ANALYSIS

Talking ‘bout economic revolution: Never mind Rwanda and China, we have to find our own path

By Stephen Grootes 26 June 2018

President Cyril Ramaphosa with former president Kgalema Motlanthe. 15/06/2018, Elmond Jiyane, GCIS

In the ongoing quest to find a solution to the biggest problem we face, that of growing the economy, empowering people while doing so and finally slaying the other problems our poverty and racialised inequality inevitably lead to, there are many ideas and comparisons that do the rounds. One of the biggest is why we have not been able to follow the examples of countries like Rwanda after the genocide, West Germany in the 1950s, and much of Asia in their post-colonial decades. Well. It’s not so simple.

It is common sometimes to blame particular political individuals, or to say that in fact it is indeed the work of just one person (Exhibit A: Jacob Zuma). None of that can be the case. The fact is, our economy has not grown, not because of a lack of resources, but because of the very structure of our society. And that makes it terribly difficult to surmount for any politician, no matter how gifted they may be.

When lamenting our poor economic performance, it is almost natural to look wistfully towards other countries which have been in supposedly similar positions and ask perhaps a natural question: why have we not been able to copy their example? Why is it that West Germany was able to emerge from the ruins of the carpet-bombing and occupation, and division, that occurred after 1945? Why was Japan, suffering after a military effort that stripped it of resources and dealing with the fallout from two nuclear bombs, able to rise so strongly? How did South Korea suddenly grow, and then of course, the ultimate example, if China can do it, why can’t we?

Closer to home, the example that is given is always Rwanda. In the Sunday Times this weekend, Sipho Dibakwane, the founder of the Impumelelo Education Educational Trust, asked the same question. Rwanda went through a recent genocide, which pretty much destroyed both the country and its social fabric. Yet it has faster internet speeds than South Africa, and is clearly growing strongly. Many, perhaps rightly, attribute this simply to the leadership of President Paul Kagame.

But, they miss the real point behind all these successes.

The countries that were able to grow strongly often have several things in common. In Rwanda, Kagame is able to rule with a free, some would say absolute, hand. In Rwanda, there is no human rights protection, freedom to dissent, or express oneself, all the fundamental rights that we have grown so fond of since 1994. In Rwanda, no one has been able to seriously campaign against Kagame, and some who do end up in jail. From time to time, someone who once had political legitimacy, such as Britain’s former Prime Minister Tony Blair, is dragged in to give a veneer of democracy to Kagame.

The same also holds true for most of the Asian examples. China is not even pretending to be a democracy in any sense of the word. Try to tweet about giant yellow ducks, and it will get censored.

South Korea, during its period of strong growth, was, generally speaking, a dictatorship. Most of the great industrialists who were building the country in those years were supporting dictatorship and many – Samsung is an example – ended up in court for corruption and generally had their legacies badly tarnished.

Of course, the examples of China and West Germany cannot be put in the exact same bag. They were not dictatorships, and both had freedom, certainly within their constitutions. But they also had something else that we do not. They, and the previous examples (except for China’s more than 100 million people belonging to the minority nations, still less than 8.5%) all have a much more homogenous population.

People within these countries speak the same languages and come from the same cultures (of course, this must be admitted in advance as being a huge generalisation).

But more important than that, in almost all of these cases the people who had economic power, those with their hands on the commanding heights of the economy, were very close, politically speaking, to those who had political power. In South Korea this led to government selecting certain industries and helping the chaebols (or conglomerates) to grow in certain sectors. In China, it appears to be business practice to select a partner who has backing from the government. Certainly, business people there appear to toe the party line (literally), or else lose out. In Japan and Germany, the industrial elites were always closely tied to government in ways that would be unseemly in, say, the US. Certainly, they were all, to use the 20th Century version of “all on the same WhatsApp group”, on the same page.

None of this is the case in South Africa. While it is true that there are relationships between some in business and some in government (the particularly interesting nexus of marriages involving the Motsepes, Ramaphosas and Radebes is one such example), it is not the case that everyone has these close relationships, or understanding of what is the common purpose.

