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Let’s concentrate on letting this crisis go to waste 


Tim Cohen is editor of Business Maverick. He is a business and political journalist and commentator of more years than he likes to admit. His freelance work has included contributions to the Wall Street Journal and the Financial Times, but he spent most of his life working for Business Day. After a mid-life crisis that didn't include the traditional fast car, Cohen now lives in the middle of nowhere in the Karoo.

President Cyril Ramaphosa has announced a R500-billion economic support package. Will it work? We don’t know. Will it be enough? We don’t know. What we do know is that if it is not accompanied by larger economic reforms, it will not endure. 

If you are anything like me, anytime someone says you shouldn’t let a good crisis go to waste, you groan inwardly and have to restrain the temptation to unleash a snotklap upside the head.

But there is one problem here: You really should not let a good crisis go to waste. And you also should.

The phrase was coined by Rahm Emanuel, the former mayor of Chicago, who served as chief of staff to President Barack Obama from 2009 to 2010. Emanuel now says, slightly ruefully, this phrase has followed him around ever since.

The thing about the phrase is that most people have forgotten, or perhaps never knew, the second part of the phrase, which is arguably the more important bit. The full phrase was: “Never allow a good crisis go to waste. It’s an opportunity to do the things you once thought were impossible.”

Emanuel was making the comment in the context of the implosion of the US banking system which drove the global economy into a terrible funk, which lasted years and cost millions of people their jobs. But the world did bounce back, arguably stronger and wiser than before. 

The irony is that there is something of a debate now about whether Obama did, in fact, let a good crisis go to waste. In Emanuel’s mind, there is no argument: The administration did not make that mistake.

In a recent Washington Post article, Emanuel argues that the reason the banking sector is in such a strong position during the current crisis is precisely because of the measures taken then, including the requirement that banks have larger capital reserves. Businesses were not given blank cheques; they were required to modernise. As it happens, the financial support granted by the US government to banks was paid back with interest.

Yet, many other vulnerabilities, some argue, were not addressed. The left argues that the great recession did not restructure society into a fairer and more compassionate place, and that applies to the rest of the world too. The right argues that economic growth rebounded far too slowly, and the world could and should have rebalanced faster. 

Arguing these positions is a rather pointless process because of the lack of a counterfactual. But what the great recession did do was satisfy the second part of Emanuel’s phrase in interesting ways.

Think about what happened as a consequence of the great recession: Reserve banks transitioned from being stoic grumps into ambulances in the cause of social needs. The impunity and arrogance of masters of the universe got pegged back a little. And so on. What seemed impossible, became fact. 

That is what social calamities do. First, they accelerate and highlight existing problems, at the same time telescoping the time period required to act. Think about SAA in South Africa; the problem seemed bound to drag on for years. But it’s now been quickly overwhelmed by much greater and more pressing problems. 

Second, social calamities tend to invert roles and functions in surprising and unpredictable ways. Think about the testy relationship between government and business that developed over the past decade of government decay and corruption. 

Suddenly, the government is really the only institution that can take the measures necessary to address the Covid-19 crisis. Government has been animated and its function underlined. Its importance and utility have been refreshed, and it’s a huge relief that SA’s senior leadership has so ably risen to the challenge. 

But business has changed too: The crisis has drawn government and business closer out of necessity. Old alliances are being rekindled, and business is at last getting heard. 

I may be wrong, but I suspect business, as a concept, will emerge from this crisis stronger too. Castigated and maligned for so long by the political class, the extent to which we all rely on business to provide, such as it does, for the society as a whole, has also been underlined. 

Yet, there is an inverse perspective that should not be forgotten. It’s important to remember to let crises go to waste. As much as crises allow us, in Emanuel’s memorable phrase, to do the impossible, they also teach terrible lessons precisely because of their unusualness. 

President Cyril Ramaphosa has announced a R500-billion rescue package which seems to me to be fabulously well-judged. It brilliantly balances the support between the need for social welfare and business continuity. It concentrates on measures that can be implemented fast. The quantum is pegged to global norms; about 10% of GDP. 

And yet, I can’t help wondering: Will the successive generations who have to pay this money back understand and sympathise with our plight now? Or will they resent our generational inequity? Unbeknown to them, we are relying on their unrequested largesse, which hardly seems fair. 

Which is why, if the current economic support measures are not paired with more substantial economic reforms, the debt will be unmanageable, and we will hurt not only our futures but theirs. And these reforms are all hard and they will all be unpopular; including big reforms to SA’s labour relations system, and a retreat from populist economic interventions in the economy. 

The great danger of doing things you thought were impossible is that you get used to the idea. Then, alas, you try to do things that are, in fact, impossible. BM


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