Threatening the unifying potential and benefits of a radical economic overhaul.
Radical economic transformation (RET) has been around for about half a decade although the need for it has been evident for decades more. This time it has come with a fanfare of bullhorns, town criers, aspirant emperors and empresses; and some hysteria in a clear strategic attempt to recapture political initiative; to unify a fractured ruling party and deflect attention from its beleaguered leader.
The timing is unfortunate. Trust between government and the private sector has broken down and investment confidence is all but shattered. With full co-operation between the state and the private sector, RET could be a unifying force. Instead it is becoming divisive and polarising. It is creating consternation on the one hand and false expectations on the other; unleashing forces that could devour each other in a downward spiral that arguably has already begun with downgrades and investor flight -- until sober minds see through the mist of rhetorical mischief and conclude that it’s not new; it’s not unique and it need not be frightening. Indeed it could be an exciting and galvanising mission that makes South Africa a metaphorical Asian tiger instead of a Venezuela.
We are not exceptional. Blaming it on the past or racial imbalances is creating a false notion of solutions and deflecting effort from where it is most needed. The problems are much bigger and the world is itself facing radical economic transformation. Indeed it has already begun. So let’s tick the boxes in a severely redacted swoop of global concerns. They have all been documented broadly in Moneyweb and other news coverage, obviating the need for detailed substantiation.
· Concentration of Economic power or monopoly capital. Large corporates domestically and globally have grown to the point where the negative impact of their power and influence now far outweighs the purported advantage of capital efficiency. The financial industry, banks and financial markets in particular have become a force that can virtually dictate the economic destiny of countries and the globe. With their influence on the state they have become “the establishment”, now under attack in many forms, including at the ballot box. (See Moneyweb Article here).
· State capture. The above clearly leads to inordinate self-serving influence on the state in the form of oligarchs; family wealth; the elite; powerful vested interest lobbies; bribery and corruption. The news is full of it and as oligarchs go, the Guptas are a rather clumsy lot with the beneficiaries in Government being extraordinarily and dangerously naïve; compared to those that have existed in Russia, Ukraine, Latin America and many others. Such is the power of the “establishment” that it has recaptured Donald Trump who became president on an anti-establishment ticket and has now clearly flip-flopped.
And then there are the Chaebols of South Korea, consisting of old family business empires such as Samsung, LG and Hyundai and controlling some 80% of economic activity with government involvement. Their success in making South Korea one of the most powerful of the Asian tigers was simple: a community and customer focus overriding profit and self-gain.
· White monopoly capital. This PR concocted phantom has been unpacked many times, but whatever substance there may be it is simply and self-evidently one of the oldest ploys of political expediency: create an enemy, identify and personify it, and blame it for your self-created mess. There is some truth to disproportionate white involvement and ownership in the economy but it cannot be shown to be malevolent in intent, action and effect. Even if it were possible to simply change the “colour” of this “monopoly” overnight, there is no evidence that this will benefit the masses. Indeed, disrupting a fine balance between capital, skills and competitiveness could be devastating in a tough global environment.
· Black Monopoly capital. If we define “capital” in the broadest sense of deployment of money in an economy, then one can argue that government at all levels is a much bigger player than any other single entity. (Mike Schüssler puts it at about 44% of Gross domestic product.) It is in itself a true monopoly and owns the only real uncompetitive monopolies in the form of state owned enterprises and their trillions of rand in assets; it has the biggest single investment arm through the PIC, and it can dictate and has dictated the rules of the game through regulation.
· Radical Government transformation (RGT) is the elephant in the room. Radical economic transformation (RET) has to start with RGT first. Can anyone doubt that we would have been in a “radically” different position if government at all levels, did what it was mandated and paid to do: efficiently, effectively, prudently, and devoid of corruption, patronage and self-gain; compounded now by party discord impacting all arms of the state?
· Inequality and unemployment. Remember the startling Credit Suisse findings amplified by OXFAM that the wealth of world’s richest 1% equals that of the remaining 99%? Here’s some country comparisons.
Not only do we rank well below those with the biggest disparities, but we are also below the United States. Of course that is arguably still unacceptable, and even more so when one looks at income disparities rather than the above assets gap. This is a metric minefield (see different measurements here) but it cannot be denied that South Africa has one of the highest income differentials in the world. That is largely a function of high unemployment. While the latter is of less concern in some countries, it certainly remains a key concern in many parts of the world – including the stagnant state of the middle class, and the job displacement threat of technology.
· Inclusivity. All of the above can be captured in this one key issue. “Around the world, no bigger policy challenge preoccupies leaders than expanding social participation in the process and benefits of economic growth” – World Economic Forum.
Radical economic transformation is nothing more, and nothing less than promoting inclusiveness and a response to the greatest global challenge of our time. Of course there are some circumstantial differences, but exceptionalising, politicising, radicalising and polarising them is suicidal and way beyond reckless. It needs a partnership of all interests. The principles of having a common purpose and sharing a common fate that I have advocated in companies (see here) can stand outside political and ideological rhetoric. It means holding hands in the good times and the bad. Those that rely solely on economic growth as a magic wand are too readily discounting some very ominous storm clouds gathering on the global horizon.
The real question is how flexible, united and prepared we will be when that storm breaks?