Radical transformation may push SA into IMF’s arms

IMF bail-outs are usually bad news for the poor. Here, our economic policy debate seems to signal that the millions excluded from the economy might be better off with the IMF in charge.

Last week’s medium-term budget policy statement showed that public finances are in a state that may at some point force the government to ask the IMF to rescue it.

This raises an obvious irony: firing finance ministers, purportedly in the name of “radical economic transformation” could place control of economic policy in the hands of very nonradical IMF technicians who would impose tough restraints on the government.

Normally, a bail-out would also force most of the country to pay for the failings of the elite as control of the budget passes to technicians who are not responsible to, and therefore do not care about, local people and their needs.

But the IMF may understand our problems better than our own elites.

Reaction to the mediumterm budget policy statement has failed, across the spectrum, even to consider that the economy’s problems may not stem only from patronage politics and the response of investors to it.

About the nearest anyone came to suggesting that the exclusion of millions from the economy might depress growth and create opportunities for patronage was a participant in one discussion who lamented that our economic woes prevented us from talking about inequality. He was shouted down but even he did not seem to consider that the economy’s plight is precisely why we need to talk about inequality.

We can agree that we would be in much better shape if the government did not waste money and if state-owned enterprises were run in the interests of all of us rather than a connected few. And that the economy is depressed by a president who looks after himself rather than the country, and by patronage politicians who want to turn the people’s money into their own. We can even agree that a change in political leadership would boost confidence and lift the economy for a while.

But these are symptoms of a much deeper problem that just about no one in the local debate is willing to recognise: that growth is limited by an economy that favours elites in business and government and freezes out many people and that it will not begin to reach its potential until that changes.

The IMF does seem to understand this. Its deputy MD, David Lipton, delivered a lecture here making precisely this point. Which suggests that it may understand what the economy (and the poor) need — and how the functions of business and the professions as well as of the government need to change — better than the local policy debate does.

This point is made for effect, not as a serious suggestion. Like any democracy, this country is better off with policies produced by politicians, who, at least in theory, we can control or remove, not by technocrats we cannot. An IMF bail-out may hit the poor hard, cutting social grants or other programmes on which poor people depend.

But it challenges us to ask why our policy debate (with the odd exception) cannot see what Lipton recognised – that the economy’s problems go much deeper than the sins of President Jacob Zuma and the ANC patronage faction and that we will be forced at best to muddle through with low growth and high poverty until the elites begin negotiating changes that open the economy to more people and give it more room to grow.

It is better for the country to make the changes needed to avoid handing the economy to the IMF. But better still to begin fixing the deeper problems that IMF technicians understand better than our elites.