in the headwinds of where the next profit windfall will come from, notwithstanding that their accountability has remained muted when it comes to corporate responsibility (think of Steinhoff or even the culprits of the 2007/2008 financial crisis). For now as much as the status quo will remain as is, bubbling under is a restless Precariat that will not be contained and should only be ignored at one’s peril.
Sanusha Naidu is a senior research associate based with the Institute for Global Dialogue. The views expressed are personal.