The neoliberal economic option, in conjunction with a liberal-democratic political practice, appears to have been the direction in which the ANC government under the leadership of Thabo Mbeki has been going for some time. In my own view, this is probably the reason why, judging by the nominations of candidates for leadership positions within the ANC, there has been a shift away from support for Mbeki to a show of preference for Jacob Zuma.
The relation between politics and economics is a complex one, in so far as the two domains can never be completely disentangled, and therefore sweeping statements about causal effects on the one by events in the other domain should be avoided.
However, if it is indeed the case — as it seems to be — that Mbeki has alienated himself from certain elements within the ANC and its alliance partners, I would wager that the reasons for this are intimately bound up with the failure of his neoliberal economic and liberal democratic, as opposed to social democratic, practices to address the needs and aspirations of the poor, as well as those of the more social-democratically (including socialistically) inclined people in the organisation effectively.
The switch from RDP to Gear in 1996 signalled precisely Mbeki’s interest in prioritising “growth” over “redistribution”, which could be read as a symbolic indication of putting economic growth before the needs of the people. The question is: What kind of economic growth? It is important to remember, here, that neoliberal economic practices — ultimately going back to what Adam Smith proposed in 1776 in The Wealth of Nations — promote individual enrichment rather than the shared economic prosperity of communities, and as such goes against the grain of the African communitarian spirit implied by ubuntu.
I am well aware that the extension of social grants across a broad spectrum over the past few years is an attempt (and a welcome one at that) by the Mbeki-led government to address precisely the needs of the extremely poor in the country, but evidently it has not been sufficient in the opinion of many within the ANC and, more obviously, its two alliance partners.
Closely related to this, what William Gumede (in his book Thabo Mbeki and the Battle for the Soul of the ANC) has exposed as Mbeki’s “top-down” modus operandi, probably does not sit well with those party members who would like to see a return to a more democratic practice where the flow of decision-making is reversed.
Whatever may happen in the course of the ANC leadership contest, however, in light of the fact that it is likely to continue being the governing party after the next general election, it would do itself, as well as the people of South Africa, a favour by giving serious thought to the desirability of a shift of emphasis in the direction of a social-democratic model of government that is able to address the persisting economic inequalities without chasing even more people out of the country.
Just as the aim of the welfare state worldwide has always been to eradicate poverty and suffering by way of a public policy that combines economic growth and equitable distribution of wealth, no South African government could afford to deviate from this goal. But whether it is attainable by the political and economic means chosen by the Mbeki-government is, I would argue, very dubious indeed.
To those who would disagree with me on this, and point to the United States as instantiating the preferred economic and governmental model, I would respond by referring to the Nordic countries — especially Norway — as the embodiments of a salutary political and economic system. Salutary, because they combine the generation of wealth with a policy of social equality that is not limited to equitable economic distribution, but extends to the cultivation, from an early age, of an ethos of egalitarianism among their citizens.
This is manifested in the absence, in these countries, of stark or unbridgeable income gaps among citizens, and in a willingness to serve the public directly and personally on the part of political office-bearers up to ministerial level. And yet, these countries boast what counts as among the highest per capita incomes in the world. Norway and Sweden are usually among the top five countries on the United Nations Development Index, which measures things such as literacy and numeracy rates (virtually 100% in these nations), income levels, healthcare availability and crime.
Compare this with the glaring disparities in income levels in South Africa, and it should be no surprise that people are likely to shift their support in the direction of leaders who are perceived, rightly or wrongly, as representing the interests of the poor and, moreover, seem to hold out the promise (again, rightly or wrongly) of a more democratic leadership style.
Dear Bert
You are living in philosophical clound cuckoo land.
1. What do you mean by neo-liberal – it’s one of those overused and abused words like globalisation. Can you be specific? Like what of GEAR had what causal effect? I think you being vague and imprecise.
2. Norway and Sweden are no comparison – simply because they do not have our profile as a country. The comparison is disingenious. You are dealing with smaller populations and more homogeneous societies and not a history in which there has been such a divide on the basis of race and class. I like it when people compare bananas to grapefruit…just completely erroneous logic.
