The misconceptions strangling growth

Shawn Hagedorn begins a series taking aim at the bad ideas blocking solutions

President Ramaphosa’s and finance minister Mboweni’s recent addresses to Parliament have removed any lingering hopes of the ANC discovering a high growth formula. Explaining the inability of our other leaders to offer a compelling growth plan is harder but more promising. It requires unpacking why the intersection of our politics and economic policy making is dysfunctional. 

This intersection has been a troubled space for many decades. Fighting corruption is important but insufficient. Chief among the reasons it has been ineffective is the ANC’s dominance of our political discourse through indoctrinating mutually reinforcing misconceptions around social justice and economic development.   

That the ANC’s leadership has given up on designing a workable growth plan doesn’t preclude their adopting one developed elsewhere if it is astutely packaged politically. For this to happen, the misconceptions which preclude healthy growth must be slayed. This is tricky as the beliefs which warp our national dialogue are shaped by the misconceptions we must unpack. 

Specific misconceptions have become as central to our discourse as they are incompatible with growth and prosperity. Rather than being exclusive to the ANC faithful, many are broadly accepted. Thus the core problems reflect how easy it is for today’s patronage-immersed ruling party to politically exploit historic injustices.

For instance, a single word cements our many economic and justice misconceptions while blocking evidence based analysis, constructive cooperation and accountability. It has been chanted so relentlessly that even the shortest descriptions of SA’s economy, by domestic or international commentators, include it. The term provokes more divisiveness than referencing “apartheid” as it is a freshly branded codeword for that era’s legacy.

That the country’s political dialogue can be ravaged by one word, “inequality”, should be a call to arms for objective analysis. Focusing on solutions while being familiar with economic development and social justice basics reveals that SA does not have an inequality problem, per se. 

The ANC’s support now relies less on its liberation-era credentials and more on a poverty-begets-dependency model. Their policies provoke rising unemployment and poverty while their messaging induces fear that others want to curtail vital payments. Further messaging then abuses statistics to express pervasive poverty as inequality. This provides the political cover to perpetuate poverty-provoking policies - which increases inequality. 

SA’s unemployment and poverty are far less closely associated with apartheid than inequality is. This creates a powerful incentive for the ANC to frame economic issues within an inequality context. Yet, whereas even today’s most successful  economic policy makers struggle to maintain growth while reducing inequality, proven policies for reducing poverty and unemployment are well known. The ANC avoids them as they are incompatible with prioritising affirmative action and redistribution.

Focusing on inequality precludes focusing on solutions. Last week, Moody’s finally acknowledged explicitly, "We attribute the persistent economic weakness to lacklustre domestic private-sector demand ..." It was obvious years ago that policies emphasising redistribution and dependency would lead to stagnation for lack of adequate domestic purchasing power. Such policy indulgences must give way to a powerful growth strategy but the ANC’s politically expedient embrace of inequality is the opposite of objectively grasping social justice and economic development dynamics to develop a solution path. 

The politics and mindsets are such that seeking to openly unpack and debate underlying misconceptions with people captured by party dogma, ideologies or greed, is counterproductive. The captured can easily appeal to inculcated narratives. A common refrain is that the beneficiaries of apartheid are just trying to avoid being sufficiently repentant and therefore policies must place increasing reliance on redistribution.

Yet appealing to social justice arguments dismissive of economic development basics cannot withstand serious scrutiny. John Rawls, a professor of social justice, was seen as the most influential philosopher of his generation. His reputation was grounded by his “veil of innocence” thought experiment. He asked, if somehow you didn’t know what your race, gender or place in society would be, how would you want your society structured?

Imagine, somewhat similarly, that you are to be born when Rawls died, about 20 years ago, and you know your destiny is to be a typical person in your society. Which society would you choose if you had 2020 internet access?

SA’s median 20 year old is poor and poorly educated with dismal prospects. When Rawls was born, this was typical in most countries. Today, in all regions beyond this one, quality of life and education outcomes have improved phenomenally and progress continues to compound. Despite being among the most generously endowed of nations, SA was among the worst places to be born 20 years ago as measured by prospects for today’s average young adults.

Core misconceptions, such as lamenting inequality instead of focusing on poverty, are girded by powerful supporting misconceptions. Being the most industrialised nation in the poorest, least globally integrated part of the world helps germinate misconceptions as does SA’s history of divisiveness. 

Words are telling. The term “beneficiation” is to economic development as “sorcery” is to chemistry. Conversely, “diffusion” of west-to-east knowledge helped propel the rise of Asia. East-west value added exporting then fueled profound upliftment which led to today’s multitude of multi-directional flows. Inflaming colonial resentments and relying on resource wealth are irreconcilable with advancing education and broad prosperity.

Redistribution focused policies to make amends for the previous government’s racist oppression are justifiable on social justice grounds so long as they are not over indulged to the point of being counterproductive. Yet 21st century economic development requires intense global integration whereas affirmative action regulations are inherently isolationist. Rather than accept that the antidote to apartheid and poverty is global integration, SA is isolated by walls of misconceptions.  

I aim to show, through a series of articles, how and why those walls must be torn down. Politicsweb is the logical forum to dissect such misconceptions but why am I qualified to help guide such a journey? In terms of direct experience, I wrote a bi-weekly column a decade ago called “Myths and Misperceptions”. As I was born and raised far away, being objective is less difficult. As apartheid was something I studied in graduate school more than a decade before arriving here, days after the 1992 referendum, my analyses feel more informed than coloured by my identity. 

When my Irish-Canadian grandmother’s spoke of how the Irish had been so oppressed, her point was that I was blessed by abundant opportunity. Growing up in America’s South as school desegregation was achieved through “forced busing” - my high school experience blended racial riots with interracial friendships - provided entry-level insights regarding racial strife mixing with slowly expanding opportunities.

What do I know about economic development? As I began studying economics and finance in the late 1970s, I worked as a waiter in a somewhat affluent retirement community. One regular customer’s insight, “learn the basics, see the big picture”, was great advice for a college freshman. He no doubt knew the challenge of a lifetime is to connect the two. 

SA is struggling with the basics of forming a successful society while majority-endorsed politics deny the big picture: the world is moving forward while this country sinks. 

A dysfunctional national discourse is something we can fix. From there, the outline of a high growth path will emerge.

Shawn Hagedorn is an independent strategy adviser   shawn-hagedorn.com