Weekend Post (South Africa)

Working together key to rising from ashes

- CHARLES WAIT

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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