3. Adam Smith is not the founder of neo-liberalism. If, you read his texts on Moral Sentiments and his subsequent book on economics you will find a very different Smith to how free-marketeers have used him. Smith was in effect interested in free trade in so far it broke the back of monopolist and profiteers. He was epsecially condemning of the East India Company. I can give you a whole lot more lucidations of Smith. I love it when people get him so wrong and people still continue because they do lazy to study his works properly.
I think Prof Olivier you are taking a big chance in your generalisations you need to do more homework.
1. There was no “switch from RDP to Gear in 1996″! It is the RDP itself that mandated the development a macroeconomic strategy in order to pull the South African economy out of the doldrums it was in at that time, and to generate higher levels of growth. It was the RDP itself that noted that “the existing (1994) ratios of the deficit, borrowing and taxation to GNP [Gross National Product] are part of our macro-economic problem. In meeting the financing needs of the RDP and retaining macro stability during its implementation, particular attention will be paid to these ratios. The emphasis will be on ensuring a growing GDP, improved revenue recovery, and more effective expenditure in order to make more resources available. In the process of raising new funds and applying them, the (macro-economic) ratios mentioned above must be taken into account.”
2. There has been no evidence to substantiate this “top-down” modus operandi”, and there has been no explanation of what is meant practically by “a return to a more democratic practice where the flow of decision-making is reversed.” Government implements ANC policies, and as far as I know there there isn’t a single decision taken at government level which is outside of what the ANC proscribes. I challenge you to name just one!
Hey Prof – You’re going to have us all arguing…
South Africa is not like either the US or the Nordic states. I’ll leave that to others to argue though.
The world economy has grown between five, five and a half percent annually for quite a few years now. The South African economy has done much worse and can’t even sustain four and a half percent at our best. In a global economy, please explain how a resource rich, emerging market (where the growth should be taking place) can be lauded for our growth when we’ve performed so poorly?
Hey guy – we’re not University Students (I was one aged 49 and many of the lecturers learned to hate my questions)
Prof, interesting, analogy between neo-liberalism, and and a liberal constititution. But, what happened after GEAR is the more interesting question, that you do not analyse. BTW, after learning Adam Smith at university from profs I have actually read him -and he is a much more complicated and empathic thinker than he is made out to be. The roots of neo-liberalism lie elswhere.
Ok, here is the deal with the shift away from Mbeki. I’m gonna make it simple and go vewy vewy slow as to make you understand… k?
1. Mbeki is intelligent –> meaning –> he thinks with his head and understands that thinking with heart not always good.
2. He promotes ideas of people who has ideas –> meaning –> he does not take into consideration ideas of people who think that there is simple answers (i think the media refers to this as autocratic) –> meaning –> a lot of people upset cause they don’t have good solutions and cross cause Mbeki does not pander to ‘really cool sounding stuff’ that is in reality, ‘not very cool’. People actually die because of ‘really cool sounding stuff’.
3. In economics, people are taught that if you take R5 and give a rand to five people to live for a year, then there is nothing next year –> meaning –> everybody starves and dies (not very cool).
4. In economics, people are taught that you should take R2 of the five rand and invest it so that it can turn into R15 over the next year. People should live of R3 if they not want to starve and die. If done like this, people never starve and die and may even have R5 for everyone (cool).
End of lesson. Maybe next time, you can also be a big clever boy.
Yo Prof I’m in agreement with most of the other commentators so far.
You obviously missed PJ o Roarke’s entertaining take on Sweden’s failure to capitalise on its own growth potential through the opportunity cost effect of stifling growth opportunities in the interests of social fairness.
Thus you equally seemed to miss the idea that liberal economic theory [whatever that is] is predicated on the concept of: from each according to his/her best capability to each according to his/her best contribution.
The core problem with Mbeki’s economic philosophy is that it attempts to graft graft onto merit and the outcome is less growth than we would like and more corruption than we need.
In other words the politically correct philosopy of BEE results in the large scale unpacking of value in our economy without a concomitant increase in productive output: This point was made years ago by the President’s brother no less..
In other words we get 7.5% inflation [or devaluation of capital value if you prefer] but only 4% economic growth.
