Rewriting our broken economic contract: Part 1

Jon Cayzer says that back in the early 1990s the ANC and opposition were separated only by methodology

The Disrupter Who Broke the Mould

It was nearly two years ago. The candidate's car quickly covered the short distance from Sandton to Zandspruit township. There can be few places in the world that can tell a nation's story as starkly as this short journey. Within a few miles the passenger crosses two worlds; the decadence of the palm-fringed, gilded communities for the few to the gut-wrenching poverty of the many black South Africans. 

Grim faced and dodging exposed live electricity cables, the candidate passed malnourished children playing next to the rotting carcasses of rodents. These are children who probably have never downed a glass of milk. Most definitely they had not felt the thrill of the candied rush of the American-style mall with its food courts, movie houses and high-end stores only a few miles away. 

The Hebrew prophet Hosea proclaimed "let justice flow like a river, and righteousness like a never-failing stream" - a favourite rhapsody of South Africa's multiracial and rich mega church preachers that draws many of the country's aspirant middle classes; and while it is true that the surface of life has greatly improved for the nation's top twenty percent, it was grey water - a toxic cocktail of pollution and human waste – that flowed through Zandspruit. The narcotizing smell of cheap drugs hung in the air close by. 

After a while, the candidate caught up with the small group of party activists who had managed to corral a few people from the township. The blue t-shirted gathering included children and a wide-eyed baby strapped perilously to her mother's back. A wooden orator in these settings, the candidate addressed them through a squeaking megaphone. Neither tall or notably charismatic, the candidate did boast a winsome smile and, though well into middle-age, exuded boyish enthusiasm.

Soon after, the candidate was barely visible speaking to a toothless and aged woman in the suffocating darkness of her shack that reeked of paraffin. No one was present to transcribe the conversation. Nor would there have been enough backlight for the photographer to capture the moment. But something happened. That almost mystical act of political campaigning was apparent to those standing outside: the candidate had made a connection.

The cognitive dissonance theory of behavioural psychology applied to politics explains why a voter might experience uneasiness after voting in a way that appears to conflict with their beliefs and preferences about themselves or others. To minimize that mental discomfort, a person will adapt his or her attitude to better fit with or justify previous actions. Had the candidate, even in this brief moment, broken through the cognitive dissonance of this one township voter? Taking his leave and ignoring the glistening fruit and cured biltong laid out on in the boot of the car for his benefit, Herman Mashaba, asked his team ‘how could voters’ possibly vote for a party that has consigned them to this living hell?’

In that long dog eat dog campaign - faced with overwhelming evidence that the state had been captured by a president who ran the country like a Mafioso syndicate, with disintegrating public services and ever widening inequality - a clear majority of 54% voted for the African National Congress. Yet fortune smiled on the ‘Happy Warrior’, Wordsworth’s poetic character, that August day. The differential turnout (the ability of a political party to inspire their supporters to cast their votes) was, as in nearly all midterm elections across the world, skewed in the minority parties’ favour. On a modest swing, the ANC lost its majority in the City of Gold and the biggest South African political disrupter of 2016 became mayor.

Prosaically speaking, the supply and confidence agreement to install Mashaba as mayor (the Economic Freedom Fighters would vote with Mashaba’s Democratic Alliance administration in council) was made to dethrone an ANC that had become tainted by corruption and incompetence. At the transformative level, however, the agreement was as unlikely as Angela Merkel’s ruling Christian Democrats’ forming a supply and confidence agreement with the socialist and populist Die Linke party. Yet it happened in Johannesburg.

It happened because the ‘capitalist crusader’ and his disrupter nemesis, Julius Malema, shared one fundamental diagnosis: The Economic Contract forged during the presidency of Nelson Mandela was becoming obsolete. The election results in South Africa’s largest metro had laid bare a profounder truth about South Africa’s economy two decades after the advent of democracy: the patient was sick and a different medicine therapy was needed.

The Mandela-era Economic Contract

Nelson Mandela had become president as globalization was gathering pace in the early 1990s after the sudden collapse of communism. His Damascene embrace of the free-market system, while attending the Davos World Economic Forum (WEF) soon after his release, undoubtedly conflicted sharply with his political philosophy. Yet only a few dissenters on the left asked if the tropes of the Washington Consensus were appropriate for a country emerging from over three centuries of colonialism and white affirmative action, with deep levels of poverty and inequality paralleled, perhaps only by India after the Raj.

