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Archive for February 2014

Cricket and election fantasies

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Lunch-time cricket at St. George's Park: socialism or the free market?

Lunch-time cricket at St. George’s Park: socialism or the free market?

Here’s what I’d do if I was elected to lead the good people of South Africa tomorrow:

  • I would allocate half the South African budget to Test Cricket. I’d buy out the BCCI and organise a Test League of Nations, to be played in South Africa.
  • I would build fantastic new stadiums, with 120 000 capacity, all around the country. Construction companies would build these stadiums free of charge to show their support for the new government.
  • I would reclassify the ‘unemployed’ as ‘spectators’. Unemployment solved! I’ll give free t-shirts and make these new grounds the only places where you can get your monthly social grant, but only after you’ve watched five days of cricket.
  • I would nationalise forests and tanneries and require them to only make bats, wickets and cricket balls.
  • I’d change the school curriculum to only focus on subjects relevant to cricket: history (cricket history, of course), math (to be able to understand the Duckworth-Lewis system), languages (to allow ex-players to become articulate commentators after their playing careers) and music (to practice playing the various instruments necessary for a stadium band).
  • I would abolish trade with countries that do not play cricket. I’ll call these countries anti-revolutionaries.

This is what happens when you spend three days watching some of the best Test Cricket South Africa has ever produced. (For those unfamiliar with Test Cricket, here is an attempt at an explanation.) South Africa beat Australia in an epic encounter at St Georges Park, Port Elizabeth, and I was fortunate to watch three of the four days live. South Africa, having been beaten convincingly in the first test, had a point to prove, and they did. Centuries by AB de Villiers, JP Duminy and Hashim Amla, and excellent bowling by Vernon Philander, Dale Steyn and Morné Morkel showed why South Africa is the No. 1 ranked test team in the world. Newlands, the venue of the third and final test match in the series, is going to be epic.

Over the same weekend that the Proteas beat the Aussies, two of South Africa’s main opposition parties – the DA and the EFF – released their election manifestos. Perhaps the less said about these manifestos the better. While there is much to applaud in the DAs attempt at realistic expectations, their promise of 8% growth is as fantastic as the fiction that the EFF managed to dish up. I think the EFF missed an opportunity here: their left-leaning policies and energetic (perhaps even inspirational) leadership is attractive to a large segment of society, and understandably so. The fervour of their rhetoric, when the economy is stagnating and improvement is slow, could have attracted a significant segment of black voters (unfortunately, given their biased policies, non-black support would have been weak regardless). But their fanciful manifesto – promising to double wages in the public sector and nationalise 60% of all mines and banks – is much like those email scams I get daily: they are not written for those that can discern right from wrong, but instead for the small percent gullible enough to believe that they can be true. Perhaps in South Africa that is actually a sizeable share of voters.

What could a more realistic EFF manifesto have looked like? I like the idea of additional bursaries for university students, and the fact that we would encourage students to study abroad (I fear, though, that the choice of recipient foreign universities will depend not on quality but political inclination). I also like the ideas of making history a compulsory subject (although, again, probably to teach a very specific type of history), of linking education and training with community service, of special courts for corruption, of moving towards green energy, and even of moving parliament to Pretoria. Instead of 60% nationalisation (see how well that’s working for Zimbabwe), why not advocate a special profit-tax on mining companies (much like Australia has done)? Instead of a higher public wage bill, why not advocate performance-determined wage increases, much like the private sector? Why not emphasize infrastructure spending, which has always been a state-led initiative?

The mantra of the EFFs election manifesto is to build a strong ‘people-led state’ that can, for example, create 1 million small businesses in the next five years. It was lunch on day 3 of the Test Match when I read this. In front of me, on the field, thousands of kids were running around, playing backyard cricket, and the realisation suddenly dawned on me: what we are trying to do in South Africa is much like lunch-time mini-cricket. Two days earlier, Sunfoil (the sponsor) organised official mini-cricket matches to be played by several hundred kids. It must have been a very difficult thing to plan: all the kids had to be brought from schools in the vicinity, buses needed to be organised and paid, t-shirts needed to be printed, each mini-match required a parent or teacher to referee (presumably they were not paid), and bats and balls and wickets had to organised for each of the 20 or so matches played during the lunch break. There was also little incentive to play well: each kid were only allowed to bowl and bat three balls, regardless of how good they were. Some excellent young batsmen, for example, faced a bowler so poor that the ball never even reached them. But it was all planned, so once their three balls were up, they had to move on the next station. Equal, but pretty dull.

