Obama’s economic lessons from Mandela
The politics of former US president Barack Obama’s Mandela centenary lecture on Tuesday dominated the headlines, here and abroad. The economics of the lecture drew less attention, yet on the list of four “guideposts” for the road ahead that Obama set out, drawing on Mandela’s lessons, item number one was “we’re going to have to worry about economics if we want to get democracy back on track”.
Obama spoke of fighting harder to reduce inequality and promote lasting economic opportunity, in a context in which globalisation and technology had driven enormous economic and social progress yet also caused an “explosion in economic inequality” that threatened democracy.
At one level, he wasn’t telling South Africa’s leaders anything new — nor was he claiming to. He said Madiba understood this, and that President Cyril Ramaphosa was committed to trying to close the widening chasm of wealth and opportunity.
But while reducing inequality and inclusive growth are very much part of the narrative these days among South Africa’s leaders, in government and in business, Obama’s economics offered a perspective which was different, and which ought to open up debate.
His call was for an inclusive, marketbased economy and, essentially, for an ethical capitalism. In South Africa the debate is, understandably, often about transformation in the racial sense, but Obama’s comments should prompt us to think more globally and innovatively about the kind of inclusive, ethical capitalism he urged. Crucially, first, he didn’t suggest the rich shouldn’t be rich — but rather questioned, in a gentle sort of way, how much money they really needed, and urged them to give some of it away.
Interestingly, though, he zeroed in on a progressive tax system and paying a “a little more in taxes” to fund school fees or hungry children. South Africa has a highly redistributive fiscal system: Obama’s comments serve as a reminder of how important it is to fix the institutional corruption and state-capture problems that have eroded tax morality, among others among the rich.
But if elites are going to part with their money to promote inclusive capitalism, Obama urged that “we have to get past the charity mindset” and bring in resources through investment and entrepreneurship.
Meaningful work
But if he had stern words for large corporations and the rich, he had them too for governments, specifically South Africa’s, emphasising “the biggest challenge for your new president when we think about how we’re going to employ more people here is
. . . technology”.
He talked about artificial intelligence and automated services and how that would make it even tougher to create meaningful work.
It took the debate away from conventional job creation and emphasised the need to think in new ways about the dignity and economic security a job provides. He mentioned a universal income grant, and he talked too about retraining and “making everybody an entrepreneur”.
Much of this is there, at least in the rhetoric of the Ramaphosa administration’s “new deal” for the economy, but just as the Tuesday event came as a bright confidenceboosting moment at a time when Ramaphosa needed it politically, it will also ideally reinforce a more confident and imaginative approach to tackling growth and inequality challenges.
And as Obama repeatedly emphasised, history shows that it is done best by strong democracies, not authoritarian societies.