NB: This article originally appeared on Business Day on 30 October 2008. It is reposted here with kind permission from Business Day. The intention is to give the left and anyone else who cares an opportunity to reflect. It was Jeremy Cronin’s response to an article by Steven Friedman also posted here earlier.
BUSINESS Day has reflected widely divergent views on what transpired at this month’s African National Congress (ANC)-led alliance economic summit. Beneath a front-page headline that read: “Economic policy jerked left as SACP calls shots,” Karima Brown and Amy Musgrave reported that “a fundamental shift to the left in economic policy emerged from the ruling ANC’s economic summit” (October 20). As examples of this shift they list proposals to set up a two-tier cabinet, a planning commission, and industrial policy focused on job creation. “The changes”, they wrote, “will surprise, if not shock, analysts.”
Steven Friedman went to the other extreme: “This is not a leftward shift. It is an attempt to prevent one by doing what Mbeki failed to do – bringing the alliance partners into the discussion in the hope of defusing tension. This is far more likely to preserve the current policy framework than Mbeki’s approach.” (October 24)
Anthony Butler (October 27) agrees with Friedman. On the envisaged planning commission, he argues “the proposed changes are consistent with a gradual strengthening of the Presidency’s policy unit.. They are exceedingly Mbekian”. On the same day, editor Peter Bruce disagreed with his columnists: “What about the coming weakening of Manuel’s authority over spending? . what about the creation of a presidium of über-ministers.?”
Let me concede the obvious. In the ANC alliance we have not helped clarify matters by variously asserting there is and there isn’t change in economic policy. At the heart of the confusion is a radical lack of clarity about what it is that supposedly is (or isn’t) changing.
To get a better fix on this, consider Friedman’s argument. “The government’s ‘economic creed'”, he writes, “over the past decade has often been misunderstood by Jeremiahs on the left and wishful thinkers on the right. It has not been purely market-driven: it has, rather, been an attempt to address poverty and stimulate growth through a broadly market-friendly approach, but with significant welfare spending and regulation of economic activity.”
Despite being a Jeremiah, I agree largely with this characterisation of what has been the government’s framework policy. However, it is precisely this paradigm of market-driven growth, on the one hand, and earnest state welfarism, on the other, that needs to change. Indeed, it has begun to change across the government in the past years. Why? As Finance Minister Trevor Manuel has often remarked, we cannot sustain our current trajectory of welfare expansion. Our levels of unemployment, poverty and inequality make this impossible. So what is reproducing these dire levels of underdevelopment? Paradoxically, it’s the systemic features of our market-driven growth.
Restored growth over the decade has been excessively dependent on primary commodity exports and on capital goods imports. It is capital-intensive, not labour-intensive. Small and medium enterprises are crowded out by corporate concentration in the minerals, energy, agro-processing, and finance sectors. In the absence of effective industrial policy, hasty and excessive liberalisation in the mid-1990s wiped out critical sectors of the economy. Liberalisation also saw major disinvestments and delistings. In a highly unequal society our savings are low, and much recent growth has been driven by consumer spending as the barely emergent black middle strata struggle to escape township poverty. Low savings mean we need to attract foreign portfolio investment through high interest rates. High rates threaten the emergent middle strata and stifle productive investment. None of this is sustainable.
The basic challenge is to transform the structural features of our growth path. The state cannot be limited to the roles of an overwhelmed welfare distributor and a macroeconomic boss-boy working for the markets. We need to transform our productive economy and vastly expand job creation. Is inflation-targeting effective? Should there be a budget surplus? These are important but subordinate questions. Macro polices must be measured according to their immediate and longer-term contribution to getting our productive economy to work better.
To be left wing is not a matter of being market-unfriendly. It is about asking transformational questions of the markets we have. Markets clearly respond more dynamically to market signals than a Soviet-era central planning structure. But market demand is not the same as social need. In our marketplace nearly half the population is too poor to signal anything. Within the context of existing power relations, markets have a dynamic allocative capacity, but are poor structural transformers and very poor future planners.
Focusing on the transformation of our productive economy is the paradigm shift that is required. It is a shift that has been under way for a few years. The alliance summit helped consolidate the shift, while setting out an array of tasks that lie ahead.
In making this shift, we are returning to the essence of the 1994 Reconstruction and Development Programme (RDP). In about 1996 the RDP got dumbed down into welfarist targets to be redistributed out of market-driven growth. The RDP was taken in this direction by the government’s economic assumptions of the day (“first grow the cake, then redistribute”).
But the RDP of 1994 explicitly understood that development was not primarily a redistributive subtraction from growth. We are now once more coming to appreciate that transformation of healthcare and education, or rural development, are critical ingredients for baking any sustainable growth.
This is why the summit focused on state-led industrial policy and on improving the government’s strategic co-ordination and planning capacities. Bruce, Friedman and Butler conjure out of these concerns a lurch towards totalitarian “über-ministers”, a centralisation that is “exceedingly Mbekian”.
I was intrigued, therefore, by a recent University of Pretoria address by Remgro chairman Johann Rupert. “The worst feature of the Mbeki regime”, he said, “was probably the paranoid reaction to any form of criticism.. Even ‘big business with government’ meetings were orchestrated ‘PowerPoint exchanges’. It was not frank dialogue . even business leaders were very reluctant to criticise, preferring the lobbying route.”
Factional plotting driven by a personal obsession with control is not the same thing as publicly led strategic planning and effective co-ordination. Lack of coherence across the state is exactly what breeds “the lobbying route”, back-room “quiet diplomacy”, elite-bargained municipal demarcations, corporate capture of line departments, tender-award favouritism, and multibillion-rand white elephant projects. Where there is strategic coherence across the state, and transparent planning that is participatory (the only effective option in a mixed economy) we enhance our democratic space.
Instead of debating abstractly whether we are moving left or not, shouldn’t we all agree (as I suspect we do) on our job-creating, education, healthcare, crime-fighting and rural development priorities? Then we need to plan together, implement together, and constantly debate and evaluate progress towards addressing these priorities.
#Cronin is an ANC MP and a member of its national executive committee. He is also deputy general secretary of the South African Communist Party.