The next day, nothing was scheduled. There was no sponsor organising anything, no ‘people-led state’ to ensure that hundreds of kids played cricket. And yet, there were several thousand kids on the pitch, playing their hearts out. How? How could this happen when nothing was planned? In fact, all that was done by the ‘state’ was to open the gates to the field.

That is the metaphor of the free market, of course. Kids brought their own bats and balls. Each mini-game had their own rules, their own number of players, their own parental supervision. They were encouraged to be innovative; some were using shoes as wickets and other mini-games even had umpires and commentators. Some kids played brilliantly well – there really is a lot of talent in the Eastern Cape! Those that had the talent and training could show off their skills to an appreciating audience. Others, with different talents and skills, either stayed on the embankment to sing and dance with the band or were running around as fielders. Different, but thriving.

There is a complication to this story, though. These were probably not the same kids playing on the different days. On the first day, I suspect that most kids were from poorer communities in and around PE, while those on the second and third day were from families whose parents were able to buy tickets and take their children to the ground. For whatever reasons, the kids from poorer neighbourhoods would not have had the opportunity to play cricket at all if their participation hadn’t been planned. How to allow free play, then, in a situation where not everyone has access? Perhaps the state is necessary to help with transport. Perhaps a larger share of the field should be dedicated to kids from poor neighbourhoods. Perhaps they should be given more or better equipment by the state, although that clearly removes the incentives to innovate as was obvious on days 2 and 3.

These are difficult questions, with even more difficult answers. But what was clear to me was that, between the Day 1 experiment in socialism, and the Days 2 and 3 experiment in the free market, the free play experiment worked much better. Those are also the policies I’d vote for.

Written by Johan Fourie

February 25, 2014 at 07:12

Is inequality good or bad?

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Voltaire: Equality is therefore both the most natural of things, as well as the most unreal. Photographed by Johan Fourie in the Pantheon, Paris

Voltaire: “Equality is therefore both the most natural of things, as well as the most unreal.”
Photographed by Johan Fourie in the Pantheon, Paris (2013)

On 7 May South Africans will vote in the country’s fourth democratic elections, 20 years after the demise of apartheid. While there is little doubt about which party will win the elections, and who will be president, there is a general sense of frustration about the slow progress South Africa has made, especially in the last five years, to deliver on the promises of the post-apartheid government. Job creation will be, as always, central to most political parties election rhetoric: from the EFF (“creation of sustainable jobs“), the DA (“South Africans need REAL jobs“) and the ANC (as reflected in Zuma’s State of the Nation Address).

Yet job creation is the means to tackle a much deeper, more striking feature of the South African landscape: inequality. The pervasive difference in living standards that remain 20 years after the end of apartheid – between those living and working in cities and those in rural areas, between those with a good education and those without, and, unfortunately still, between black and white South Africans – is the conundrum that fixates much of our attention. And even though the EFF would want you to believe different, there are unfortunately no easy answers: a massive, state-led industrialisation programme, as history shows, exacerbates inequality, even though the faces of those in power may change. The ANC and DA, instead, propose to grow the economy piecemeal, by implementing market-oriented policies (with differences in emphasis), provide jobs (through the private and public sector), and raise all boats, so to speak. A less radical plan, but also a more proven one.

But regardless of which policies we implement, is it realistic to expect inequality to decline? Sure, some policies may reduce poverty, increase employment, but will it really reduce inequality? And, more fundamentally, should it?

A lengthy debate in the Daily Maverick recently centred around this question: Is inequality a bad thing? Johann Redelinghuys first argued that ‘inequality cannot be fixed’, so we shouldn’t even try to implement policies to attempt to do so. In response, Marelise van der Merwe argued that ‘inequality can and should be fixed’. It is fascinating to also read the comments section, although with the proviso that this is a biased sample of South African public (more educated, and more liberal). This debate mirrors a much broader literature in Economics, dating back at least to Adam Smith, who, many forget, was also critical of societal inequalities. (So, too, were other notable thinkers of the Enlightenment. See Voltaire’s quote above.) But with rising income inequalities globally over the last two decades, notably in China and the US, economists have had to think a lot more about this issue (see Branko Milanovic for more on this issue).