In other words the country’s economy is currently shrinking because there are too many worthy causes being served that are not working hard enough to pay for their beneficiation.
This in a nutshell is the essence of Mbeki’s problem and like Malaysia’s freeloading system we too shall hit the ceiling of low performance clashing with rising costs, if we haven’t already done so..
All the focus on Neo Liberal economics which is entirely warranted is masking of the fact that the political and social manifestations are horrific what connects BEE elites. Hijackers. Fraudsters and liver stealers rapists child molesters etc is the neo liberal mindset. The New African is a neo liberal african. This runs contrary to the struggle culture. What to do? Reconstruct a new african that asks not what can my nation an for me but what can i do for my nation. Can we negate neo liberalism yes only he we rediscover the intellectual traditions of where we cogni from. On surface changing leaders is of little consequence as they both drink from the same neo liberal well. Put neo liberalism in the African context of scarcity and you open the door to Fascism . . . Post colonial african style.
Hey Bond
We have had growth since 1994 – unprecedented. The thing is what led to the growth. Clearly, fiscal austerity measures stabilised conditions and secondly improving tax collection led to significant capital accumulation which was used to stimulate growth. But some would argue we had a jobless growth – bar perhaps a increase in job creation in new service sectors. But in general in the traditional sectors like agriculture, mining and manufacturing there has been no growth in jobs and stagnation. Our growth has been a result of a general growth in demand for commodities mainly from the emerging economies. We are benefitting from this boom. But commodity growth in the long-term is a bane if you do build from it stronger capacity for manufacturing – manufacturing in turn stimulates entrepreneurship and innovation. We now have belated industrial policy that tries to do that.
Secondly, the traditional white middle class has been buffered with more numbers with a growth in the numbers of the black Middle class. This middle class is valued has having a spending capacity of R160 bn are beneficiaries of AA, BEE and other transformative mechanisms engineered by the state. Which comes to my second point that the boom is also stimulated by consumption. We also have consumptive demand for SA goods from the rich in the rest of Africa. JHB’s annual turnover the CBD alone is valued at R17 bn from African trade alone.
Both the commodity and consumer booms are bubbles -they don’t last forever. The question is if we see a decline in demand and reduction in consumtiopn – with lots of debt repayments that usually will have to be honored- what next for the economy?
We are not building a true economy with a solid base- meaning we lack true entrepreneurship, innovation and skills development that will sustain our economies beyond the illusory booms of commodity and consumption led growth. Industrial policy is key and has always shown itself as providing a better foundation for an economy – it’s relies on true strengths: skills, ingenuity, and organization and not the lottery or luck that comes from the good times of the market. However, this being said Africa is likely to see growth for another 5 years so say the World Bank in their annual outlook on the global economy.
Prof. Hassen is right Smith is much more complicated but he is firstly a great moral philosopher who was a contemporary of Hume and shared much of Hume’s liberal thinking. Smith sought to replace a religious moral worldview with a secular moral worldview hence his book Theory of Moral Sentiments has to be read in conjunction with the Wealth of Nations. So, Prof one can’t be lazy about these things he is a far too important man to leave to flimsy reading.
You should read both and don’t read secondary sources they just bunch of distorters and liers – mangling Smith work entirely.
John Savaga, I am very far from being a Prof. I am still a student, and do not currently have any aspirations to work at a university. I came across an alternative reading of Adam Smith by reading Amartya Sen – who is one of the most signiifcant contemporary intellectual. I was first very miffed at Sen, but reading even the Wealth of Nations, there is a much more complicated picture of Adam Smith. The roots of neo-liberalism lies in the New Right. And its intellectual roots are in Hayek and Freidman.
Our simple problem is a lack of skills. The ANC chose to burn books and schools during the struggle and now we lack the skills base to grow. It will take at least 1 generation to get the skills level up to where we can compete internationally.
But, my Lord, the peasants grow restless.
Dear Ebrahim – Sen is a good man. His not a radical economist like I would like him to be. But he did lay the groundwork I think for thinking differently of development and the role of the state without a radical overhaul of capitalism. His rights based approach provides a different framework to the Asian model of the developmental state. I prefer the works of Veblen.