But, more important, the relationship between business and government is much more strained here, and there is much more distance involved, than in the case of Japan and West Germany. This means that even if they wanted to, it would be more difficult to work together. But this also gave them a sense of legitimacy with the rest of society. Workers there were really presented with no other choice but to suffer in the short term and hope that their children would have a better life. Which, by and large, has happened.

In South Africa, we cannot do that. Our governing classes don’t have legitimacy with the entire population; the rich are, understandably, seen as having gained their riches through an unjust system, and at the cost of the poor. The fact that we live in such an open society means sometimes immoral business practices further delegitimise the rich. And their own behaviour (the millions paid to mining CEOs for example) further erodes any residual trust.

However, perhaps even more significant than that is the element of freedom that we have. This translates into workers having significant power through unions, along with demands from those who have nothing to be included into the system. All of these are legitimate; for example, you could not now turn around and say that unions at Eskom are going to be banned. So, while it may make economic sense, and may make complete sense for the country, to simply impose a 0% increase on Eskom workers, it is politically impossible. Even if the consequence could be the total collapse of Eskom and a possible “cascade” effect on the rest of our economy.

The same holds true in other ways too. People here will, quite legitimately, march on government for jobs, they will demand access to the economy, even if they have no skills (through no fault of their own, but thanks to our educational system both in the past and in the present). This makes crafting any kind of economic solution much more different, and difficult, just on a structural basis. Rwanda has those internet speeds because Kagame could impose a technical solution on different companies; it would be hard to imagine that working here (never mind how our government has almost actively delayed faster internet through its inability to pick a policy for years).

The same holds true in other areas. Imagine if government were to pick and choose certain proto-industrialists and decide to make them rich. There would be a huge fuss and bother, and journalists would ensure everyone knew about it, leading to questions in Parliament and other problems. When that has happened, as it did recently, there was an incredible unhappiness. But more than that, in our case, every decision is reviewable by a court. Which means that while processes are properly respected, the entire system is also slowed down.

This then paints a picture of a country that is very different to the other examples that are often touted as proof that somehow we have “failed”.

Which then leads to the question, if they have done it, and we are so different to them, can we do it too? Certainly, there is no obvious reason why this should be impossible; it’s just more difficult. In Brazil, a country with the closest inequality to ours (and with an equally diverse population), the economy has grown strongly at times, although there have also been periods of stagnation. There, the president Lula was able to get the economy growing by coming to office with a legitimate mandate, and was then able to implement growth and pro-poor policies. Perhaps the key here was legitimacy; he was able to overcome any opposition because of the size of the electoral majority of his group of parties (he is still seen as the most popular politician in the country today, despite the fact that he faces very serious corruption charges and is currently in jail). It obviously helped that he also followed policies which generated economic growth. The policies could be described more as “pro-poor” than “taking from the rich redistributive”. This meant there was no huge opposition from people who had resources with which to oppose.

This would mean that in our case legitimacy is also key. This is exactly what the government of then Presidents Nelson Mandela and Thabo Mbeki had in the late 1990s and early 2000s. It is this legitimacy that can be used to coerce different constituencies into complying with an economic plan even if it is against their own direct interests. This may mean, strangely, that the best way to get the economy to grow could be for Ramaphosa to get a large mandate in the 2019 elections, which would mean a landslide for the ANC.

But we also need something more than that. We need a plan in the first place.

President Cyril Ramaphosa spoke before coming to power of his “social pact” between government, business and labour. He now appears to have gone quiet on that idea. Either something is happening in the background, or he is too preoccupied with keeping the ANC together. But it is hard to see what else would work, whether it be an explicit or implicit deal. And, given his own particular life story, he is supposedly the one person who could make this pact stick.

But he also needs to generate capacity in the state, and to ensure that he has legitimacy there too. It is no use trying to modernise education if you can’t cajole teachers’ union SADTU into going along with you. Education, for children and adults neglected in the past, would be vital to any effort at getting our nation to succeed. This also means fundamental changes at the state-owned-entities, and getting them to work as levers in the economy. At the same time it is also important to somehow convince union members to be a part of the new plan, even if that goes against their own members’ immediate interests. And of course, the business owners, the middle-classes, need to be cajoled into this too.

In other words, there is simply no plan that everyone will be happy with. That means that should there be a plan implemented, and everyone is left unhappy, that we are finally on the right track. If only because it is the only one. DM

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