Google
RSS Feeds RSS | Views on ITInews | contact | terms of use | privacy 
 


Editorial Categories:

FINANCIAL SERVICES
ADVISERS & BROKERS
BANKING & BONDS
BUSINESS MANAGEMENT
COLUMNISTS
CONSUMER AFFAIRS
CRIME & FRAUD
ECONOMY & GLOBAL
EDUCATION & TRAINING
ESTATES & WILLS
HEALTHCARE INSURANCE
INDUSTRY & LEGISLATION
INSURANCE
INVESTING
LEGAL AFFAIRS
LIABILITY INSURANCE
LIFE INSURANCE
MARKETING
PEOPLE & COMPANIES
POLITICS
PROPERTY
RETIREMENT PROVISION
REVIEWS
ROAD ACCIDENT FUND
SHARES & UNIT TRUSTS
SHORT-TERM INSURANCE
TAXATION
TECHNOLOGY
VIEWS & LETTERS


Forthcoming Events:

No Upcoming Events



Save by getting insurance quotes


Proudly South AfricanInforming Consumers and Financial Advisors since 1988 | Click Here to Advertise
Car, household, life and business insurance quotes

News Article : The state of South Africa’s political economy
Category: Economy & Global : Local Economy
Author:Jac Laubscher
Email:[email protected]
Posted:22 Jun 2015

 Email this article Comment on this Article  Print this article

A pragmatic rather than an ideological approach

Can South Africa form a smart, capable, effective, efficient, entrepreneurial, innovative, non-corrupt state?

The Q1 2015 edition of the African Communist contains an article by the Deputy Minister of Finance, Mr Mcebisi Jonas, which provides some useful insight into the present state of South Africa’s political economy (bearing in mind that as indicated by Mr Jonas he is expressing his personal views on this matter).

The title of the article (“Radical economic transformation: towards synthesis and praxis”) places it squarely within the context of the so-called “second phase of the national democratic revolution” in fact, the article is characterised by a realistic and sober assessment of South Africa’s current economic situation and the challenges it faces, and the constraints on policy options as a consequence of not only the global environment, but also domestic shortcomings.

The article argues strongly in favour of a pragmatic rather than an ideological approach to the search for solutions to South Africa’s challenges.

According to the author, the article should be seen as a call “to navigate the turbulent global and national currents requires a unique mix of pragmatism, opportunism and innovation, while remaining true to our ideological commitment to restore social justice”.

Although Mr Jonas argues for a strong role for the state in the economy, he also recognises the role played by markets and the private sector, even if it is for pragmatic rather than ideological reasons, for example, one is still confronted by the usual references to “monopoly capital”.

I must admit that I am a great supporter of pragmatism myself.

In my view, ideology encourages subjectivity and results in people being blinkered in their views.

In other words, ideology is a simplifying mechanism that allows one not to have to think too hard about the reality that confronts one and to deal selectively with the facts.

In the words of Nobel Prize-winning economist Douglass North, “the subjective and incomplete processing of information plays a critical role in decision making.

It accounts for ideology, based on subjective perceptions of reality, playing a major part in human beings’ choices.

By ideology I mean the subjective perceptions (models, theories) all people possess to explain the world around them.” Furthermore, “the theories individuals construct are colored by normative views of how the world should be organised”.

The five different understandings of what “radical economic transformation” means identified by the author bear ample evidence of North’s view, viz.

  • Government-official as reflected in the Medium Term Strategic Framework (MTSF) for 2014-19 with rapid and inclusive growth as its stated objective, and nine pillars of implementation identified
  • Labour (COSATU), with the emphasis on promoting the interests of organised labour but lacking a growth strategy to deal with low-skilled unemployment
  • Populist (EFF), with its emphasis on changing ownership structures through nationalisation but devoid of any ideas to develop and grow the economy
  • Mainstream left (SACP), with the emphasis on delinking the economy from global and financial forces, and downplaying the importance of GDP-measured economic growth 
  • Creative pragmatist (e.g. Joel Netshitenzhe), emphasising the “need to adopt innovative and pragmatic developmental solutions, and a shift away from fixed ideological positions”, for example by the diversification of South Africa’s international economic partnerships (with Africa and BRICS playing an important role) and the formation of a social pact (possibly through a “second Codesa”).

It does not come as a surprise that the Government-official understanding discards the populist understanding, nor that it regards the labour view as not comprehensive enough.

What is somewhat surprising is the critical view it takes of the mainstream left approach, describing it as “romantic” in various respects, given the large number of members of the cabinet who are also members of the SACP.

It bluntly states that the SACP’s “notion of the “GDP-myth is a distraction, and at worst feeds into an anti-growth logic that is potentially dangerous”.

On balance, Government’s own understanding is closest to the creative pragmatist understanding, although Mr Jonas (together with the SACP) believes that one must be careful not to overestimate the ability of Government to influence the private sector to assist it in reaching the “progressive outcomes” it is striving for.

The pragmatism of Government’s current economic policy philosophy is clear from a number of critical observations made by the author.