In fact, my fellow economist, Sen’s wife Emma wrote the most seminal piece on Smith. That’s where Sen gets his stuff from. You should read her book. Neo-liberalism starts with Mill – well the seeds of it. You know Mill worked for the East India Co, so did Malthus. Mill’s father wrote a whole history on the East India Co and India. Mill’s liberal views on economics was greatly influence by the 20 odd years is spent as clark in the east india co. Much of the private sector thinking was seeded at this time and then of course developed into a full orthodoxy by Hayek and Friedman. A study of the rise of the corporation – it’s history will tell you a lot about the later developments of neo-liberals. Then there is also Schumpeter. Friedman in particular succeeded because his views were taken very seriously and implemented by the neo-liberal state – from the days of Thatcher to Reagan and so on. Of course they all being proven wrong. This whole subprime debacle is still to see the end of its day
John Savaga, Yes I know that Sen’s wife has written on Smith. I like Sen for the reason that his ideas have been central to bringing inequality out of the cold, and has given all these trasendental types a bloody nose. Veblen, i gotta read. I have read some of the recent institutional economists, but sometimes the foundations are more enlightening.
Hey Savage (That sounds a lot better than Hey Bond!!!)
I agree with everything you’ve written here, and most places elsewhere on Thought Leader except the REAL GROWTH issue. Please redirect me to a site, a reputable site showing a year’s growth that is greater than half the average for Resource Rich Emerging Economies.
Or if you can’t do that, show me one set of statistics where we have equalled the average growth of the world economy.
Continuously talking about unprecedented growth when the world is growing so much faster is very dangerous. We rest on our laurels.
I am reminded of meeting a Ugandan Minister in about 2000. I congratulated him on Uganda’s twelve and a half percent growth in the previous year. His amusing comment was “Yes it was good but twelve and a half percent of nothing is still nothing…” He then gave me an interesting discussion on how a country cannot afford to slip in the world economy because it is so difficult to catch up.
Oh and I was around when the 65/69 boom took place (9 to 15% annually) – Did you say something about unprecedented growth…
I like Hey Bond! Has a ring to it. Maybe I am thinking of James Bond.
No I was not comparing SA to world growth. I was comparing SA growth to our own growth pre-1994 – there was definite stagnation in the economy from 1980-1995.It was Swaart Gevaar time. I am also wondering what is the point you trying to make with the comparison to world growth – we a long way from achieving those scales.
My view is that infrastructure led growth must be built on ‘real’ productive activity in order for the infrastructure to be paid off and make a return for what is invested. ASGISA at present may lead to huge sunk cost in infrastructure with no simultaneous production growth- so we spending money on infrastucture but no productive capacity of a scale that will use the investment made. Or maybe it is a chicken and egg situation. But in my book growth in production should provide the cue for infrastructure growth. But it is a difficult one this. I am wondering for instance if Eskom doubles its capacity to 80 000MW spending the R200bn it has will all that power be used.
If, it doesn’t then we will have surplus power and create a lot of white elephants and whose benefits accrue to high-powered wheelers and dealers who are busy signing up lucrative contracts for their friends and family. Including Chancellor House of the ANC.
I suppose you right I shouldn’t use the word unprecedented but rather say the late 1990s was better than the 1980s.
The Economist has an intelligence unit and the World Bank and IFC have fairly good statistics. Maybe Ebrahim can tell you more. You are right about the international benchmark. I don’t dispute that.
Hey Ebrahim – you should read Veblen’s great work Theory of the Leisure Class and his theory of corporations. Subsequent person who has borrowed themes from this work is Kenneth Gailbraith – The Affluent Society.
Hey, this is great – we got a debate going! Which is always a good thing in a time when many of my students tell me that they are ‘of the TV, film and video-generation’, and I should not blame them too much for not being more clued-up on how to write. That’s just by the way. Clearly, I’ll have to write something more substantial on neoliberal economics, because this seems to be the main issue where there is mutual misunderstanding. (Apart from the fact, of course, that my piece was intended as an attempt to make sense of the early (and reversible; it’s early days yet) indications that there has been a shift away from support for Mbeki towards more support for Zuma, judging by regional nominations for the position of President of the ANC. Neoliberal economics came into the argument in so far as I would guess that Mbeki’s economic policies, which promote this economic practice, seems to me to be a likely factor in what SEEMS, at this stage, to be waning support for him. So – I’ll have to post something on this issue, to make the necessary connections – which were merely implicit in this piece.
