Builders versus burglars: who will win in SA?
A new book shows how taking a long view of economic history casts South Africa’s current travails in a more optimistic light, and reveals the importance of embracing technical innovation and expanding economic freedom as a route to prosperity
If you are intrigued as to what makes a perfect soldier, or why Indian brides have a dowry but African grooms pay lobola, or why the Transkei was once the world’s biggest producer of chopsticks, then economic history could be your thing.
One book, in particular, has been making waves: Our Long Walk to Economic Freedom, by Stellenbosch University economics professor Johan Fourie. He put it together during the lockdown, when he transcribed 34 of his lectures for students and realised he was holding a book that provided a uniquely South African perspective on the top research finds in economic history over the past decade.
One of the most striking aspects of the book — apart from its light-touch approach to weighty subjects such as colonialism, slavery, war and apartheid — is its optimism.
Fourie says his students today are notably more pessimistic than those of 10 years ago.
“I sense that my students of a decade ago would have said after the global financial crisis that growth could revert to previous levels as we have a history of excellence in South Africa,” he says. “But the younger generation just see postapartheid South Africa as one big negative story.”
His own view, as an economic historian, is that humans tend to overestimate change in the short run, but underestimate it in the long term. Taking the long view, he says, suggests that it is “the builders rather than the burglars who ultimately win out”.
In fact, the evidence from economic history is unequivocal. Over the past two centuries, economic freedom — the ability of every human to work, produce, consume and invest in the way they please — has increased exponentially, says Fourie. And, where it has been allowed to flourish, it has created immense prosperity.
The average human today is at least 18 times richer in real terms than in 1800, he notes. However, in some places — such as SA and many parts of Africa — economic freedom for most was suppressed until quite recently. The average African is only six times more affluent today than 200 years ago, and many economies on the continent are still tied to the boom-and-bust commodity cycle.
The big question is whether we can hope for a better future. “It’s very possible that the world will become a much more prosperous place over the next decade,” writes Fourie. “But it is also possible that growth will stagnate and living standards decline. There is no guaranteed outcome. This is especially true for Africa.”
For Africa to succeed it will need to prevent a recurrence of past policy disasters and embrace technical innovation, he argues.
Throughout the book, Fourie teases out the pivotal role that science and technology have played in affecting the course of history.
In a prescient chapter on war, for example, he notes that new technologies can be harmful and intensify conflict. Take the landmine — Cambodian dictator Pol Pot once described it as the “perfect soldier” because it doesn’t need food or water, wages or rest, and it will lie in wait for its victim.
Conversely, the project to clear Mozambique of landmines by 2015 was of similar economic value to some of the largest infrastructure projects in history, such as the construction of railways in the US in the 19th century.
“Our economic freedom depends on co-operation,” Fourie writes. “War and conflict destroy it. A prosperous future is one without war.”
Another major theme of the book is how practices we regard as politically or culturally determined are often rooted in economics.
For instance, Fourie traces the practice of lobola back to Africa’s abundant land-labour ratio. Simply put, because Africa had land in abundance, the most valuable commodity was people. This gave rise to the social institution of the bride price or lobola, whereby the husband’s family pays compensation to the bride’s family for the loss of her labour and company.
In India, with a low land-labour ratio, the transfer of money or gifts runs in the opposite direction upon marriage — from the bride’s family to the groom’s.
Fourie also thinks economics explains why apartheid’s failure was “inevitable”.
In a nutshell, the National Party’s economic blueprint was that an educated, white elite would fill all the manufacturing and service jobs and the unskilled black population, residing in the bantustans and fed a measly diet of bantu education, would fill the rest.
But not only were the party’s policies immoral, they were also “idiotic”, writes Fourie. For just at the time that the government planned to produce more unskilled labour, the economy was increasingly demanding semi-skilled and skilled workers to fill jobs in the manufacturing and services sector.
The government’s solution was to spend heavily on infrastructure and incentives to lure manufacturing firms to “border industries” on the edge of the rural homelands. For most firms, relocating to these far-flung areas was not an option — despite the lure of cheap labour. Some Asian firms, however, made a success of it — so much so that at one stage the Transkei was the world’s largest producer of chopsticks.
But as soon as the incentives dried up, the firms pulled out and many others mechanised due to restrictions on the labour market, fuelling unemployment.
Fourie concludes that, ultimately, apartheid ended because, to borrow a phrase from the late ANC leader Albert Luthuli, “economics will not obey racial blueprints”.
Fourie makes an optimistic case for Africa, noting that the digital revolution has transformed the traditional path of economic development and provided another route to prosperity — and it has been embraced by Africa “at bewildering speed”.
It’s not just cellphone penetration, which has opened up things like banking and insurance services, technological innovation is also rapidly leading to more integrated and empowered networks, allowing producers to scale up production, reduce prices and expand consumer choice, writes Fourie.
It is also enabling new export industries in the services sector, from call centres to highly skilled businesses in sectors such as finance and engineering.
Fourie doesn’t expect Africa to shift from primary exports to service exports overnight, but he takes comfort from the fact that change is undoubtedly happening. He points out that while growth of 10% a year in internet speed or cellphone coverage may not be immediately visible, within a decade their speed or market penetration would have doubled.
But for Africa to really succeed, he believes, it will need to do more than embrace the efficiencies that come from technical innovation. It will also depend on whether it can expand economic freedoms.
“The lesson from history is clear: as long as we continue to empower ordinary people to contribute to and benefit from the remarkable advances in scientific knowledge, the future, for Africa and beyond, will be bright.”
Turning to what can be done to elevate South Africa’s growth path, Fourie says there is no doubt that, just as in 1996, the country needs to get the fundamentals right. But it also needs creative solutions that improve economic freedom.
“If history has taught us anything, it’s that wealth is created by empowering ordinary people with the freedoms to help them build better lives,” he says. “Technology can assist.”
For instance, instead of building a big-budget coal-fired power station, Fourie would incentivise the switch to renewable energy by, say, giving people solar panels. Instead of funding a state broadcaster, he would provide free and fast internet access. And instead of designing another top-down economic strategy, he would get children into good schools so they can design their own.
Fourie’s overriding message is that the modern world is nothing like the zero-sum game of Monopoly, where for you to win, I need to lose — a world view that many in South Africa still seem to cleave to.
It is much more like a game of Settlers of Catan, he explains, where success requires cooperation and interaction, and wealth creates more wealth. Or, put differently, that not only can you prosper while I prosper, but that you have to prosper for me to prosper.
Ultimately, Fourie concludes that the future belongs to the optimists even if, or when, they are wrong. “In this world, the optimists have it, not because they are always right, but because they are positive,” he writes, quoting economic historian David Landes from The Wealth and Poverty of Nations. “Even when wrong, they are positive, and that is the way of achievement, correction, improvement, and success. Educated, eyes-open optimism pays; pessimism can only offer the empty consolation of being right.”