ISMAIL LAGARDIEN: The future is Asian, while SA is stuck in reveries of fallen angels

It’s a wonderful thing, really, when you read news and views from across the world and don’t rely on just those opinions that satisfy your biases, or that give rise to a type of apophenia where you see a capitalist or communist plot everywhere you look.

Earlier this week I read an opinion piece in the Financial Times by Mohamed El-Erian, a former deputy director of the IMF and now a professor at the Wharton School at the University of Pennsylvania. It’s not too much of a caricature to say he is as much part of the global capitalist elite and establishment as can be.

In his column El-Erian was rather forthright about the US central bank: “Forget all the fancy talk about neutral interest rates and output gaps. The two basic questions facing the Federal Reserve are simple to state and complex to answer: is the world’s most powerful central bank finally committed to return monetary policy to serving the real economy rather than financial markets; and can it do so in an orderly fashion?”

The real economy. That phrase stood out. Anyway, El-Erian continued: “For too long monetary policy has been essentially co-opted by markets. The phenomenon started innocently enough with central bankers’ desire to counter the damage malfunctioning markets inflict on economic wellbeing. Rather than occurring rarely with well-targeted implementation, massive liquidity injections and floored interest rates developed into a habit.”

Later in the day, on Monday, I caught up with reading from the other side of the world, starting randomly with Rangoon (in a previous incarnation I did some volunteer work among Karen refugees from the Irrawaddy area of Myanmar), then turned to the cleaning up after the devastating floods during the monsoon season in Malaysia’s Klang Valley.

I was impressed by the way the central bank, Bank Negara Malaysia (BNM), got involved in what El-Erian described as the real economy. After the devastation of the monsoon rains and floods earlier this year, BNM announced more or less R700m in financing facilities for micro and small and medium enterprises (SME) affected by the floods as part of a disaster relief effort. This year they will assist SMEs in covering the costs of repairs and/or replacement of assets for business use (such as machinery) that were damaged by the floods, and/or for working capital.

Following the evidence, and ignoring any ideological apophenia, I found that the BNM had, as a matter of policy, instructed banks around the country to assist small and medium enterprises, making sure that they take the risk of trying to manage an envisaged number of bad debts. Between 2016 and 2021 there were altogether 1,226,494 micro and small enterprises, which accounts for 97.4% of overall establishments in Malaysia.

There has been an increase of more than 140,000 such enterprises, compared to a total of 1,086,157 in 2016. This amounted to an average growth rate of 5.2% per annum during the six-year period. The Covid-19 pandemic has had a devastating effect on small business in Malaysia. Before the pandemic, in early 2020, the growth of SMEs was actually higher than that of Malaysia’s GDP.

It is impossible to ignore the role SMEs (including microenterprises) have played in the growth of East and Southeast Asian political economies. While definitions of what an SME or microenterprise is, varies from China to South Korea, Vietnam and Malaysia, the evidence is clear. East Asian SMEs have been, and continue to be, the largest source of domestic employment across all sectors — from product lines to service industries — in rural and urban areas.

SMEs are very active in some spheres, engaging in multiple product lines, small-series production and the service industry. The sector is considered a major and sustainable generator of employment and income for citizens, who do not have to rely on employment by or within the state. By doing so they have successfully charted a pathway from the periphery of the global political economy to being important players at the core.

In his book The Future is Asian: Global Order in the Twenty-First Century, Parag Khanna of the National University of Singapore recalled a question by German president Frank-Walter Steinmeier about Asia’s position in the future. He replied: “The view from Asia is that history has not ended, but returned. Asia commands most of the world’s population and economy, has catapulted into modernity, maintains stability among its key powers and has leaders who know what they have to do — and are doing it — to prepare their societies for a complex world.”

The last stop on my daily read was about noncitizens being burned to death, populists demanding a return to renaming a defunct and offensive public holiday Van Riebeeck Day, and the liberation movement still at war with itself. There was the de rigueur nostalgia for Thomas Sankara, Kwame Nkrumah, Winnie Mandela and the return to power of Zandile Gumede. It seems SA’s future has to go through its deep past and be rubber-stamped by odious types in the liberation movement.

• Lagardien, an external examiner at the Nelson Mandela School of Public Governance, has worked in the office of the chief economist of the World Bank as well as the secretariat of the National Planning Commission.