LETTER: What is the economy?
Equating the private sector with the entire economy is wrong
President Cyril Ramaphosa has again saddled up his white horse, stating that “the economy is in the hands of white males”. A variant of this that is often heard is that “wealth” is in the hands of ... and so on. However, unless we confront two errors the debate is stillborn.
The first is that it is seldom appreciated that the state (education, health, social security, transport, power & water infrastructure and government) and the state-owned entities (SOEs) are themselves part of the economy, comprising about 40%. Equating the private sector with the entire economy is simply wrong.
The second error is equating the economy with wealth. The economy represents production or GDP. This is not the same as wealth. Wealth comprises in the main investment in houses, pension funds and shares in public and private companies. These are basically a book entry, reflecting the physical plant of a country: the manufacturing and service assets that constitute an economy. If the wealth is consumed, there is no economy.
The economy is in effect a vast set of activities comprising access to finance, the application of skills and the use of physical assets. Finance is global, amounting to about $50-trillion worldwide. This is (eagerly) available to invest anywhere, including in SA. But it cannot be simply “transferred”. Likewise, skills can be acquired (over a lifetime) but are not simply transferable.
Finally, physical assets (the least important component) can be transferred but are useless without the other two components of the economy. All three are needed to work together.
We have to understand what the economy is if we want to trans(re)form it.
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