TRUDI MAKHAYA: Flawed narratives about SA’s economy have real effects
While hard economic facts are beyond dispute, assumptions, conspiracies and prejudices only make matters worse
Floris, the last of the Van Barnevelts, has a good story to tell, the satirist Herman Charles Bosman wrote.
The problem is that he mentions his opinion of the local school committee too soon. He knocks the ash out of his pipe at the wrong moment. He insists on telling that part of the story he should have left out. Bosman could have been talking about our current narrative deficits. We are Floris, compatriots. Floris is us.
But before I delve into this predicament, let’s start with the hard facts. In January, the National Planning Commission (NPC) issued a report taking stock of our country’s economic performance. The paper joins a sizeable body of work, including the comprehensive Kgalema Motlanthe-led high-level panel on the assessment of legislation and the acceleration of fundamental change, which attests to the gap between the promise of our constitution and the lived reality of most South Africans.
If anyone had thought at the fall of apartheid that SA was going to be a post-Cold War miracle economy, they would have been disabused of that notion by now. The predictions of a “peace dividend” were disappointed. The promise of a post-historical, ideology-free, market-driven global economy to lift all boats is met with scepticism even in the halls of Washington.
The National Development Plan review paper reminds us: “SA has long been trapped in low growth, low employment, high inequality and poverty. Short periods of improvement took place in the 1960s and 2000s, mostly in alignment with rising upswings in global commodity cycles. GDP per capita growth has hardly expanded over the past half a century due to its stop-start-stop nature.”
Despite all that has been said about the swelling of the middle class by black people beyond the pool of the missionary-educated elite of the past century, the reality captured in the paper is that of a small, asset-poor and fragile black middle class, with low intergenerational mobility. Lifting a nation out of poverty decisively requires a long period of sustained growth. The growth rates need not be exceedingly high; the trick is to avoid frequent reversals.
There are two main propositions that animate our discussions on the economy. There is the argument that economic policy is not radical enough. We need aggressive redistribution and activist use of instruments such as monetary policy. On the other end of the spectrum is the proposition that current economic policy, the voluminous output of our planophilia, can deliver desired outcomes. It has just never been implemented with discernible vigour or commitment.
Both propositions are wrong. The narratives — simple stories that explain events — that accompany these propositions yield more heat than light.
The empirical support for a wholly radical policy agenda is thin. For countries that enjoy some success in elements of unconventional policy, there are steep entry requirements. Foremost, to borrow from modern monetary theory doctrine, they enjoy a high degree of economic sovereignty. This is not something one declares or conjures up, it is rooted in the realities of how an economy generates growth and how it is integrated into the global economy.
Ours is a small open economy dependent on imports, including imported intermediate inputs needed by our secondary and tertiary industries in their production processes. Thus we need foreign currency; already our exchange rate is quite volatile. Our sovereign debt, even if largely rand-denominated, is held to an appreciable degree by foreign investors. Our major corporates are vulnerable to the sentiment of foreign shareholders who hold a not insignificant proportion of their debt and equity.
Successful rebels, particularly in East Asia, have contained their deviations from orthodoxy within limits. And their actions have and continue to be bolstered by high savings rates, large domestic markets and — particularly in the 1960s to 1990s — favourable geopolitics.
The school of thought that only sees poor implementation as the challenge tends to be too wedded to the diminished Washington consensus. This is especially the case with the “pursue low-hanging fruit” strain of this narrative.
Its prescripts pay too little attention to the deliberate creation of comparative advantage. It has limited appreciation of the negative effects of both corporate and state-sanctioned market power on the entry of new firms and on value-added production where inputs are monopolised. It does not see the problem with the recipe, just the cooks. But our malaise is not simply a matter of perfect policy thwarted by corruption and incompetence.
The recently adopted Economic Reconstruction and Recovery Plan attempts a healthy balance of demand and supply side measures to heal the economy from the effects of the pandemic (and pre-existing conditions) and to set it on a path of structural transformation. Many of the recommendations presented by the NPC affirm the choices made in the reconstruction and recovery plan.
This capitalises on our endowments — sustaining human capital during the crisis, maintaining and building hard and soft infrastructure, rebuilding the productive base of the economy and linking it to the vast continental market, in addition to our traditional export markets.
Predictably, in some quarters the plan is criticised as a misadventure in excessive government intervention. Yet in others it is criticised for lacking in revolutionary ambition.
The world has become impatient with SA. The hard economic facts are beyond dispute. But homo narratives that we are as a species, these facts are wrapped into crude, essentialist narratives. When we are considered at all in global platforms, we are spoken of as a nation slipping into post-liberation dysfunction. Too many South Africans aid and abet this narrative. The assumptions, conspiracies and prejudices that fuel doomsday narratives in the radical trenches or in cloistered boardrooms wear down business and consumer confidence.
In his work on “narrative economics”, Nobel laureate Robert Shiller warns us to consider “the possibility that sometimes the dominant reason a recession is severe is related to the prevalence and vividness of certain stories, not the purely economic feedback or multipliers that economists love to model”. Drawing on now popular concepts of epidemiology, Shiller discusses narratives in terms of their rates of contagion and recovery.
Do we propagate sensible narratives about our economy? To what extent have we gained immunity from the narrative apparatus of our oppressive past? In this piece, needless to say, I have added my own slant to the narrative spaghetti. My plea is for careful consideration of how our words contribute, or detract, from our economic potential.
The way forward lies in principled pragmatism. The story we should be crafting is of a country with an odious history trying the best it can to change the structure and performance of its economy. We cannot afford to indulge in contagious, harmful, self-fulfilling narratives.
• Makhaya is special economic adviser to President Cyril Ramaphosa.
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