Weekend Post (South Africa)

Work­ing to­gether key to ris­ing from ashes

- CHARLES WAIT Finance · Politics · Business · Nelson Mandela · Buffalo · Reserve Bank of India · Winston Churchill · John Stuart Mill

Our democ­racy, rooted in the con­sti­tu­tion with the Bill of Rights, is aimed at the well­be­ing of all peo­ple in SA but, on a Free­dom Day marked by Covid-19, is it serv­ing its pur­pose?

The eco­nomic per­spec­tive is that a mar­ket econ­omy sup­ported by an ap­pro­pri­ate role for the state should be the main in­sti­tu­tions on this road.

Ter­mi­nol­ogy such as free mar­ket, cap­i­tal­ism and so­cial­ism is not used be­cause of the emo­tions stirred by such names. Devel­op­ment state is an­other phrase with many mean­ings so let’s rather not use it.

On Free­dom Day, in­equal­ity is an in­escapable is­sue and sev­eral in­di­ca­tors show that our new democ­racy has not yet solved the prob­lem.

The lock­down un­der­lines this prob­lem, but also re­veals the ex­cep­tional good­will of South Africans to­wards peo­ple in dis­tress.

We live in one of the most un­equal coun­tries in the world, where the eco­nomic hard­ships caused by Covid-19 are sharp­ened per­haps to a greater ex­tent than in other coun­tries.

How­ever, at the same time there has been an out­pour­ing of as­sis­tance from all sec­tors of so­ci­ety.

In Nel­son Man­dela Bay, for ex­am­ple, the busi­ness cham­ber has been proac­tive and raised sev­eral mil­lion rand to as­sist the lo­cal health care sys­tem.

Com­mu­nity and faith groups have moved quickly to set up cri­sis feed­ing schemes and other projects.

On a mi­cro-level, in­di­vid­ual cit­i­zens have been mak­ing sand­wiches for the hun­gry and sewing face masks for es­sen­tial ser­vice work­ers.

Buf­falo City has seen sim­i­lar ef­forts and this un­der­ly­ing at­ti­tude tes­ti­fies to what Vil­fredo Pareto (1848-1923) called a will­ing­ness of the priv­i­leged to give up in favour of the less priv­i­leged.

Why can we not turn this in­her­ent at­ti­tude into prac­ti­cal pol­icy ap­pli­ca­tions?

Our democ­racy is largely a rep­re­sen­ta­tive democ­racy in which we elect rep­re­sen­ta­tives to po­lit­i­cal po­si­tions, and rep­re­sen­ta­tive bod­ies op­er­ate in the pri­vate and so­cial sec­tors.

The ex­is­tence of rep­re­sen­ta­tive in­sti­tu­tions is not the is­sue how­ever, their ef­fec­tive­ness and ef­fi­ciency are.

This point of rep­re­sen­ta­tion is where the pri­vate and pub­lic sec­tors meet on mat­ters of pol­icy.

Ma­jor past crises have taught us lessons about oper­at­ing at this point of tan­gency.

The Great Re­ces­sion of 2007 and be­yond brought the re­al­i­sa­tion of the need for a sym­bi­otic re­la­tion­ship be­tween the two main par­tic­i­pants.

Our democ­racy has so far suf­fered be­cause of ad­ver­sity at this point, ad­ver­sity which came to a boil dur­ing the Zuma era.

At the time of the lock­down some com­men­ta­tors used this op­por­tu­nity to crit­i­cise the sys­tem by say­ing that the pri­vate sec­tor is al­ways averse to state in­ter­ven­tion, but now run to ask for res­cue pack­ages.

How­ever, I be­lieve the gov­ern­ment be­ing the point of call is proof that our democ­racy is work­ing.

Those pri­vate sec­tor en­ti­ties call­ing on the gov­ern­ment are in fact call­ing on fel­low tax­pay­ers — the gov­ern­ment is only the agent, and the tax­pay­ers and vot­ers are the prin­ci­pals.

If the gov­ern­ment had a sav­ings ac­count to as­sist busi­ness, those sav­ings would have come from past ex­cess tax rev­enue.

Hav­ing no such sav­ings ac­count causes the gov­ern­ment in­stead to have to step in to as­sist with bor­rowed money and that in turn will need fu­ture tax­pay­ers to ser­vice the debt.

In our democ­racy, we have a cen­tral bank with a con­sti­tu­tion­ally en­shrined in­de­pen­dence from po­lit­i­cal in­flu­ence.

Un­der heavy pres­sure from pop­ulists, the SA Re­serve Bank has stuck to its guns.

The re­sult is it can now do what cen­tral banks are sup­posed to do — ap­ply mon­e­tary pol­icy as dic­tated by the eco­nomic con­di­tions of the mo­ment.

Had the cen­tral bank ne­glected its man­date un­der pop­ulist pres­sures, this would not have been pos­si­ble.

The week or two be­fore March 26 saw the SA gov­ern­ment where, on May 26 1940, the Bri­tish war cabi­net un­der Win­ston Churchill was, be­tween a rock and a hard place.

On one hand, seek peace and face long-time suf­fer­ing un­der a dic­ta­tor­ship, or the na­tion­wide hard­ship of a war con­tin­ued.

In our case the hard­ships, ten­sions, hunger, loss of in­come and jobs caused by a lock­down have had to be weighed against fight­ing an in­vis­i­ble en­emy po­ten­tially able to wipe out a large por­tion of the pop­u­la­tion.

Which free­dom had to get pri­or­ity?

The Bri­tish econ­o­mist, John Stu­art Mill, wrote in 1848: “What has so of­ten ex­cited won­der, is the great ra­pid­ity with which coun­tries re­cover from a state of dev­as­ta­tion ...”

With a sym­bi­otic in­stead of ad­ver­sar­ial re­la­tion­ship — and the lock­down shows pos­i­tive ev­i­dence of this spirit of work­ing to­gether with each other rather than against — SA has the in­sti­tu­tions that can put us on the path JS Mill ob­served.

• Pro­fes­sor Charles Wait is pro­fes­sor emer­i­tus of eco­nomics in the fac­ulty of busi­ness and eco­nomic sciences at Nel­son Man­dela Univer­sity

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