Step one: upgrade the discussion by checking perceptions
Many expect too much of the IMF, while others fret about losing economic sovereignty. Meanwhile, the life prospects of millions of South Africans are being unnecessarily downgraded to chronic destitution. Talk of national unity is farcical if the pandemic and looming credit crisis can’t inspire a realitygrounded national dialogue.
None of our leaders can offer workable solutions as our public debates are squeamish about distinguishing between the legacies of historical injustices and the effects of today’s policy biases. Such blurring undermines accountability while allowing debilitating misperceptions to flourish.
There is thus little understanding of why our policies have been setting debt and poverty traps for many years. It is almost inevitable that the IMF will soon guide a restructuring of our sovereign debt. For this to trigger a desperately needed set of policy pivots and not be just the first of many such restructurings, our national dialogue must purge, through objective scrutiny, the politically induced distortions that exploit emotions and values we hold dear. We are now morally obligated to adopt the intensity and objectivity of an emergency room in an earthquake ravaged city.
We are ignoring 21st century economic development fundamentals and allowing economic debates to be framed by political posturing. We must dare to follow the analysis wherever it takes us and learn whatever we need to learn.
A collective belief in economic sovereignty epitomises our nation’s inward-looking and backward-facing biases. Conversely, global integration blended with disruptive innovations propels this era’s growth. Many natural resource deposits are becoming stranded assets as services outpace manufacturing while digitalisation undermines borders.
Our stunted domestic purchasing power is inadequate to dent unemployment, whereas the global economy can easily absorb nearly all of our unemployed. Among our self-induced growth impediments is our rejection of David Ricardo’s theory of comparative advantage, which underpins global integration’s upliftment powers.
Anchoring policies in race, inequality and redistribution precludes sustained high growth, which is only possible through greater global integration that requires prioritising competitiveness and adding value. Our prospective growth bursts rely on a commodity cycle whose long-term outlook dims as innovations spur ghost town effects, threatening resourcefocused economies.
Of course, rampant corruption offends our values. Yet while we must aim to eradicate it, that by itself would not meaningfully alter our perilous economic trajectory. Enormous corruption accompanied China’s decades of amazing growth, which was unleashed by sharp policy pivots.
Quantitative tools reveal conclusively that our society’s inequality cannot be remedied through redistribution.
The IMF’s debt restructuring specialists will be overwhelmed by the need for their assistance in many countries for quite a while. Yet they can quickly discern that our debts are unsustainable due to policies that preclude adequate growth, and that this traces to the politics of exploiting racial injustices to benefit a modest number of elites.
The IMF can’t force the ANC to do anything. The fund is managed by political appointees accountable to leaders of mostly wealthy countries. Such global realities empower the ANC to put its interests ahead of the nation’s, to the detriment of all who are not politically connected.
The big picture is that this is the only region that isn’t eradicating poverty — quite the opposite — and regional progress will be harder still if SA becomes a serial debt defaulter.
Follow-the-money analysis unpacks what the pandemic has highlighted: our economy is devoid of resilience. The coming credit crisis will further expose how our policies and practices induce decline. The government redistributes from the most productive to the least, while authorised financial service providers extract excessive sums from low-income communities in return for contributing little value. That there are 10-million funeral policies speaks volumes.
Negotiations to reduce the public-sector wage bill should spotlight why above-inflation wage increases are offset by excessively expensive debt. Few emerging households are accumulating wealth. The Marikana tragedy signalled as much, but those insights went unheeded.
Sovereign debt restructuring must be accompanied by restraining the publicsector wage bill, requiring that consumer debt is also restructured. Our solution path begins with collectively upgrading the national dialogue. Perceptions must be subjected to objective assessments. Pivoting policies while restructuring sovereign and consumer debts should then be manageable.