SA’s interlaced political and economic difficulties are multiplied by profound shifts in the global economy. That SA’s elites are not articulating comprehensive solutions reflects decades of its universities producing specialists while the nation’s challenges have become extraordinarily diverse.
Leaders of top global universities have long maintained that business people well-educated in social sciences are better prepared to navigate amid hectic social shifts. Elite UK and US educators committed to such paths long ago. Other nations have adopted similar approaches – as has SA, but only recently.
Having academics think like business people remains elusive but the payoffs can be massive as demonstrated by Silicon Valley having been parented by Stanford University. Resetting SA’s economy requires similarly exceptional leadership that mixes business savvy with seeing SA’s possibilities within an updated, broadly developed world view.
The business community has not been rising to the occasion as: successive governments have discouraged private sector policy inputs; SA’s businesses are geared for the status quo; rarely are business leaders ever expected to meaningfully contribute to such sweeping political-economy shifts.
The country’s growth prospects have been pummelled as consumer discretionary incomes wilt under threats from rand weakness inducing inflation along with over indebtedness made worse by rising rates. The ruling party’s anti-business tripartite alliance has blocked fruitful government-business relations. Normally, extensive economic policy missteps trigger opposition gains but, while economic casualties are set to expand from a large base, national elections are distant.
The global economy is rapidly reinventing itself in ways which resolutely refute the foundations of SA’s political-economy. While today’s global order has provoked tremendous progress, its core flaw has been the proliferation of patronage machines dominating resource focused economies, such as SA’s.
The recent collapse in commodity prices – which looks to be as much secular as cyclical – is now destabilising resource endowed countries across the globe which have not developed competitiveness-focused economies. Yet commentators are suggesting SA can be righted simply by removing President Zuma or through avoiding a recession and a junk credit rating. Vastly greater shifts are required.
Another impediment is that SA’s public and private discourse is remarkably concentrated amid so called “right brain” processing. When children ask why people beg at street corners, the responses invariably evoke values. It is not easy to overcome the habit of invoking values to cope with complex multi-disciplinary issues.
Learning maths beyond arithmetic teaches the ability to think abstractly and objectively. Such lessons have been overwhelmed in SA by the calculus of victims-and-villains politics.
SA’s values collage reflects residual resentments inspired by an earlier government’s efforts to confine information flows and silence values-based debates. The nation’s current dialogue is routinely restricted by vilifying the viewpoints of those deemed outcasts.
Rejecting the policies of a Hendrik Verwoerd, Robert Mugabe, George W Bush or Jacob Zuma should not preclude critically examining their perspectives and tactics. Each of them took controversial positions regarding the global order being predicated on unconditional sovereignty - which encourages domestic imperialism, that is, patronage machines among resource endowed nations.
As commodity prices have been harshly impaired, these issues pose severe threats to countries as diverse as Venezuela, Saudi Arabia and Russia. SA’s future hinges on being able to manage such issues while adopting policies to accelerate growth and transformation. Currently, the nation is stuck in a political-economic paralysis with indulging values and biases substituting for informed debates.
The comments sections of many SA media outlets evidence a belief that the capture of economic rents by political elites is an African trait. Economic and political history make clear that power grabs were the way of the world until rather recently. Eminent educators delight in illuminating the twisted stairs political philosophy ascended for societies to favour individual rights over might-is-right.
In recent decades scholarly efforts have further considered how the painful path of democratic advances benefited by the unfolding of profound economic forces. Nobility-peasant constructs were predicated on the importance of rural land. Industrial-led growth devastated rural land’s political and economic value. Similarly, today service-led growth is pummelling the economic value and political relevance of controlling commodity deposits. Hence the sudden popularity of the economic expression, “stranded assets”.
SA’s pre-1994 regime manipulated constitutional protections to legislate privileges for a minority defined by race. This was an incredible affront to what so many intellectuals consider to be humankind’s signature social accomplishment, the rule-of-law answerable to democratic forces.
The old SA regime also positioned itself as a bulwark to communism which represented a global threat to the economic dynamism necessary for people to be free to pursue their ambitions. Today SA’s political-economy is as complicated as it is unsustainable; this is not new.
In the quarter century since Mandela was released, communism has ceased to be globally relevant. Rather the economies of the East and the West have merged to an astonishing degree. As Marx greatly respected Adam Smith, he would not be surprised that it is a Smith insight that dominates global commerce today: As the size of the market increases, returns to specialisation benefits compound.
Political and economic stability requires SA’s businesses become vastly more competitiveness-focused through specialising and innovating across local and international supply chains. Rather, SA’s big businesses retain oligopoly biases while the ruling party is disdainful toward competitiveness-focused policies.
Today’s vulnerable nations failed to invest in people and competitiveness. The lists of such countries are dominated by resource endowed nations. Democratic capitalism has spread across the globe. Its failures correlate more with geology than geography.
SA’s polity is captured by a patronage network encircled by populists. The global economy demands that nations compete through innovating, specialising and integrating across supply chains domestically and beyond. As hopes of most young South Africans unravel, SA’s ruling party and its business leaders dither.
Under the pre-1994 regime, exceptional business students were encouraged to specialise in accounting and actuarial science. Today, SA’s top universities have adopted variants of Oxford University’s esteemed Philosophy, Politics and Economics programmes.
Verwoerd was an accomplished academic in sociology who knew well that such programmes are thoroughly laced with the “social justice” debates of great thinkers. Better to direct future business leaders to achieve high technical expertise. Such preferences remain among SA’s executives.
Sending the next wave of business leaders on international management courses seems reasonable. Except such programmes sharpen their existing skills rather than broadening them to grow and transform SA’s economy while accelerating competitiveness gains.
As neither the pre- nor post-1994 governments have been receptive to business leaders intruding on their policy-setting turf, SA’s private sector has not invested in understanding how economic development policies and commercial objectives can complement each other. Yet only the private sector has sufficient institutional capacity to drive formidable economic progress.
Now that SA’s near and long-term prospects orbit around economic stagnation thus luring political upheaval, there is pressure for public and private sector leaders to coordinate their efforts. Notwithstanding much expertise in capital markets economics, the understanding of SA’s executives around economic development drivers is impoverished.
Today’s global order can no longer tolerate the domestic imperialism of resource endowed nations being captured by cronyism. The featured political transmission mechanism, the Mediterranean refugee crisis, threatens European integration and inter-regional peace. The economic counterpart, collapsed commodity prices, threatens SA’s fragile calm. Youthful ambitions require a new political-economic dispensation which seems beyond the purview of the nation’s leaders.
Upgrading from SA’s many ill-conceived and misaligned policies is neither difficult nor adequate. Transitioning swiftly from a resource reliant economy with a patronage focused government into a globally integrated competitiveness-focused economy is an immensely demanding undertaking.
SA’s public and private sector leaders must accept their mutual dependency and shared responsibilities. Discussions should begin by acknowledging the breadth of the challenges.
Shawn Hagedorn is an independent strategy adviser. He can be followed on Twitter @shawnhagedorn.
This article first appeared in Business Day.
