A few weeks ago, a few hundred protesters marched through the Cape Town city-center demanding free housing, sanitation and other services. The boisterous crowd, spurred on a by a member of the ANC Youth League, then went on a pillaging spree, destroying cars and, notably, the livelihoods of some of the city’s poorest entrepreneurs.
While this event is not unique to Cape Town – as a quick Google search for the words ‘service delivery protests’ would show – the New York Times decided to publish an opinion piece by T.O. Molefe which use the Cape Town protests as setting to build a case against ‘the false doctrine of (economic) growth’:
Twenty years ago after this country was reborn after more than three centuries of rampant and institutionalized racial discrimination, it remains mired in economic disparities.
Unfortunately, despite evidence showing that the economy almost tripled in size over the past two decades and inequality worsened, pundits, business leaders and policy makers, including Ms. Zille’s party, continue to insist that growth heals all. It just needs to be made more inclusive, they say.
The solution, they say, lies in deregulating the labor market to get people into jobs — regardless of whether those jobs are secure or allow people to live with basic dignity — and relaxing exchange controls to give South African capital greater global mobility, because it will all trickle down to the poor in the end. They are wrong. The solutions they propose have been tried elsewhere and have failed. But such arguments are particularly infuriating because they relegate to a side show the goal of remedying the racial and economic inequality created by colonialism and apartheid — those same forces that pushed Ms. Boltney and millions of others to the city’s periphery — out of sight.
Since its rebirth, South Africa’s has had in place the moral and constitutional basis for ending inequality and poverty in the most direct and equitable manner possible: redistributing wealth and income from the rich minority to the poor majority.
But, instead of pressing ahead with this, the country’s leaders succumbed to a false global doctrine that — using the World Economic Forum’s archaic assessments of competitiveness — views the basic human rights protections contained in South Africa’s Constitution and labor regulations as factors that reduce the efficiency of markets. Such egalitarian laws, in this view, prevent the country from competing for foreign direct investment with countries like India and Indonesia, which do not have the same progressive founding ethos of social justice and human dignity.
It is perhaps slightly ironic that Mr Molefe uses Cape Town as the setting for his attack against the capitalism. The Western Cape is one of the fastest growing regions in South Africa, where poverty levels have fallen most significantly (but also where migrants are moving to, which suggest that conditions and opportunities must be better there than elsewhere, right?). I have other questions too. Perhaps Mr Molefe would tell us in greater detail when and where labour market deregulation has failed? Or where growth has failed to reduce poverty? Or why he calls competitiveness ‘a false global doctrine’?
Mr Molefe, author of ‘Black Anger and White Obliviousness’, suggests that ending poverty and inequality will be achieved through the redistribution of wealth and income from the rich to the poor. When last did Mr Molefe investigate South Africa’s income distribution? If he used the Census 2011 to do this, he would realise that even if all of South Africa’s whites left the country tomorrow, and their incomes were transferred directly to the poorest, we would still have lower per capita incomes than Brazil, Russia, Latvia or Gabon. In other words, we would still be poor. And does he know that if all white South Africans left the country tomorrow, the Gini coefficient would stay the same? That is because the major trend after apartheid has been the large increases in inequality within the black (and white) population.
I suspect Mr Molefe also failed to read any of the most recent work by economists that attempt to address South Africa’s legacy of discrimination. Based on years of excellent research, Servaas van der Berg summarises the difficult solutions we face if we are to reduce inequality and increase living standards. Yet Mr Molefe would probably disregard such advice, given that it is posted on a World Bank website, an institution he clearly despises. There are valid reasons to criticize the work of the World Bank. Jagdish Bhagwati has done so. Yet Mr Molefe would do well to read Bhagwati’s latest book – Why Growth Matters – which explains the miracle economic transformation still underway in India. In fact, Mr Molefe’s use of India and Indonesia is extremely ironic: these are two countries in the world that has made the most rapid improvements in poverty in the last two decades by doing exactly the things he warns against.
First-year textbooks often use the metaphor of doctors to explain what economists do. When a patient feels ill, they go to a doctor who, through various tests, identifies the cause of the illness and prescribes remedial medicines. Similarly, when a country is performing poorly, it is the economist’s job to identify the causes of the problem and identify remedial policies. Economists in South Africa are doing this, in education, in health, in fiscal policy, monetary policy, environmental policy and labour markets.
Unfortunately, as elsewhere in South Africa, the advice these doctors give are sometimes difficult to swallow. Their diagnosis suggests that the symptoms of the disease will remain for a long time, and its demise will be painful and expensive.
So, instead, we visit a sangoma. With no formal training as a doctor, this is someone who prescribes a remedy that is more to our liking. Sometimes, if we’re lucky, the symptoms would disappear. But mostly it doesn’t, and often-times it is likely to worsen. That is because there is no scientific basis for the prescriptions.
The likelihood that Mr Molefe’s prescriptions improves the welfare of our poorest citizens is far smaller than if Mr Molefe had understood the science of economics. There is a reason sangoma’s are popular; they give easy answers to difficult questions. Sangoma’s are also quite vocal, and shamelessly promote themselves.
I fear we will see the proliferation of sangomanomics in the coming years, with no or even negative consequences for those who most suffer the perils of poverty.