Politics retards economy
THE South African economy has been stagnating since 2009. From 2003 to 2008 the economy was growing at an average of 5% annually.
However, this growth pattern changed drastically after Thabo Mbeki was ousted as the president of the country, in 2008.
The economic downslide coincided with the installation of Jacob Zuma as the president of the country in 2009.
Prior to Mbeki’s recall, his government was pursuing a growth policy called Gear (growth, employment and redistribution).
His political detractors criticised this policy as a neo-liberal economic project.
They agitated for populist theories of political economy, a concept I will summarise.
It has been very popular among developing nations’ economic theorists in recent years.
Left-wing politicians, when they speak about the economy, in most cases talk about political economy.
Historically, the term political economy was used to describe the studies of production and trade, and how they relate to the laws, customs and the governments.
They tend to focus on the distribution of national income and wealth.
This branch of economics originated in the philosophies of morality in the earlier centuries, before the industrial revolution, as the study of the economies of states, or polities, hence the term political economy.
South Africa’s postapartheid economic programme, the reconstruction and development programme (RDP), was premised on this philosophy, the political economy.
The RDP did not take into account that the decisive sphere of economics was production.
Economic growth and social development can only happen under policies that encourage continuous production improvements or productivity.
Economic progress can only be ensured through development and mastery of production.
The RDP architects were blind to the fact that the source of economic wealth was in production.
The Gear programme was founded to rectify that oversight.
The RDP’s ambitious plans of reducing poverty, unemployment, illiteracy and inequality had to be funded, hence the Gear policy.
The RDP’s social development part was to increase the citizens’ quality of life, such as the improvements of literacy rates and life expectancy, and the reduction of poverty and inequality levels.
Modern day political economy is a euphemism for central planning.
According to Soviet Union era economist G A Kozlov, political economy was coined by bourgeoisie economists.
He argues in his 1977 book, Political Economy: Capitalism, that the term political economy was first used by French economist Antoine de Montchrestien (1575 to 1621) in a work entitled Traite de l’economie politique.
Kozlov maintains that “only later did it acquire its true scientific development as the political economy of the working class”.
This narration by Kozlov explains why in South Africa the economic and political discourses are dominated by this branch of economics.
The overemphasis of political economy in a country that is still in an infancy stage of development is linked to the failure of post-colonial territories in growing their economies.
They spend more time doing analysis than implementing practical policies and programmes that will grow their economies.
It would have been prudent if politicians could have laid more emphasis on the science of producing, distributing, selling and purchasing of goods and services.
That is done through assessing new methods of production and the use of up-to-date technologies.
Countries that excelled in growth did that on the back of openness to trade and capital.
Genuine collaboration between government and experienced business people is crucial in creating a supportive and mutually reinforcing business environment.
Our economy will grow once investors trust us.
They want to know what we do, what we want to achieve and how we are going to achieve what we want.
Investors’ confidence means that people with money trust the government.
No one will part with his money if those in charge of the country are not trustworthy.
Once the trust of investors is obtained, economic growth will enhance capital inflows, both domestic and foreign.
Investors will buy more and better machinery for their production purposes.
Interest rates can only be lower if the economy grows. Low interest rates imply that manufacturers can borrow money to invest in their capital stock and pay less interest on it.
Our economy is not driven by people who seem to comprehend the factors that drive the economy.
The continuous threats of asset distribution is one major issue that creates lack of confidence in the ruling party.
Investors cope better with a government that acts on its pronouncements, even if at some times they do not agree with it.
Our government keeps on crying wolf about everything, from land reform and distribution, to mining charters that are poorly considered.
These ad hoc, loose and bold pronouncements are the main causes for big business to sit on more than a trillion rand, waiting for clear and consistent voices from the government.
The political howling about poorly considered policies is going to hold us in the doldrums of political depression, let alone what they call “technical recession”.
Our economy is not driven by people who seem to comprehend the factors that drive the economy