A counternarrative to radical transformation
Without tackling large dysfunctionalities, the idea that the poor prosper as prosperity rises is not convincing
What is radical economic transformation? As the government must take its line of march from the governing party, this is a question Finance Minister Pravin Gordhan would have sat down to think about when preparing to deliver his budget.
But after trying to fathom the policy content of what has become the favourite cry of President Jacob Zuma and his avaricious faction, Gordhan must have decided to revert to the economic theories with which the Treasury is safely familiar and counterposed the slogan with the notion of “inclusive growth”.
In the days leading to the budget — usually a “closed period” for the Treasury — Gordhan and his deputy, Mcebisi Jonas, were out and about on television and the newspapers spelling out their sensible vision for economic growth and setting up a counternarrative to the radical economic transformation story.
It was a carefully thought-about political intervention. But will it be enough to win the political battle in the ANC? And more importantly, is the inclusive growth idea something that can be put to work for the poor in a clear and demonstrable way?
The term “radical economic transformation” first found its way into official ANC or government documents at Zuma’s second inauguration in 2014, where he promised to bring about “radical economic transformation”.
Prior to that the ANC in all its resolutions and discussion documents had spoken only of “economic transformation” with the ANC’s more left-wing allies frequently trying to interject that this transformation project would require a radical shift.
The ANC’s language began to change when the ambitious Julius Malema and the ANC Youth League, who fancied themselves as kingmakers in the ANC succession race, began a campaign for nationalisation of the mines as a proxy issue in the succession race.
The campaign was more an attack on the ageing incumbents in the ANC — it was combined with calls for “generational change” in the leaderships corps — than a genuine ideological battle. It nonetheless required a response from the ANC, which came up with the idea of the “second transition”, which said economic transformation would be the goal of the next phase of struggle.
Leading on from this the term “radical economic transformation” began to gain currency but was used for the first time in an official document by Zuma only at his second inauguration speech in May 2014. By the time of the national general council in October 2015 it had been inserted into the ANC lexicon.
But “radical economic transformation” was a response to a populist challenge from within the ANC and did not come onto the agenda by design. Those in the ANC who craft economic policy — its economic transformation subcommittee — never embraced it and more or less carried on as usual.
Now that the term is here and official it has become a useful weapon for Zuma and his crew to batter the committee, a small clique within the ANC national executive committee, which up to now has kept control of economic policy. Linked to this assault is the narrative being propagated by the Zuma camp, inside and outside the ANC, that the slow pace of transformation is a result of a conspiracy by “white monopoly capital”, aided and abetted by the Treasury.
It is into this context that the Treasury, which has enjoyed strong influence within the economic transformation committee, has resurrected the vision of inclusive growth. The inclusive theory makes economic sense in an interconnected world where most experiments in state intervention and suppression of the market have ended in disaster. It takes into account the prudent management of the economy and real possibility that to deviate from that course can spiral into disaster as ratings agencies downgrade the country’s credit status, higher debt costs result, investor confidence drops further and hardship increases as government finances are squeezed even further.
It is the consensus of the investor community, business world, the World Bank and the globe’s best left-leaning development economists. But while it is a notion that makes sense to the well-heeled, how well does it work for the poor?
Gordhan might argue that inclusive growth includes a wide range of developmental, economic and social policies and actions that in SA have not yet had the opportunity to work.
Large dysfunctionalities — such as the education system or the apartheid spatial divide — have not been tackled with any real political will. Without these, the idea that the poor grow prosperous as general prosperity rises and they are able to accumulate assets, is not convincing.
And crucially, as Gordhan has pointed out repeatedly over the past few days, while inclusive growth relies on the right combination of growth and transformation, SA’s growth prospects right now are miserable. The budget’s optimistic growth projection is 1.3% in 2017 after managing only 0.5% in 2016.
Over the past year and quite intensely over the past week, Gordhan has been out to discredit Zuma’s radical economic transformation story. He has asked while live on television: who are these people? In whose interests is the call for radical economic transformation? He has answered himself: it is in the interests of the friends of those who are making the call.
HONEST DISCUSSION
The campaign has two targets: the ANC and the wider public.
For the ANC he has set up a meaningful debate for the policy conference in June and the December national conference thereafter. Much hinges on the precise wording of ANC resolutions, which are then used for the next five years to guide the government’s work.
It is important that an honest discussion is held over whether the inclusive growth paradigm is really a policy solution for SA.
There are two glaring problems. The first is the elusive nature of the structural reforms required to ignite the growth engine.
The solution to this, Gordhan has suggested, is the tired one of a social compact. Since the much-vaunted and very disappointing Growth and Development Summit in 2003, the government has continually revisited the suggestion of a social compact between the government, business and labour. The National Development Plan reached the same conclusion. After the disaster of the killings at Marikana, a social pact was again put back on the agenda.
On Wednesday, Gordhan said what was necessary was “a stronger conversation between government, business and labour”. He raised the idea, to which there has been hardly any reaction, of a charter of economic rights.
Apart from the 2003 experience, which achieved little, there has been — despite all the challenges in SA — a reluctance to enter into a compacting process. Optimistically, it is possible that conditions are beginning to change. In the past, organised labour was perpetually the spoiler and organised business (apart from taxation) did not see the need for a real attempt at redistribution.
Labour is now weaker and business more desperate. And some in the ANC — such as Gordhan and Jonas — are perhaps ready to acknowledge that the conventional development economics they have tried to apply since 1994 has not served the poor nearly sufficiently. Jonas recently remarked in a newspaper article that the post-1994 consensus, which had protected white privilege and prosperity, had run its course.
Gordhan said in the budget briefing on Wednesday that “some new thinking has to be put into economic models”.
But just as these conditions shift and the stance of the three partners is weakening and softening, the ANC has lost its political centre. In its fragmented state, it will be difficult for it to drive forward a social compact when the main leaders are at each other’s throats.
While Zuma’s call for radical economic transformation is a cover for a small clique to make a grab at state and private resources, Gordhan’s call for inclusive growth is one, that for now, exhorts the poor to be patient.
Between the two, there is not much to choose from.