Back to Basics

Weathering a volatile global economy requires both pragmatism and a return to the basics of strong economic management and planning, writes JAN HOFMEYR.

Since assuming office in 2009, the Zuma administration has frequently been faulted for its inability to forge a coherent vision for this country. Arguably, the 2011 State of the Nation address (SON) did little to alter this view. Despite touching on all the right issues, the rhetoric and presentation fell far short of inspirational.

Given the pervasiveness of material insecurity in our country, citizens’ demands for decisiveness and clarity in government planning to undo acute levels of poverty and inequality are legitimate. The SON address typically provides the president an appropriate platform to take the country into his confidence. Whether his words actually resonated with the populace is difficult to say, but appraising his speech and performance also requires cognisance of the broader global context in which government currently operates.

The world is in a precarious place. Common wisdom about politics and the economy is being challenged in various contexts and ironically, despite unprecedented access to information, our world is becoming increasingly difficult to fathom. A confluence of factors like climate change, demographic transformation, the near collapse of the global finance system as we know it, and the marked shift in economic power from Western economies towards newly industrialising ones, such as China, India and Brazil, has made our planet a less predictable place.

It is not that we know too little, because each of these is quantifiable to varying degrees. Rather, we are unable to connect the dots. We can measure, but in this period of profound reconfiguration, grasping critical links, their meanings and broader implications is complicated.

Government also has to grapple with new, inescapable realities. While this volatile context does not absolve it from key responsibilities or failures, it helps create perspective. Pity the likes of Greek prime minister George Papandreou, for example, whose government will implement a 30% pay cut to senior civil servants this year. Spare a thought for former Irish Taoiseach Brian Cowen, whose party suffered a resounding defeat in general elections in February, brought on by a Brussels-imposed austerity package. What vision and inspiration can they offer demoralised citizens for 2011?

Even Barack Obama, champion of change in 2009, has seen his ambitious domestic US agenda watered down by devastating mid-term elections, and internationally, recent events in North Africa have further discredited American foreign policy in the wake of the Wikileaks saga.

These gentlemen and their peers would, no doubt, be more than happy with Zuma’s 62% approval rating in a recent Ipsos-Markinor survey, albeit down from 77%.

Yet despite these ratings, Zuma is well aware that there is no room for complacency. He knows that growth forecasts aside, the cost of living will rise significantly this year, especially for the poor. This will put pressure on social stability and cohesion both in South Africa, with its porous borders, and the region as a whole. In other developing nations rising food prices have already resulted in public violence, and government will certainly want to counter such prospects here, especially in a local government election year. Zuma will also be keen to prove to his SON critics that the content of his speech will be followed by action.

Of course, the danger exists that short-term interventions to placate voters may be inconsistent with longer-term national priorities. Given current global circumstances, such decisions may have unforeseen future consequences. What, then, should guide government engagement with domestic challenges, amid stormy international waters?

First, pragmatism is required to adapt to volatile circumstances. Not in a reckless sense, but in terms of principle alignment to the most pressing priority areas, as well as affordability. In this regard, the New Growth Path document released by the ministry for economic development last year highlights a number of the trade-offs needed to accelerate growth. However, realistically such pragmatism would also require some jettisoning of ideological reasoning, and improved cooperation between the state, labour, business and civil society.

The issue of nationalisation, for example, should not be a zero-sum debate. Though the state may lack capacity in certain sectors at present, this does not mean that in principle it would be inappropriate for the state to control these entities and invest in capacity accordingly. At the same time, state majority shareholding in inefficient and unprofitable parastatals that drain the fiscus at the expense of developmental expenditure cannot be allowed to do so perpetually. The same flexibility in thinking is required across the spectrum from education to labour-market reform.

The second priority requires a return to ‘the basics’ which, in a maritime metaphor, anchor a ship in tempestuous conditions. This would imply an emphasis on fiscal discipline, shared growth, investment in human resources, and job creation in particular. Government’s track record on the first two is fairly solid, but less so for the latter. Both once received considerable attention during the SON address, with matching promises towards funding commitment.

The final areas of basic intervention deserving of higher priority are the exploitative and illegal practices of corruption (public and private) and corporate price-fixing. It is indeed unfortunate that words such as ‘tenderpreneurship’ have become part of our national vocabulary almost overnight. Rent-seeking by political elites at the cost of development is plainly immoral. Equally so is the collusion amongst corporate entities to fix prices, on foodstuffs in particular. These practices need to be dealt with more visibly and harshly. Government should lead by example, but has in a number of high-profile cases been slow to do so.

Many of these issues are addressed in the latest edition of the annual Transformation Audit, published by the Institute for Justice and Reconciliation and entitled Vision or Vacuum?. The edited publication contains insight from some of the country’s leading developmental researchers, while departing from the premise that principles, such as adaptability and an emphasis on the fundamentals of governance, stand between the achievement of a prosperous, equitable, and non-racial society, and one characterised by perpetual volatility.

Jan Hofmeyr is manager of the IJR’s Political Analysis programme and editor of the Transformation Audit. A version of this article appeared in the Cape Times.

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