Policy best thing out of the DA for years

THERE is no sense beating about the bush: the Democratic Alliance’s (DA’s) economic plan announced at the weekend is the best thing to come out of it for years. It is detailed, insightful, balanced, full of practical ideas and eminently sensible.

I’m sure there will be plenty of detailed commentary, but for me three important aspects of the document stand out, and by important I mean outside of whether you agree with the particular economic prescriptions or not.

First, the document represents an important step. I’ve always been frustrated by the lack of a clear economic policy from the DA.

But this seems like more than economic policy: it suggests a party thinking about the practicalities of actually being in power.

The ANC and most political pundits, even those who are critical of the ANC, consider this notion rather ridiculous. Yet, on important issues, where it might be easy to overpromise, the DA seems to me to be holding back. That suggests a party worried about practical issues as much as theoretical stuff.

For example, the document supports a reduction in business tax, but not by much; two percentage points. It also calls for “rationalising SA’s portfolio of state-owned enterprises”. But only after an investigation. The section gives the impression the DA would not be comfortable with wholesale privatisation.

In both cases, it could be argued, why not go the whole hog? Since the prospect of a majority DA government is so small, why not slightly overpromise? The document is after all suggesting SA could achieve an 8% growth rate, which I doubt is possible. Yet the tone is surprisingly restrained, and that suggests the DA doesn’t consider the notion of ruling, at least in parts of SA, a total joke.

The second important issue is that the document really lays down the battle lines with the Congress of South African Trade Unions (Cosatu). It just pulverises Cosatu, in a way that suggests any kind of rapprochement of any description between the union federation and the DA is now gone.

That’s important because it provides no latitude in Cosatu’s tight relationship with the ANC. Given the tension between Cosatu and the DA, it might have been tempting for the DA to try to drive a wedge between the two. A good opportunity would have been the new road-toll taxes, where their interests intersect.

Instead, the document goes in the opposite direction. It specifies in detail huge swathes of the Labour Relations Act it wants changed, and is generally pretty uncompromising. That doesn’t seem important now, but it might in future. It also might be important in municipal areas where the DA wins power.

That Johannesburg jobs march attacked by Cosatu seems to have hardened attitudes. A good demonstration is the DA’s notion of jobs zones, “exempt from restrictive aspects of South African labour legislation in order to enhance flexibility, productivity and competitiveness with regard to labour input costs”. That’s a pretty tough line.

The third aspect is how the document contrasts philosophically with the African National Congress’s (ANC’s) vacillating and bewildered approach to economic policy. Clearly, even if none of these measures get implemented, the DA is recognising the need to pin economic underperformance on the ANC.

While SA was hitting growth rates of 5% and more, there wasn’t much room for the DA to mobilise. But now that growth is tailing off, there is much more for the DA to get on the front foot. With indecisive leadership, coloured by “out of the park” notions such as nationalisation, worsened by mixed messages from the ANC, the DA has a very strong platform in the economy.

Will the public buy this argument? Do South Africans blame the ANC for the economy, or the eurozone? I suspect South Africans are a bit confused about it all — who isn’t? Anyway, even if they do blame the ANC, will that be sufficient to shift associations? I don’t think it will, at least not in the short term.

There are plenty of good ideas — the document doesn’t pussyfoot around issues. It calls for the immediate scrapping of exchange controls, with which the ANC has been tinkering for a decade. I like the idea of a venture capital fund, although the Industrial Development Corporation is supposed to be it.

I have two specific problems. Free trade is a tricky political issue, I know, but the notion is not particularly championed. The other is that the mining industry, which is such an enormous tragedy of SA’s recent past, is not being singled out. How SA, of all countries, could have dropped the mining industry ball so badly remains a gargantuan shocker, and I’m surprised the DA didn’t make more of an issue out of it.

What I would like to hear is explicit support for this approach by business organisations. Incredibly, at its most recent meeting with the government, Business Unity SA endorsed the New Growth Path. If the official representative of business is going to endorse political platforms, the organisation might consider endorsing those that support its interests, rather than those seeing business as a rather unpleasant cog in a much larger machine.

WHAT is pessimism and why are we so prone to indulge in it? And more particularly, is SA an especially pessimistic place?

The phenomenon of pessimism is perhaps one of the most debilitating aspects of human existence because it lies in the intersection between psychology and development. It affects everything, from our ability and willingness to change, to our capacity to lead.

It almost goes without saying that the world is a pessimistic place, despite the fact that optimism seems more positive as an attribute. One test would be this question: is the world a more or less violent place now, than it was over the past decade, compared to the previous decade, over the past century compared to the century before it, and over the past millennium compared to the millennium before it?

The instinctive response would probably be, perhaps less, definitely more, and I don’t know.

In fact, the answer is that notwithstanding severalwars, in Iraq and Afghanistan for example, we live in the most peaceful period of all time by extraordinary margins. Historian Stephen Pinker has demonstrated that not only was the prevalence of unnatural death much higher in the 19th century than the 20th, notwithstanding two world wars, but the occurrence of unnatural deaths in hunter-gatherer societies was higher still.

There are all kinds of ways to demonstrate the preponderance of pessimism from the micro to the macro, and from the individual to the social. The anthropological explanation for pessimism is broadly that it is hard-wired into our genes as a result of the more cautious among humans tending to survive. It wasn’t the brave cave man who inquisitively sought out the rustling in the bush, it was the cautious man who hung back and wasn’t bitten by the snake.

The economic explanation for pessimism is related: since we only have one life, the incentive to take risks is small, and the incentive to stand pat is very high. Since you only have one life to lose, the potential advantages of risking it have to be very large, and the statistical advantages of not risking it much higher.

There are some contradictory studies too that suggest hope is a crucial, adaptive technique in human psychology and development. Yet hope is different from optimism. I think it is generally true that most people have to be encouraged, or even forced, to take risks.

What is curious about pessimism is how both the right wing and the left wing are afflicted by it. Uncharacteristically, Wikipedia puts this rather well. Social conservatives often see the West as a decadent and nihilistic civilisation which has abandoned its roots in Christianity and/or Greek philosophy, leaving it doomed to fall into moral and political decay. William Buckley famously remarked that he was “standing athwart history yelling ‘stop!’ ”

For left-wingers, the economic sky is always just about to come crashing down on the heads of us poor chicken-lickens. Except it never does. When I read the obvious glee with which left-wingers understand the euro crisis, or the banking crisis, or the long recession in the developed world, it seems such obvious wishful thinking. Markets are constantly in a state of crisis of some sort. Yet, as a Goldman Sachs economist has pointed out, at current growth rates, China creates an economy the size of Greece every three months.

A recent Union Bank of Switzerland report shows gross domestic product (GDP) per capita in constant currency terms has grown by 25% in the developed world over the past decade. In the developing world, it has doubled.

There are now only three countries in the world in the MSCI Emerging Markets index with purchasing price parity GDP per capita below $5 000, and all three, India, Indonesia and Philippines, will breach this level within five years.

South Africans do seem to me overly affected by pessimism. One indication is the huge cash balances many businesses are holding on to. Another is the seemingly neverending desire to invest outside the country. Politics is often cited, and I’m sure it’s a factor: it’s hard to invest in a mine if there is even the slightest chance the government might grab it.

Government is only 25% of the economy; even doing its worst, government’s actual effect in the short term is probably pretty slight. Finding economic hope is perhaps a key issue of our times.