Firstly, the article acknowledges that the multi-class composition of the ruling party has resulted in policy contradiction and paralysis, with conflicting views of priorities and how they are to be achieved.

Although Government tends to publicly emphasise the National Development Plan (NDP) as the blueprint in accordance with which it acts, Mr Jonas points out that the MTSF has been informed by a combination of the NDP, the New Growth Path, and the Industrial Policy Action Plan.

In his opinion the result is that the MTSF “is not articulated as a clear strategy with the most highly prioritised and sequenced interventions, but rather as a smorgasbord of everything Government is doing in the economic space”.

Secondly, as pointed out by Mr Jonas, one of the main criticisms of the NDP has been its insufficient attention to industrial policy, while industrial policy is at the heart of South Africa’s attempt at achieving rapid and inclusive economic growth, changing the structure of the economy, reducing South Africa’s dependence on commodity markets, encouraging higher productivity, and improving competitiveness.

(Mainstream economists tend to shy away from industrial policy, dismissing it as the government trying to pick winners, which it is not qualified to do. They do so at the risk of ignoring a core aspect of current economic policy.)

Thirdly, Government is constrained in what it can achieve by currently available policy instruments, the implementation capacity of the state, and its ability to influence decision making in the private sector.

One should therefore be realistic about what results are achievable in the short term.

In short, the private sector will at times experience discomfort as a result of an activist government that is set on achieving its objectives.

However, if South Africa can succeed in forming a smart, capable, effective, efficient, entrepreneurial, innovative, non-corrupt state, it will greatly improve the possibilities for constructive partnering between the state and the private sector.

References

African Communist. Number 188. 1st Quarter 2015.
Douglass C. North: Institutions, Institutional Change and Economic Performance. Cambridge University Press. 1990.

Comments:
There are no comments at this stage. Be the first to comment!
Please Login To Comment On an Article - Click here To Login

ITInews invites comments at the foot of each of its articles in which readers can respond freely - anonymously if they wish - to various topical issues and industry debates. However, comments submitted by readers that are defamatory or deemed, by the editors, to be racist or obscene will be deleted from the database. Furthermore, ITInews's editor would like to caution potential posters on its websites that while it welcomes robust debate, it will not hesitate to make the IP addresses of the authors of such defamatory statements available to the authorities, in the event of a court order compelling them to do so.



Get car, home, life and business insurance quotes in 3 easy steps



Join us today

Insurance Quotes


Car Insurance Quotes
Household Insurance Quotes
Business Insurance Quotes
Funeral Insurance Quotes
Life Insurance Quotes

Read the InsuranceQuotes Blog

Economy & Global - Local Economy
Disaster Insurance
Global Economy
Local Economy

More in Economy & Global : Local Economy
Can South Africa avoid junk status? (Part 2)
The risk of a downgrade in the near future is relatively high
Can South Africa avoid junk status? (Part 1)
The South African government does not have a growth policy
South Africa falls short of national savings ‘pass rate’: first Savings Index launched
Investec GIBS Savings Index
Aligning monetary and fiscal policy
Is a tightening of monetary policy in conjunction with an unavoidably tight fiscal policy the best o
The effect of indigenisation, such as BEE, on financial development
Indigenisation as an economic intervention is frustrated by high levels of corruption
The insolvency U-turn
Euler Hermes Economic Outlook 2015-16
Where will growth come from? Part 2
A possible growth strategy in the current global environment
The (not-so-) hidden message of the Medium Term Budget
South Africa needs to reconstruct social consensus behind a path of accelerated economic growth
Where will growth come from?
The absence of an inherently independent growth dynamic in the economy
Contracting GDP detrimental to SME development
2015 was expected to be a better year ...
The SARB and the carry trade
Trying to support the exchange rate of the rand by hiking interest rates is an exercise in futility
Why small business does not create jobs
In South Africa we are self-employed out of necessity
The Fall in Private Investment
South Africa’s potential growth rate has suffered long-term damage
The Management of Government Debt
South Africa runs the risk of its credit rating being downgraded
A few thoughts on the slide in oil prices
The implications of lower oil prices for South Africa are numerous and mostly advantageous
SA consumers cut back on socialising as tough economic conditions
But gifting still a significant portion of budget
Visa African Integration Index shows improvement
But long way off the global median
South African digital economy the most developed in Africa – MasterCard Index
South Africa, Egypt, Kenya and Nigeria are quickly moving towards digital evolution
The threat of secular stagnation
It is generally accepted that structural reforms are the only answer
A medium-term budget: an effort to draw the line
Weak economic performance has enforced material consolidation of fiscal policy


Available Recruitment:
No Vacancies Listed...


ITM Website Design Cape Town
Copyright © 2005 - 2015 ITInews Online Publications (Pty) Ltd. All rights reserved Insurance Times & Investments Online and ITInews. ..::ISSN 1995-1256::.. No part of the materials including graphics or logos, available in this Web site may be copied, photocopied, reproduced, translated or reduced to any electronic medium or machine-readable form, in whole or in part, without specific permission from ITInews Online Publications (Pty) Ltd. Distribution for commercial purposes is prohibited.