Vol.3 No.1, 22 January 2003

New Year's Resolution: A New Paradigm for Growth

By Margaret Legum

The December ANC Conference delegates elected Trevor Manuel top of the NEC. He is even mentioned in media speculation about the succession for the leadership. He has done an astonishing job in achieving the short-term objectives of the government's macroeconomic policy.

Under Manuel's leadership at Finance, despite the global economic crisis, and within a global racist (sorry, Afrosceptical) market sentiment, South Africa has slightly grown its GDP, reduced its internal and external debt and controlled the rate of inflation - while cutting taxes and beginning to bring down its massive interest rates. The rand has ended its collapse and begun to recover its value. This stands in contrast to most other 'emerging' markets. What more could we ask?

What we could ask is a new macroeconomic paradigm that would deal with the undoubted economic failures. Unemployment, poverty, and economic stagnation - all of these have deepened, resulting in growing numbers of people excluded from the economy and thus politically alienated. The government's line is that these must be set against gains in social delivery of things like water, housing, education and electricity. So they should. Sadly, figures show that growing numbers of people are unable to access these benefits, because they do not have regular income. It is a shocking and enraging experience to have these offerings - denied under apartheid - snatched back for no fault of one's own.

Nothing will compensate or substitute for the lack of paid work. The government claims that current policies, if relentlessly pursued, will in time correct these failures as well. This is an illusion. Even in rich developed countries there is a growing underclass of people, some supported by humiliating means-tested welfare benefits, now into the third generation of hopeless joblessness, poor education and criminalisation, They make up an international smouldering brigade of potential street activists, even terrorists. Unless brought into mainstream economies they will make the beneficiaries of the current economic system pay with interest.

Guess who said this? 'The attempt by powerful domestic and international interests to force us to accept laissez-faire unfettered capitalism flies in the face of the entire developmental experience of the twentieth century. All successful reconstruction and development in Europe, America, Japan and East Asia has entailed massive state involvement, the creation of domestic demand, huge investment in human development and policies to direct investment and industrial activity…None has relied exclusively on the market, or attempted to remove the state from leading the development process…'

That was Sam Shilowa, now Premier of Gauteng, then, in 1996, General Secretary of COSATU. That sentiment was not uncharacteristic of the thinking of the ANC leadership. But the 'powerful interests' that Shilowa referred to prevailed. The process is described in detail in Professor Terreblanche's forthcoming book 'A history of Inequality in South Africa'. He shows that, in secret parallel talks, the price exacted by the South African corporate sector for its support for the ANC at CODESA was ANC support for 'unfettered capitalism' and the reign of the global market.

That process was almost certainly inevitable. How could the ANC, new to the job, stand out against the most powerful international coalition in history? It faced a coalition of multi-national business with interests in opening all markets to its operations and the power to punish governments that refused to play. A coalition which had already captured virtually every ruling party, including the British Labour Party. A coalition whose ideology was overtly supported by every international financial institution and every prominent economics department in the West. And a coalition that had the power to reward with scholarships and training a population impoverished by apartheid.

So it is churlish to blame the current practice of the prescriptions of that coalition on the current government - or Trevor Manuel as its brilliant exponent. The government has needed courage to face down its opponents, especially those in the Triple Alliance. Shilowa's arguments, expressed in an article for Towards Democracy (third quarter 1966) are extremely hard to refute - even more so now that his predictions have been shown to be accurate. But the government has stuck to its guns.

What is needed now is courage to change - to show that the government can learn by experience. There were signs in 2002 that some new thinking was on the cards - in particular there was talk of GEAR having served its purpose of stabilisation. And the ANC's birthday pronouncements put 'economic development and job creation' at the top of the agenda.

One of the stumbling blocks to change is the time government spends in the company of people whose advice in favour of current policies is self-serving. It would be interesting to research the diaries of government and its agents in terms of who they consult, and whose invitations they accept. The President's international Panel of business advisers will encourage him to stick to the present line, praising him for his courage in doing so, and making off with the benefits. Big investment firms, used by government for judgement on the economy's health, are not objective. They have an interest in policies that prevent government taking South Africa's future into its own hands. They do not approve steps to favour local enterprise over foreign, to invest South African capital in South Africa, to stimulate local economies - in a word to manage the economy in the interests of South Africans.

A test will be how the government handles immanent negotiations with the US over free trade agreements with Southern African countries. Robert Zoellick, the American negotiator, makes no bones about the proposals. In a letter to the US Senate he says the agreement will 'address barriers in those countries to US exports…The goal is to conclude these negotiations with timely and substantive results for US workers, ranchers, farmers, businesses and families'. This will be presented here as a great opportunity for our exporters. But it will conflict with developing South African capacity to meet the needs of South African workers, farmers, businesses and families. We can do that much better by developing our own markets.

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