The period between Eastern Europe’s ‘Velvet Revolutions’ in 1989 until the September 11, 2001 terror attacks on New York’s Twin Towers seemed like a golden age. The third industrial revolution was in full swing delivering the world’s remaining superpower a balanced-budget and a dot.com boom that powered America’s longest ever period of economic growth. China’s recovery as an economic, innovative and cultural behemoth lifted more people out of poverty in a generation than at any other time in history.

South Africa had its own good news story to tell. The Lion King president bestrode the world stage like a colossus. Global celebrities such as the Clintons, Oprah Winfrey, the Spice Girls and Princess Diana flocked to South Africa. The cheerful mood chimed with an intense period of “democratic state building.” The ANC government made spectacular strides in providing jobs, water, housing, education and other services for the black majority. 

The ANC and the opposition were separated only by methodology. Both sides of the aisle supported supply-side economics: inflation targeting; low budget deficits as a percentage of GDP; the 'golden rule' of only borrowing to invest over the economic cycle; low taxation by international benchmarks; an independent central bank; a floating currency, and the lightest of industrial strategies. Apart from Thabo Mbeki’s internal critics who blamed ‘jobless growth’ on his economic conservatism, everyone believed that the cake would continue to rise. Politicians argued instead about the speed at which the cake would rise.

To make the cake rise faster, the opposition (and some Mbeki-ites) advocated a leaner state with privatization of the state-owned enterprises to promote competition and even enable employees to become majority shareholders. Privatization sale proceeds would be used to drawdown the national debt, invest in public infrastructure and cut taxation.

There was also strong cross-party agreement on the need for collective action to redress the sins of apartheid and colonialism: black ownership targets for government tenders (black economic empowerment); land reform as a precondition of tenure and restitution; and affirmative action to rebalance the composition of the workforce in favour of the black majority. 

Even through the long ‘national nightmare’ of Jacob Zuma’s presidency that wrecked many of his own party’s achievements, the country’s political establishment continued to follow the same economic vision. In fact, this is when the establishment took its eye off the ball. The opposition fell into the trap of defining itself almost solely as being the polar opposite of Zuma’s presidency. 

Universal and basic rubrics of 'clean' and ‘capable’ government since the days of Alexander Hamilton became an entire brand. ‘Our detergent will get the deepest stains out’ message could have been straight out of a Mad Men ad. Thus, the president’s Houdini tactics to evade corruption charges for raiding the state’s coffers gave his internal and external opponents as much a ‘get out of jail free’ card as it did him.

Overcoming intellectual provincialism

This intellectual provincialism of time and space meant that technological forces that were beginning to disrupt the global economy went unheeded. Most world leaders have started to reimagine the role of government, especially the welfare state, in a new world where tech, automation and artificial intelligence (AI) might outpace net gains in job creation and GDP growth.

Big data will transform our industries and services such as 3-D manufacturing will change how we make goods. South African-born Elon Musk’s Tesla's driverless cars and trucks will disrupt employment and services chains from drivers to insurance providers. A PricewaterhouseCoopers report in 2017 estimated that nearly four in ten of America’s jobs are at a high-risk of automation by 2037. If this holds true for the world’s most sophisticated economy the impact upon South Africa will be exponential.

Yet the entire political establishment continues to blithely “promise” millions of new jobs in its electoral manifestos, online platforms and public representatives’ speeches.

 Like the voter who persistently votes for a party that they know has failed them, the establishment seems unable to overcome its own cognitive dissonance between the implausible promises it makes and the global economy’s direction of travel. This explains why there are early signs that Donald J. Trump’s populist rhetoric to make ‘America Great Again’ is punctuating South African politics. Riffs of ‘America First’ posturing about immigration and ‘jobs for South Africans’ will likely blight our liberal democracy in 2018.

A Mashaba style ‘capitalist crusader’ with a bold vision is what South Africa needs to shatter the outdated nineties consensus forged under Mandela. It will require a vision of deep substance to overcome voters’ cognitive dissonance - voters love the Freedom Charter but also revere Mandela, whose government was fundamentally liberal, at the same time - to futureproof the workforce and economy.

If Cyril Ramaphosa secures the ANC leadership nomination, he will almost certainly head a majority government in 2019. SOEs will be privatized and an IMF-backed debt restructuring programme will be implemented. A Rooseveltian ‘New Deal’ will be refreshed. If Ramaphosa fails, the ANC coalition might fracture and a grand coalition with the opposition emerge. 

But these are local scenarios dwarfed by the consequential challenges of jobs and growth in the fourth industrial revolution.

Jon Cayzer is a former speechwriter to Herman Mashaba, Helen Zille, Lindiwe Mazibuko and private secretary to Prince Mangosuthu Buthelezi.