Fixating on growth could subvert prospects of long-term prosperity
Systemic shift is occurring globally as old model of large-scale industrialisation is unable to produce the goods
The recession has come as a cold shower to policy makers and their economic advisers, but only because they decided to ignore the facts. Whether they chose so out of expediency or sheer ignorance, I don’t know. About five years ago, I started writing about SA’s myopic approach to economic growth, predicting GDP would contract annually, leading to a recession in the middle of 2017.
Every single year, I diligently produced my projections of future growth, which parted significantly from the optimistic data published by the Reserve Bank and even from the less benevolent estimates of the World Bank. I was right, they were not.
No doubt our leaders are responsible for the current contraction, but the root causes go beyond SA.
A systemic shift is occurring globally, with the old model of large-scale industrialisation unable to produce growth almost anywhere. European economies are stagnant and so has been Japan for a few decades. China has more than halved its growth expectations, while Brazil and Russia have been in prolonged recessions for years, in line with my 2012 predictions most Brics countries would soon face serious crunches.
Even Africa, which was until recently heralded as the "rising" continent, is experiencing severe downturns. Take Nigeria, which was celebrated as the continent’s economic miracle. In 2013, I had already indicated the country’s development "success" would be short-lived based on extensive exploitation of natural systems and local communities.
As the IMF suggests, the world might have entered a "secular stagnation". The US has been partly shielded from this trend because of its dominant currency position, a critical advantage in times of quantitative easing, and because of the expansive policies of the Obama administration. Although President Donald Trump presents himself as the "growth" president, he will probably achieve the opposite: his reckless policies will undermine the gains of the past, collapsing job creation in the more dynamic sectors of the economy in an effort to resuscitate moribund fossil fuel industries.
Factoring in the possibility of a new financial crisis — which some see already brewing in the US, but I dare bet it will be China that brings the global economy down this time — it becomes clear the world is in for a bumpy ride.
Over the past few years, I have learnt a thing or two about development, especially sustainable and equitable development. Above all, I have learnt the obsession with growth may have disastrous consequences for long-term prosperity.
Not only does this obsession make people blind to the environmental and social costs of conventional industrialisation, but it ultimately weakens the economy itself, undermining future growth. It’s a suicidal strategy, which SA perfectly embodies.
As I describe in my new book, Wellbeing Economy: Success in a World Without Growth, a low-growth future need not be grim and hopeless. Actually, it could prove to be the much-needed window of opportunity for "real" economic transformation, not just rhetoric. A focus on wellbeing means a different model of industrialisation, supporting companies that have a positive effect on society and nature.
It means strengthening small businesses and fostering local economies by training people in jobs that add real value to communities. It also means empowering citizens by better distributing resources and opportunities.
The obsession with growth has made the world fans of big things: large industries, shopping malls and energy conglomerates, which are encouraged with benevolent regulations and subsidies paid by taxpayers.
Simultaneously, there is a shrinking population of small and microenterprises, which struggle to stay afloat amid regulatory obstacles and lack of support. The time has come to level the playing field.
What is needed is a no-subsidy policy and a system of full-cost accounting, whereby companies must be held accountable for impacts on nature and society. This will make small businesses more competitive, because their production is generally less destructive and better attuned to local needs.
It will also generate incentives for conventional industries to change. Belgium-based Umicore has shifted from conventional mining to recycling e-waste, having realised that there are more precious metals and minerals in disposed cellphones, TVs and computers than underground. Why can’t the country’s mining industry do the same, perhaps in collaboration with thousands of artisanal miners turned e-waste collectors?
There should be fewer malls, which favour large distribution, exclude the poor and marginalise small businesses anyway. More local markets should be established that are inclusive and diverse.
Rather than pumping money into a colander such as Eskom, which provides highly polluting, inefficient energy, micro-grids and off-the-grid schemes should be supported. It is paradoxical that the country is still burning coal and diesel to power homes, when it has such an incredible exposure to sunlight.
What SA does not want is for billions to be dumped on gigantic nuclear plants, which are just as centralised as coal power and constitute a huge hazard not only for citizens, but for generations to come as their deadly waste will hang around for centuries. What the country wants are cheap solar heaters and photovoltaic panels on each rooftop. Distributed energy means power, real power: the best form of political "empowerment", which makes all communities autonomous and self-reliant.
It also needs to be realised there are many ways to make a positive contribution to the economy that also include informal work, volunteering and community activism.
All these processes increase social cohesion, thus reducing the risk of marginalisation and poverty and resulting in a bonus for the economy and for the public revenues of the state. No country has ever succeeded economically without healthy communities.
If SA is serious about long-term prosperity, it needs to build strong local economies, driven by highly qualified artisans and small farmers.
Indeed, automation is making assembly lines and commercial agriculture interested in human workers. There is no way SA will ever generate the many jobs its politicians have been promising through large-scale industrialisation.
The future of development is about shifting from mass production to customisation, which means a closer relationship between producers and consumers at the local level, aided by a fusion of new manufacturing technology and traditional knowledge. We need better mechanics, electricians, plumbers, farmers, gardeners, teachers, nurses, therapists, doctors and caregivers, and fewer bankers, lawyers and CEOs.
Concrete is useful, but efficient infrastructure is already provided by nature, free of charge. Wetlands are better at purifying water and reducing the risk of floods than sewerage plants and retaining walls. Rivers and aquifers are better at irrigating than pipes and tanks. Worms and bees are better at fertilising than chemicals.
There is much to be learnt from ecosystems, even when built infrastructure are planned.
Thousands of jobs could be created for the protection and promotion of ecosystems, rather than for their destruction, as so often happens in the quest for growth.
Focusing on wellbeing requires less money than pompous growth plans.
It means having a more balanced economy that optimises resources rather than maximising short-term profits.
Ultimately, it should achieve growth too, but quality growth.
- Fioramonti is the author of Wellbeing Economy: Success in a World Without Growth.