As a positive, inequality creates incentives to work hard. I remember reading a news article a few years ago about a new housing project in the North West province. The government had decided to build several dozen houses after protests by the inhabitants of a small town. One of the commentators on the news site wrote a remarkable story, which went something like this: I was born into a similar township as these individuals. When my friends stayed out late at night, my mother would force me to stay indoors, and study by candle light. I managed to do this for most of my high school career and, when I was the only one to get a C in matric, was fortunate to get a scholarship to go to varsity. It was hard. I failed one year, but finally succeeded with my engineering degree. I found a job, got married, bought my first house, which I’ll have to pay for the next 20 years. Now my friends in the township just got their houses for free. Is that fair?

As Redelinghuys notes, not all of us are born with equal ability, or skill, or determination. Some will rise faster than others, either because they work hard or because they are lucky. In a society where the incentives for self-advanced are removed – like communist societies – innovation, creativity, and entrepreneurship, the reason we’ve been able to improve living standards over the last 200 years, dies. If equality of outcome sounds like a great idea, travel to a former communist country that has remained closed to the market (like Cuba). It’s not a great place to live.

But – we are not born equal for other reasons too. Not only do we differ in ability, skill, and other human traits, we also differ because of historical reasons. Some of us happen to be born into a household where both parents have a university education. Others happen to be born into a household on communal land in the former homelands. Some of us happen to be born into a household with a single parent. Others happen to be born into a family with no income earners. Some of us are born more privileged.

These differences in our starting conditions expand over time. Wealthier parents can afford good nutrition, can send their kids to good schools, and even make sure that these schools are run well. They can provide the necessary health care, they can travel together, they can watch their weekend sport (and pay for sport tours, and equipment, and a school with good sport facilities). As these differences expand, so do our levels of income inequality, further deepening the divide. These high levels of inequality are bad, as Daron Acemoglu argues, for three reasons

First, people’s well-being [happiness] may directly depend on inequality, for example, because they view a highly unequal society as unfair or because the utility loss due to low status of the have-nots may be greater than the utility gain due to the higher status of the haves. Second and more importantly, equality of opportunity may be harder to achieve in an unequal society … Third and most importantly, inequality impacts politics. Economic power tends to beget political power even in democratic and pluralistic societies.

Severe inequality of the kind we have in South Africa is bad because it removes peoples ability to compete fairly. Two Spanish economists expand on this in a new paper published in the Journal of Development Economics. Gustavo Marrero and Juan Rodriquez suggest that a country’s inequality can be divided into ‘inequality of opportunity (IO)’ and ‘inequality of effort (IE)’. These two types of inequality affect growth through opposite channels, so the relationship between income inequality and growth is positive or negative depending on which component is larger. They test this proposal using inequality-of-opportunity measures computed from a US database for 23 states of the U.S. in 1980 and 1990. As hypothesised, they find a negative relationship between inequality of opportunity and growth, and a positive relationship between inequality of returns to effort and growth.

In essence, Johann Redelinghuys believes that South Africa’s levels of severe inequality is the result of inequalities of effort: that poor people are poor because they are generally less hard-working and unambitious. In contrast, Marelise van der Merwe believes we are an unequal society mostly because the lottery of life predetermine one’s ability to rise to a high standard of living. As she notes anecdotally, “if you’re white and have money, you can be a drunk moron flunking on the bones of your ass for most of high school and as long as our marvellous education system pushes you through matric you can probably get into some kind of college and blubber your way into a job.”

Empirical evidence of our survey and census data suggests that Van der Merwe is much closer to the truth: with a few variables, including race, parental education and location, none of which any of us have control over, researchers are able to predict a person’s future income level fairly accurately. It’s not even only about race anymore: A black girl, born into a female-headed household in the rural Eastern Cape, will have a much lower income and living standard when she is 20 years old, than a black boy, born to parents with a university education in the suburbs of Johannesburg. Note that this statistical probability disregards that individual’s own effort, ability or determination to succeed. Inequalities of opportunity still trump inequalities of effort in South Africa, and by a long way.

The challenge is to design and implement policies that increase equalities of opportunity without decreasing inequalities of effort — policies that level the playing field without without changing the rules for some and not for others. Pure redistribution, of the sort the EFF propose, is unlikely to work. Here’s Larry Summers in the FT yesterday:

If income could be redistributed without damping economic growth, there would be a compelling case for reducing incomes at the top and transferring the proceeds to those in the middle and at the bottom. Unfortunately this is not the case. It is easy to think of policies that would have reduced the earning power of Bill Gates or Mark Zuckerberg by making it more difficult to start and profit from a business. But it is much harder to see how such policies would raise the incomes of the rest of the population. Such policies would surely hurt them as consumers by depriving them of the fruits of technological progress.