Prof great to hear from you – but let me give you a few criteria to run your test of neo-liberalism with, perhaps Ebrahim can add a few more – here are some:
1. Extent of privatization in the country-
2. Exchange controls and repatriation policy-
3. Taxation regime..
4. Degree of state intervention in the economy-
5. The nature of the market
6. Trade policy and WTO…
7. Monetary policy…
8. Nature of private sector vs state enterprises…
9. Intellectual property law..
10. State budgeting and allocations…
11. Poverty programmes and grants…
And, then are many more. You then have to compare this with another neoliberal country of your choice and another emerging economy – let’s say Brazil.
I guarantee you will find out how hard it is to make such a comparison and how different every country’s economic policies are that no one country satisfies the label as a straight-jacket. I think this whole neo-liberal word is just rubbish. It obfuscates the important issue – the link between growth and redistribution/the link between ownership and participation in the economy/ the link between wealth creation and income patterns/ the difference between a parasitic state and a caring state etc.
Giving an economy a label in your philosophically abstract and ungrounded way is just playing with words. Even a Communist/socialist country which in ideological terms is not neo-liberal can well depict the same economic disparities as a neo-liberal economy simply on the basis of an understanding of how wealth is distributed and how the state interventions in the overall welfare of its citizens.
I challenge you Prof because I don’t want you to be stuck with erroneous catchy labels because they can often deny reality or an understanding of reality. I think as Steven Friedman once wrote on his blog and it applies to the word neo-liberal – you must throw away that word neo-liberal like one needs to throw away that word globalisation. Free you great philosophical mind and think deep and not abstractly.
I would add that neo-liberalism needs to be understood as a political project, that seeks to empower the ‘market’ over just about everything. And in that sense the label ‘neo-liberal’ remains important. Prof I am ooking forward to your article.
Dear Prof and Ebrahim\
Good point Ebrahim but let’s also be clear ‘what this market is’ – it too can be a very vague and nefarious concept. I think the way to look at it is to see it has a set of rules that frame the mechanisms of economic exchange – the exchange of labour, natural resources, the production of goods, and exchange of goods of value like property, knowledge and money between actors. The characteristics of these rules would determine which economic actor involving in the exchange of economic value benefits the most – is it the state, the big company, the work or some other entity, including the environment by the way. If, market rules give more power to some actors over others they eventually can change the rules of the game to their advantage until they encounter a new interest or force that tries to re-balance or reform the rules of the game. markets are contest between different forces of economic exchange trying to mediate the best outcome or interest in theor favour. Well, this is my simpleton’s defintion of markets.
Hey Savage – Bond, James Bond, Dr J.P. Bond as he is known is a Director of the World Bank. He’s a French Economist of some repute. You won’t find much on him if you Google because he’s not loved by the Greens. He has this strange notion that humans are his first priority. He was subjected to a violent email “hate mail” campaign in the mid 90’s. I think the issue was that he felt that indigenous people should be allowed harvest a limited number of trees in some Central American forests.
James Bond was also one of the many campaigners that cut off funds to our previous government. Comparing our current situation to the “Swart Gevaar” period is in my opinion a bit unfair… on the Afrikaaners that is. They did better in international terms with very negative intervention from the IMF, World Bank, King Commission and their international trading partners. Whatever we may think of their policies, they kept the economy going under very arduous conditions.
Enough on the Bond’s, James Bond, John Bond and the Broeder Bond.
Natal University had a very interesting computer model of the South African Economy in 2000. It wasn’t particularly accurate but it did give an interesting insight to the interrelationship of the different aspects. I wonder what happened to it.
Where i grew up, things weren’t ‘going’…
Lianski – You may want to look at the employment figures, year by year over the last 20 years then reevaluate that statement.