Johan Fourie's blog

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South Africa’s Great Leap Backward

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Great Leap Forward

Over the next few days, South Africa’s new Minister of Finance, Malusi Gigaba, will meet with representatives of the IMF, the World Bank, international investors, and ratings agencies in the US. His aim is to restore confidence, to steer the South African ship through the troubled waters of junk status.

This was a tough task a week ago, but his appointment of Chris Malikane, associate professor of Economics at Wits University, as adviser, has made this almost impossible. Malikane penned an 8-page manifesto early in April, which will apparently form the basis of his policy advice to Treasury. The document is available here: Chris Malikane – Concerning the Current Situation 2017. (Brace yourself: the phrase ‘white monopoly capital’ appears 58 times. The words ‘science’ or ‘innovation’, not once.)

I read the document just before I had to teach a class on China’s Great Leap Forward yesterday, and the similarities were startling. Malikane calls for the expropriation of ‘banks, insurance companies, mines and other monopoly industries, to industrialise the economy’. He wants to establish a state bank, nationalise the Reserve Bank, and ‘expropriate all land without compensation to the ownership of the state’. Oh, and he also wants ‘free, quality and decolonised education, free and quality healthcare, improved quality housing, community infrastructure, etc., affordable and safe public transport, and affordable and reliable basic services such as water, sanitation and electricity’.

An excellent Business Day editorial summed it up perfectly:

Malikane’s ideas are rooted in Marxist voodoo economics. For a finance minister to be taking advice from one with such outmoded and unorthodox ideas puts SA on the path towards such economic disasters as Zimbabwe and Venezuela. Doing so is an act of grotesque irresponsibility.

Just as we all borrow from banks to pay home loans, so South Africa borrows from international lenders to pay our expenses (which are more than our income, i.e. our budget deficit). If international investors do not believe we will be able to repay, they will make our loans more expensive by raising interest rates. It is not that these international investors want to exploit us – just as banks do not exploit us when we voluntarily go to them for loans – it is just that they want to make sure they get their money back. How an academic macroeconomist at one of South Africa’s top universities do not understand this, I do not know. One has to wonder what he teaches his students at Wits?

I hope the IMF, World Bank, investor and ratings agency representatives ask Gigaba about the economics of his new adviser. I hope they ask him what exactly Malikane will do in his capacity as adviser. I hope they ask him to state his own views about the market economy, about the interplay of fiscal and monetary policy, and, just for fun, about the role of Marxist economic thought in understanding international capital flows. And I hope they ask him whether he’s heard of China’s Great Leap Forward, and its consequences for the Chinese economy.*

*Spoiler alert: 43 million people died.

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4 Responses

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  1. I wonder whether one could broaden the comparison with China, connecting elements of the anti-colonial narrative in South Africa to the Cultural Revolution in China?

    Nico

    April 25, 2017 at 03:14

  2. You hit the nail on the head ! Gigaba’ s recent statement that nothing will change is a blatant nonsense and totally in conflict with the mere appointment of Mr Chris Malikane as an advisor , not to speak of ANY of the latters proposals and/or the honourable Mr Zuma’s and State-capture and enrichment actions & plans .

    By all means , add Cuba to the list of examples such as Venezuela and Zimbabwe where the never ending Communist /Socialist “revolutions” have been ever so successful in addressing inequality… if only in the sense that in those countries now everybody is “equally poor” and the people have lost most, if not all, their democratic freedom !! Of the above, Venezuela has by now actually turned into a humanitarian tragedy !

    Add the utter irony that one of SA’s latest friends in the form of Communistic China, has pulled some 400 to 500 Million previously dead poor citizens out of utter poverty , ever since and only, after centuries, they have – if only – started to steer away from their draconian communistic recipe in exchange for increasingly “freeing up their economy” .

    Reality and proof is that stimulated free enterprise models bring wealth and growth, nationalisation brings mediocrity and stifles economic growth for which nobody takes individual responsibility or accountability . One of many example of this must be Poland and East-Germany , ever since they were freed from the Marxist idealistic model and free enterprise re- introduced .

    Peter Degens

    April 20, 2017 at 12:22

  3. Rational thoughts for an irrational cleptocracy. History, economics and logic are lost upon them.

    Christiaan Hoek

    April 20, 2017 at 09:46

  4. Malikane cannot be schooled in the same Macro Economics that I Iearned. His paper is one written by a socliologist who has never worked a private sector day in his life.

    Philip Copeman

    April 19, 2017 at 10:51


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