Summers proposes to redress inequality through market forces, notably the fiscal system:

It is ironic that those who profess the most enthusiasm for market forces are least enthusiastic about curbing tax benefits for the wealthy. Sooner or later inequality will have to be addressed. Much better that it be done by letting free markets operate and then working to improve the result. Policies that aim instead to thwart market forces rarely work, and usually fall victim to the law of unintended consequences.

To what extend the South African tax system can redress the inequalities of the past (without thwarting the incentive to work hard), is a tricky question. What is clear is that we need new ideas. Don’t expect any enlightened answers before May, though.

Written by Johan Fourie

February 17, 2014 at 21:11

We are all European

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We are from Europe. Oh, we are too.

“We are from Europe.” “Oh, we are too.”

Kids, throw away those South African history textbooks. Or those coffee table history books with pictures of Kirstenbosch or Groot Constantia or the Company’s Gardens on the cover. Or those serious historical works that proclaimed that South Africa’s system of apartheid between the descendants of European immigrants and native Africans began in 1652 when a motley bunch of sailors and soldiers arrived in Table Bay to build a refreshment station for the fragile ships of the Dutch East India Company. Throw them away, because they are all untrue.

No longer can it be claimed that Europeans first settled in South Africa in 1652. Instead, Europeans arrived much earlier, around 1000, and settled throughout the western and northern Cape, trading with the indigenous inhabitants – the hunter-gatherer San – and often using them as servants, slaves or wives. They brought with them new resources and technologies – cattle-farming, for example – as they settled the some of the nicest regions of the country, forcing the San, or Bushmen, into the more rugged and less fertile regions, like the  Kgalagadi (with which we now associate them).

Who were these ‘European’ invaders? They were the Khoe, and they were – at least, partly – European. That is the startling conclusion of a recent study published in New Scientist. By using DNA analysis, a team of Harvard scientists found traces of European DNA – “sequences from southern Europeans, including Sardinians, Italians and people from the Basque region” – in the DNA of modern-day Khoesan tribes. The scientists estimate that the European DNA made their way into Khoesan DNA sometime between 900 and 1800 years ago – which was well before known European contact with southern Africa.

We know that the Khoe migrated into South Africa from modern-day Botswana. They were a cattle-herding people, slowly moving south from their roots in modern-day Kenya. In South Africa, they settled first along the Gariep (Orange) river, and then, over decades and centuries, moved south to settle in parts of the Eastern Cape, where they met the Xhosa, and Western Cape, where they lived alongside the San. We knew that the Khoe descended from east African tribes. What we did not know was that these tribes were descended from migrants with a very similar DNA to modern-day southern Europeans:

Archaeological and linguistic studies suggest that a subset of the Khoisan, known as the Khoe-Kwadi speakers, arrived in southern Africa from east Africa around 2200 years ago. David Reich and his team found that the proportion of Eurasian DNA was highest in Khoe-Kwadi tribes, who have up to 14 per cent of western Eurasian ancestry. What is more, when they looked at the east African tribes from which the Khoe-Kwadi descended, they found a much stronger proportion of Eurasian DNA – up to 50 per cent.

Homo sapiens migrated out of Africa between 125000 and 60000 years ago, and it is from this migration that all humans descend. Recent evidence suggests that these migrants interbred with Neanderthals in Europe, to the extend that Neanderthal DNA survives in some European population groups today. But the return migration into Africa (probably through Ethiopia) is something that few scientists expected. Moreover, the proof of this return migration is in the fact that Neanderthal DNA was also found in many African populations, including the Khoesan and tribes in modern Nigeria.

So much for apartheid history which taught us that Europeans first ‘discovered’ the southern tip of Africa on 3 February 1488 when Bartholomeu Dias’ ship entered what he called Aguada de São Brás, later renamed Mossel Bay. Or for apartheid racial hierarchies. Or for current distinctions between ‘European coloniser’ and ‘indigenous African’. As the lead scientist, David Reich, suggests, ‘the cultural implications are complex and potentially uncomfortably close to European colonial themes. I actually am not sure there’s any population that doesn’t have west Eurasian DNA’.

We are not only all African, we are all European too.

