Ditch Redistribution 2.0 in favour of overarching poverty reduction policy
Politicians are choosing the expedient populist route ahead of the election instead of tackling the root problem
The run-up to the election should be disentangling how SA’s political and economic woes reinforce each other. Political parties should be fiercely competing to best frame the issues and provide solutions. Instead, policy debates remain inconsequential. With policy shortfalls set to compound, conscientious citizens must develop their voices to buttress their voting.
The ANC’s covenant with its constituents presumes universal economic freedom will follow universal political freedom. While this was always going to involve considerable redistribution, over-reliance on redistribution has sabotaged growth prospects to the point where poverty and debt traps have been tripped. Cleaning up corruption is insufficient to fix this.
Prior to 1994 policies restricting access to opportunities and resources made poverty nearly ubiquitous among blacks. Policy reversals then led to black poverty bottoming out several years ago at about 60%. It is now near two-thirds, reflecting post-1994 policy remedies having been exhausted. The government’s recent response — legislation to expropriate property without compensation, perhaps to be followed by prescribed assets — signals a politically expedient but economically reckless “Redistribution 2.0”.
Redistribution can speed up transformation or temporarily mitigate the damage of policies that hobble progress. Per capita income has stagnated for a decade, with the future trajectory limited to minimal improvement. Promoting a basket of objectives, wrapped within us-versus-them packaging, blurs accountability. Incessant corruption revelations further distract. As SA’s politics have been on a twisting roller-coaster for more than 30 years, the objectivity to navigate the politics-versus-economics trade-offs has been sapped.
Credit deterioration, budget disappointments and feeble growth are feeding on one another, thus tightening funding options. Prevailing redistribution paths have been exhausted and now globally sacrosanct lines are being breached. It is no coincidence that political interests are organised ineffectively and that policy-making and co-operation are both suffering. Now, as populist pressures percolate, the governing party further embraces growth-defeating policies.
Plan B begins with demonstrating why one objective must be prioritised above all others. Instead, accountability is evaded as the ANC’s wish list of objectives shapes the election landscape. This enthuses campaign audiences and alliance partners while undercutting scope for needed policy reforms.
As just tweaking the status quo would tempt dire consequences, it is crucial to set the stage for prudent post-election policy pivots. Current prospects for appropriate policy shifts after the election are grim.
Whereas other democracies are threatened by “fake news”, SA is imperilled by “false beliefs”. Social media and media houses must react to the policy-light election process by unpacking these false beliefs. Done diligently, this will reveal how broad prosperity can be achieved. As mainstream media houses are more tethered to political events during elections, social media’s nimbleness can lift SA’s political-economic dialogue.
The required policy shifts are not difficult to discern once several broadly held false beliefs are expunged. Such purging by diverse media efforts, combined with having a workable plan that has survived wide public scrutiny, should greatly improve the post-election policy environment for necessary changes. The key early milestone on the path to escaping today’s political-economic doom loop is framing poverty reduction as the overriding priority.
The ANC’s laundry list of “priorities” spans equality, jobs, investments, growth, redistribution and land. While each of these issues is important, the path to broad economic and political wellbeing begins with subordinating all of them to tackling poverty. As the election process isn’t inciting such awareness, alert citizens must interrogate, prioritise and frame key issues in forums that transcend campaign rhetoric to surface solutions.
Prioritising inequality is politically alluring but strategically unworkable. SA must reduce inequality by pummeling poverty. As a large majority of countries have successfully prosecuted poverty, SA can import and adapt proven policy blueprints. Conversely, as the global economy is being reshaped by continuous disruptions, there are no importable blueprints to tamp inequality.
The government creating jobs, in the absence of a powerful long-term plan, is a winner politically yet economically destructive. If the government, amid weak growth, mobilises funding to create, say, 200,000 jobs in 2020, the total number of jobs could still decline. The already flat-ish long-term trajectory of total jobs would surely decline.
The world is flush with money looking for good investments. Investors’ disinclination to commit to SA reflects the country’s bad policy choices alongside the lack of a credible plan. A well-designed plan, competently executed, would provoke profound investment flows.
While high growth is a huge plus, political forces understandably prioritise “inclusive growth”. This precludes a growth-focused strategy as policy trade-offs between inclusion and growth remain elusive. Something similar has happened with defining “jobs” versus “decent jobs”. The gap between growth and “inclusive growth” is tougher still for policymakers as it is rife with economic, social and ideological quagmires.
Given the injustices of the past, a deep redistribution reflex is to be expected. Importantly, however, the overindulging of this reflex has induced the country’s grim prospects. Now, the “expropriation without compensation” gateway is seen as SA’s road to perdition. While there is scope to responsibly make more land and farming equipment available, vigorously embracing this path refutes how the world has ravaged poverty. Consider that communist China, which has enshrined property rights, is moving to driverless tractors.
Once poverty reduction is acknowledged as the overarching priority, SA’s disconnects will surrender to problem-solving. As nearly all SA’s poor are black, this would advance unity through competently tackling racial inequality. An overarching goal is also consistent with evidence-based analysis, which a laundry list of priorities dodges.
But won’t focusing on poverty reduction further empower the populists? No. We are huddled together on a sinking ship with no plan. Of course the most vulnerable, who constitute a majority, want a better deal. But they aren’t the problem — it is the policies that constrain them. The underlying disconnect is the conflating of two false narratives: that a workable plan doesn’t require disciplined framing and that there is a redistribution backstop.
The more affluent must appreciate that they will benefit greatly from poverty being sharply reduced. Politicians and policymakers must likewise accept the recklessness of excessive reliance on redistribution.
Redistribution will never deliver broad prosperity as domestic purchasing power is grossly insufficient to sustain adequate growth. Overburdening emerging households with expensive debt has greatly exacerbated this central policy error. Thus SA’s policies were always destined to trigger debt and poverty traps. Corruption hurried the outcome while distracting from misconceived policy choices.
Once it is widely understood how focusing on overcoming poverty can unleash a powerful growth plan, unmasking harmful policies — as with exposing corruption — should create its own momentum. Providing a workable set of solutions will arm well-meaning, yet economically inept politicians with a good enough toolkit to see off those who are happy to feed on the carcass of a rotting economy.
Ousting corrupt officials will, however, deliver a false dawn if false beliefs aren’t also outed. Media houses can only cover so much. Citizens must spark change. Social media and other less formal networks can greatly advance the national dialogue.
SA’s more attuned voters, whether young or old, must understand how most countries have devastated poverty. Spotlighting false beliefs will then reveal local solutions.
• Hagedorn (@shawnhagedorn) is an independent strategy adviser.