EDITORIAL: Malusi Gigaba picks a destructive path
New economic adviser Christopher Malikane’s ideas are rooted in Marxist voodoo economics
What can one say about Finance Minister Malusi Gigaba’s new choice of economic adviser, Christopher Malikane, other than to throw up one’s hands in despair? Malikane has set out his stall in an eight-page summation of his ideas published in various newspapers at the weekend. His ideas are rooted in Marxist voodoo economics.
For a finance minister to be taking advice from one with such outmoded and unorthodox ideas puts SA on the path towards such economic disasters as Zimbabwe and Venezuela. Doing so is an act of grotesque irresponsibility.
There is, of course, a legitimate debate about the pace and nature of transformation in SA. Nobody can or should deny that SA remains a racially skewed society — hardly a surprise given its history.
However, SA has been steadily tackling this problem with extraordinary success over the past two decades. SA’s black middle class is now numerically larger than its white middle class. Notwithstanding the repeated misinformation on the topic by no less a person than the president of the country, according to the latest available accurate data, black South Africans directly own just slightly less than white South Africans of the JSE. Indirectly – in other words, via pension funds – black South Africans own more of the JSE than whites. That proportion will increase as the wealth of black South Africans improves.
This is hardly a surprise; successive ANC governments have been active in supporting transformation, and the fruits of this policy have been impressive, even given the huge scale of the problem. Yet transformation cannot meaningfully take place in an economy that is not growing. There is hardly an economist on the planet who does not recognise that forced, large-scale redistribution is a destructive and self-defeating policy that leads to economic disaster not only for those from whom the property is stolen, but also those to whom it is notionally given.
Yet the necessity for economic growth is not even mentioned in passing in Malikane’s diatribe. In place of growth, Malikane, like most Marxists, sees only "wars" between "classes", which cynically he sees as a positive that can be used to the advantage of "progressive forces".
It’s a depressing viewpoint, and one that all the world’s major economies including those that once tried to act on its precepts, have rejected, although not before it destroyed millions of lives.
Contrast that approach with the basic precept of conventional economics: that using market systems to balance supply and demand tends over the long run to enrich all sides. Trade in products, labour and skills is not a zero-sum game: it leads to prosperity by enhancing trust, mutual interdependence and economic stability.
Except in the rarefied world of Marxist academics, this is not a polemical point. Nobody from the left, the right or the centre of economics would seriously dispute this basic proposition.
Specifically, Malikane proposes the nationalisation of banks, mines, the Reserve Bank and "white" land to solve the crucial issue of "white monopoly capitalism". That hoary old "solution". Obviously, doing so would destroy the country’s economy — not to mention that the finance minister’s economic adviser is proposing measures that are prohibited by the Constitution in the format proposed.
But then, to top it all, with a sweep of his imperial hand, Malikane says the state should be providing free education, healthcare, better houses and infrastructure, affordable public transport and affordable basic services.
One asks, with tears in one’s eyes, with what? Having destroyed the country’s ability to accumulate capital, how on earth are these services going to be paid for? On that subject, there is, unsurprisingly, no prescript.
Malikane is, of course, entitled to his views, however dangerous they might be for South Africans both black and white. But what Gigaba has done is confirm the fears of orthodox economists, from China to Mexico, that he does not really intend to prevent the slide into deep junk status. Quite the opposite: he intends being an agent in its decline.