Written by Johan Fourie

February 11, 2014 at 05:39

DAgang: A very short engagement

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No laughing matter: Mamphela Ramphele and Helen Zille in good times. Photo by: Mike Hutchings

No laughing matter: Mamphela Ramphele and Helen Zille in good times. Photo by: Mike Hutchings

The Democratic Alliance, South Africa’s largest opposition party, announced last night that Mamphela Ramphele will not be the party’s presidential candidate in the national election. Only a week ago, Ramphele hailed her offer as the DA’s presidential candidate and acceptance of it as “another astonishing moment in what we offer the people of South Africa, and once again the world”. Not so. The media statement released last night states Ramphele “reneged on the agreement that she stand as the DA’s Presidential Candidate, and that Agang SA’s branches, members and volunteers be incorporated into the DA. … The DA negotiated with Dr Ramphele in good faith. Indeed she is a long-time personal friend of mine and I sought to bring her into politics over many years.  We have been through many false starts, but when Dr Ramphele insisted on Monday that we go public on Tuesday to announce her acceptance of our offer of the DA’s presidential candidacy, we accepted that she had finally made up her mind.By going back on the deal, again, just five days after it was announced, Dr Ramphele has demonstrated – once and for all – that she cannot be trusted to see any project through to its conclusion. This is a great pity.”

Perhaps the backlash from her own supporters is what caused Ramphele to renege on her agreement. When she created Agang, her party, early last year, she was adamant that the DA was not the solution to South Africa’s socio-economic problems:

As I met with young people I heard a refrain: we want to take up the challenge confronting us, we want to be more active and engaged but we do not have the platform. We will not vote for the ANC because of their corrupt, autocratic ways, nor will we vote for the DA because we know they do not understand the transformational challenges facing the country.With these comments foremost in my mind I went back to the DA. I did not believe that the English-speaking white supporters of the DA understood the inequities visited on the majority in the country and the consequences of their perpetuation for the quality of our democracy.Some, including Hlumelo [Biko, Ramphele’s son], would argue that the political settlement of 1993 allowed white privilege to remain unchallenged. Hlumelo calls it the ‘Great Fraud’ that let white people escape redressing the socio-economic consequences of apartheid. I felt the DA was complacent, trapped in their inability to realise that poverty could be eradicated.Eventually my discussions with the DA reached a point where we agreed on the principles: most importantly, that the economy needed to be restructured. We agreed we needed to work together.

The DA was an established machine but it needed to be repositioned. And repositioning meant more than rebranding the DA. This problem would not be solved by my presence as leader of that party. My presence would not obliterate the misgivings of the majority of black people.

Take Malusi [Magele, Ramphele’s son] as an example. He grew up playing with Helen Zille’s children. He was always welcome in their household. He did not doubt for a moment that Helen Zille was committed to a better South Africa. Yet he told me that he would rather die than vote DA.

How often would this sentiment not be repeated across the country? So what would be achieved by my joining the DA or even joining a rebranded DA? Nothing.

It is difficult to understand why these sentiments would change so suddenly. More will surely become clearer as the election battle heats up. What is clear is that it is Helen Zille that will suffer the most from Ramphele’s about-turn. It is already forgotten that it was Zille’s position to give – that she voluntarily offered her own position to Ramphele in an attempt to improve her party’s chances at the ballot box. Now she has to front up to questions of window-dressing – the ANC called it ‘rent-a-black’ – and the unhappiness within her party at the abuse of power, however benevolent. On paper her decision was plausible: Ramphele has the CV of a presidential candidate; compare, for example, hers with our incumbent president Jacob Zuma and Julius Malema, leader of the EFF. Yet what Zille failed to see, perhaps clouded by the bonds of friendship, is that Ramphele lacked the political nous that Zuma and Malema have in abundance.

Zille made the mistake of equating friendship with good politics. Perhaps her ambition to affect change was too strong; her patience at the slow political change in South Africa since 1994 had finally waned. Perhaps she thought that, when ANC opinion (especially of its leader) is at an all-time low, there was a chance, however small, that a large minority for the opposition will force the incumbent party’s hand. Instead, she overplayed her own, and her miscalculation has put the DA back another four years.

But the larger lesson should not go unnoticed. What Zuma and Malema understand is that it is impossible to ‘restructure’ the economy, for good or bad, without political power. We still have little idea what ‘restructuring’ means to Ramphele and her followers: Agang has been extremely vague in proposing economic policies. Yet for all her good intentions, by reneging on her candidacy, Ramphele has failed not only in her own attempts at transforming the economy – a transformation that, given her experience, would likely have boosted South Africa’s tiring economy – but she has dealt a huge blow to the Democratic Alliance’s aspirations to do so too. #DividedForChange has never been a sexy slogan, nor a successful one.

Written by Johan Fourie

February 3, 2014 at 06:31