Free market versus fleecing Marxist
If beautifully tailored suits could inspire confidence, Finance Minister Malusi Gigaba would be well on his way. Unfortunately, the fashionista has sown nothing but confusion.
In his public pronouncements, he flipflopped between accusing the Treasury of being “captured by white monopoly capital” to lauding it as “a strong, professional and stable institution”.
He promised policy continuity, but appointed University of the Witwatersrand Marxist economist Chris Malikane as his special adviser – a move described by the DA’s David Maynier as having a grenade lobbed into the Treasury’s lap.
Malikane is calling for a new economic plan that will provide for the revolutionary overthrow of established business through the expropriation of land and the nationalisation of the mines and banks to accelerate racial redress.
Gigaba, meanwhile, has been telling investors that SA’s “top priority is to achieve inclusive growth” and he has invoked the centrist National Development Plan (NDP) as the core of SA’s development vision.
For former finance minister Pravin Gordhan inclusive growth meant harnessing the energies of the private sector to boost job creation. There was no need to abandon the Constitution, radicalise policy or demonise whites to achieve this. The NDP already provided the blueprint, he said.
The two schools of thought are irreconcilable. Malikane’s involves nationalising industries; Gordhan’s involved subjecting state-owned monopolies to the stiff breeze of private competition.
The problem is that Gigaba inherited a public purse straining at the seams and a business confidence that has been shredded. SA cannot afford fiscal policy errors, let alone entertain wild economic experiments that would make Hugo Chavez proud.
The drama playing out in the Treasury is a microcosm of the one playing out in society.
Malikane’s populist views mirror those of a group of young activists who are angry and impatient about the failure of the economy to reduce inequality over the past 22 years as a small black elite amassed enormous wealth. Their solution is to throw out foreign investors, nationalise private assets and rebuild society in an equitable fashion.
The established business community and the new elite counter the argument by pointing out that SA has transformed a lot since 1994 and that inequality is best defeated by freeing the private sector from the shackles of overregulation, allowing it to grow faster and create many more jobs.
“SA’s real failure is that we’ve got caught in a political debate between two polar extremes — between the free market and some crazy 1960s attempt to implement the Russian revolution,” says Wits vice-chancellor Adam Habib. “What we need is to enable a thoughtful, reasonable conversation on the economy.”
The tragedy is that these were exactly the discussions Gordhan and the country’s top 100 CEOs started before the former finance minister was axed. Business had come to the party — albeit late in the day — with a R50bn plan to put 1-million young people into internships and enough seed funding to start the creation of a small business venture capital sector.
This signified big business’s realisation that the free market alone would not solve inequality and unemployment.
“We have come to the realisation over the past year as business that we can create 1-million jobs and solve some of these problems collectively, not through free markets, but by a cohesive mind-set,” says Discovery Group CEO Adrian Gore, a leading member of the CEO Initiative.
The will to keep working in partnership with the government is now evaporating. Zuma’s axing of Gordhan destroyed business’s trust and pulled the rug out from under the country’s growth recovery.
Habib points out that society was not sufficiently aware of the discussions between business and Gordhan where some flesh was being put on the bones of the inclusive growth concept.
“The only story people know is that Gordhan was fired because he stood in the way of the nuclear deal,” he says. “Now that Gordhan is out, all we’ve got is this polarised debate.”
The debate SA should be having is how best to transform society by emulating the experiences of successful nations such as Singapore or the Scandinavian countries, says Habib.
Interventions should be put in place that allow power to be transferred slowly but systematically. Education is a great equaliser, with the ability to produce a generation with power to negotiate high salaries and create their own companies.
US development economist Ricardo Hausmann pointed out on his recent visit to SA: “There is too much of an obsession with making the top of society black and not enough focus on making the bottom of society better.”
The test for SA’s business leadership now is whether it throws up its hands and walks away or musters the strategic will to tackle rising unemployment and inequality.
As Cosatu strategies coordinator Neil Coleman noted recently: “Failure to address the socioeconomic crisis in the country will give space to demagogues to exploit growing frustration to justify their predatory behaviour and can only end with us landing up in a fully fledged kleptocratic state.”
SA CANNOT AFFORD FISCAL POLICY ERRORS, LET ALONE ENTERTAIN WILD ECONOMIC EXPERIMENTS