Opinionista Saliem Fakir 12 November 2014

Desperate times: Fixing the economy should come first

The troubles at Eskom, the reluctance of Gauteng drivers to pay e-tolls, the collapse of the Post Office service – symptomatic of failing and ailing public enterprises – the vibrations of the nervous and volatile rand as it transmits uncertainty across the economy, the expulsion of NUMSA…all of this brings with it the further disruption of whatever limited accord existed within and with labour. The litany of economic bad news each day speaks of a systemic problem – the lack of an economic centre that holds diverse interests and policy together.

The effects of this crisis are also political, or you could say such a void is a consequence of our fractured politics. Economic malaise eats at hope and the sense of a future, not only of the chattering classes, but all and sundry seeking to live to a ripe old age in good health, with enough of a pension, living in violence-free neighbourhoods and holding onto memories of more happy than unhappy days.

Without a centre, no country can have successful economic policies, nor calibrate national sovereign interests against what is going on elsewhere in the world – both in terms of geopolitical intrusions and economic shocks, as a result of economic failures elsewhere on the globe. There should be less domestic economic instability to deal with the recurrent variety and range of external shocks.

Successful countries that have been able to build a resilient and a sustained growth period needed the right political-economic combination to succeed. Anybody who believes that capital, the state and labour can go it alone without the three mutually reinforcing each other’s role in the economy are fooling themselves.

The current rupture of the political-economic balance clearly points out that old accords, past deals between elites, and established institutional mechanisms to facilitate various interests do not work for what requires a different and more inclusive economic dispensation. This is even more so given the changing landscape in the light of new political alliances erupting from within the old, the impatience of alienated disgruntled elites (whose agitation will be persistent), the civil unrest of the discontented poor and the changed tone of party-politics. Perhaps waiting and seeing how things will turn out, by current incumbents, may just be too late, as positions become fossilised with time. Negotiations without conflict would be the first, and inevitable next move.

A common-sense and rational outcome comes from good coordination between different players in the domestic economy and the management of powerful private and foreign state interests outside of our borders. Domestic disagreement and policy strife breaks down not only trust but formal and informal mechanisms of coordination. It is a recipe for our own ‘secular stagnation’, to appropriate Lawrence Summer’s own thesis of the problem besetting advanced economies at present, as they and we face a long phase of slow growth and we run out of policy tools to recharge our ailing economies.

Economic challenges can be resolved, but will require extraordinary leadership, long-term thinking, the will to work together and the recognition that peaceful co-existence needs realism and not some nefarious, fuzzy idea of a ‘Rainbow Nation’.  A political process to reduce the growing trust deficit is more urgent than ever. This could be the basis for some consensus building, and moving forward long-term economic planning. Economic planning in a comprehensive sense, in South Africa itself, is pretty non-existent. It is dispersed across many departments and agencies.

Even the establishment of the National Planning Commission (NPC) and the National Development Plan (NDP) lacks the sense of presence within government and coordinating influence over all external stakeholders to have the clout other national planning commissions or units enjoy in other countries over economic planning. If anything, a lot of economic planning is already happening outside of the NPC. In any case, the role of the NPC is advisory and so it will always be.

Managing the affairs of a country should not be left to some people only, but be the business of everybody. This would require the ability of government, labour, business and other key civic groups to have a safe space for the different interests and parties to talk openly. Nedlac used to be that forum, but it is defunct, and with the CEO on his way out, it is hard to see how the role of Nedlac can be revived again to its true form and character as in the past. The split in COSATU and exclusion of other players makes Nedlac something of an ‘exclusive’ club at the moment, and so its convening power is already weakened or limited in its inclusivity.

That said, the closest we come to some form of economic planning is inflation targeting – and I mean this in a tongue-in-cheek way – because we tend to be quite obsessed with monetary policy as the only sure, acceptable solution to grow the economy. Managing inflation is without doubt an important aspect of our economy, but it alone cannot solve problems that weigh upon us and threaten the long-term prospects of creating a more robust and sustainable economy.

For long-run economic growth, monetary policy has to be run in tandem with good fiscal policy, if not subservient to it, until growth has reached its proper target. In addition, fiscal policy works best when implementing agencies within and outside of the state can absorb enhanced fiscal spend and deliver efficiently economic programmes. On this point it is relevant to point out that the crisis of performance in some state institutions has to be resolved if less doubt is to be cast on the state’s ability to carry out some of these developmental functions. It is not a totally sorry state of affairs as reading daily newspapers may seem to convey. Some state agencies are doing well and run well (as long as you are not sending any mail for the next few months).

Common sense has to prevail over what the state can and cannot do.

The burden of delivery of the entirety of goods and services needed in the economy that can guarantee a successful and efficient development path for all is not a burden that the state can take on entirely by itself; it will need other forms of non-state agency to deliver the rest of it and even the bulk of it. The complexity of the economy, the need for a variety of technical competencies and knowledge is far too dispersed for one form of economic agency to have a complete command, level of depth, experience and monopoly. Such complexities and expanse of effort require a collective approach that can only come from co-ordination, but the task of co-ordination is made more efficient and better if there is trust.

For consensus, an economic centre or forum is needed involving labour, government, business and other organisations, not to meet once and have a series of pontifications at a big conference, but for parties to put down ideas and research on key aspects of the economy from their different perspectives. Something like this is needed for the next three years, where parties are locked in a process to find common ground and prioritise ways to deliver key economic policies and programmes. Perhaps such a forum should also involve the political parties, to get their buy-in and reach out to other constituencies, to discuss the economy and the way forward.

Finally, any accord has to acknowledge that one part of economic contributors’ purchasing power or income should not be so whittled down that being in full-employ means that in their retirement they and their family are worse off – while somebody above them has more than enough for retirement, can spend time on a cruise ship and ensure their successive generations continue to have social and economic advantage. These disparities must have reasonable correctives as the image of disparity and material disadvantage itself fuels the demand for more wages.

Any form of economic accord that is negotiated has to come with mutually agreed reciprocity between state, labour and capital. Economic crisis and discord can force upon us wittingly and unwittingly to take positions and make compromises that do not always speak best for our common national interests. Economic crisis tends to push us into the arms of ‘friends’ where help will come with strings attached and when we are forced to borrow, others will impose upon us measures which we will not like, but will have to accept because we can ill-afford an alternative.

What has been said above is all well and good, but where will such a shift in perspective come from? This remains a troubling question, and the spectre of the continued lack of urgency to do something drives the pessimistic idea that we are in for a long period of despair. Let’s hope not – and that enlightenment will prevail sooner rather than later. DM


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