Opinionista Trudi Makhaya 17 February 2014

Overcoming the temptations of Neo-volkskapitalisme: Part 2

How do we escape the vicious cycle of narrowly-conceived, identity based, excessively statist economic strategies? I would start by acknowledging the proper role of the state in economy and society. The state cannot shy away from its task of building capabilities in the economy to create the conditions for sustained development and growth. This is what the original volkskapitalisme got wrong. It was built on wealth creation through exploitation and exclusion, creating a government- and monopoly-dependent class.

I would like to borrow an interesting concept from the post-war Germany Freiburg school of economics and law, that of an economic constitution: the basic agreements that a society holds about the type of economy it will have and how it is to be run. The economic constitution also addresses how gains and losses are distributed and managed. The economic constitution or less formally an economic order, usually implicit and unwritten, is informed by the political constitution.

The current South African economic order does not properly reflect the values and intentions of the Constitution. I am convinced by constitutional scholars like Pierre de Vos, who argue that the Constitution as it stands today is expansive enough to allow for economic policies that lead to meaningful human development. The current economic order was forged under the ‘nervous conditions’ of the early nineties; with the central anxiety being about preserving property rights and free markets. It’s clear that today the critical challenge is that of poverty and lack of opportunity. Property rights become meaningless when a country explodes. The country can no longer focus on preservation; energy should be directed towards the kind of society we would like to build. This is an incomplete conversation, emerging as we are from the initial and fragile phase of our transition.

The trouble is that the country is being nudged towards an economic order that continues to deal with race and state in outdated and narrow-minded ways. We have government interventions that are constantly captured by the elite. Under volkskapitalisme, it was the Afrikaner capitalists who advocated for state support and lobbied for policies that exploited black South Africans. In the emergent neo-volkskapitalisme order, it is tenderpreneurs but also established elites aided by corrupt officials that seek to direct government resources in favour of their private accumulation of wealth.

If the waning idea of an ‘economic CODESA’ were to be revived, I would propose that it includes in its terms of reference the search for mechanisms to give full effect to the values of our Constitution. The result should be an economic order that reflects that we the people value human dignity, freedom and equality. Former Constitutional Court Justice Zak Yacoob talks about an important freedom that remains overlooked – freedom from poverty. However, this cannot be license for wide-ranging and unsubstantiated interventions in the economy.

What would an economic constitution fit for a globally-connected, non-racial society look like? It would embody a consensus where partners in society – the unemployed, organised labour, established business, entrepreneurs and government – can share the gains and losses of development equitably. In my formulation of the social partners, I separate out the unemployed and entrepreneurs because from the evidence of the past twenty years, it is clear that these groupings are the ultimate outsiders who are not represented by established constituencies.

Bringing more of them into the economy is the challenge of the next decade. If the unemployed remain outside the tent for much longer, this country will explode. If entrepreneurs continue to be frustrated and ignored, the economy will remain stuck with mediocre growth. But as we all know, it’s not the concerns of the unemployed and the entrepreneurs that influence policy and its implementation. Instead, as I mentioned in the first part of this essay, we devote our attention to failed oligarchs and neo-volkskapitalisme fanatics. This is at our peril. As economic development scholars Acemoglu and Robinson note in Why Nations Fail, Apartheid South Africa attained ‘economic growth without creative destruction’, the kind that eventually peters out due to its lack of dynamism and inclusivity.

A new economic order would privilege pragmatic interventions, driven by society’s long-term needs and not ideology nor narrow interests. To dismiss policies because they offend one’s ideological sensibilities is irresponsible in the face of our economic woes. The focus should be on outcomes. In the face of inequality, unemployment and poverty, policy should favour access to economic activity and upward mobility. We continue to be let down by the inability to let outsiders into the economy and doing so whilst enhancing productivity. The core task for those driving this new consensus should be the creation of a middle class society; a diamond, rather than a pyramid with better racial optics at the top.

The ideas are all there, including in the little-read tome known as the National Development Plan. The future demands that we do things differently and make difficult trade-offs, in a society that exhibits low levels of trust. The challenge for any new administration is two-fold. The first is to articulate the fundamental principles that will govern all economic policies and legislation that emanate from its term. The second is to commit credibly to those principles. The economy can no longer afford inconsistent or mixed messages from the economics cluster. Much as certain government actions can be found to be in conflict with the Constitution and set aside, a similar approach should apply to actions that violate the fundamental principles of the new economic order built on the vision of an efficient, inclusive economy that delivers broad-based prosperity. DM