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South Africa the Shift From Socialising the Economy to Liberalising It

         Date: 2012-08-03

           Tag: South Africa, South Africa Economy

Summary: Where the ANC's economic plan lacks a united front and coherence - as demonstrated in a recent ANC policy conference - the DA hopes to capture the public imagination with its own image for the futur…

Where the ANC's economic plan lacks a united front and coherence - as demonstrated in a recent ANC policy conference - the DA hopes to capture the public imagination with its own image for the future and by taking the gap created by a faltering ANC.

Where the ANC is mesmerised by the virtues of the state, the DA is mesmerised by the virtues of the private sector. Yet both miss the point: Economic policy should be tailored to a changing national and global context rather than be based on a set of beliefs and perennial economic truths.

Economic theory is not a religion and the Chinese model (which the DA grudgingly praises) was built on experimentation where the Chinese found their way through the chaos of life as opposed to accepting theory at face value.

Designing a plan to have a particular ideological look and feel will not necessarily lead to unleashing pent-up and frustrated economic agency.

Part of the problem is that the DA's document assumes that, like religion, there must be strict separation of state and the church, so it must also be between state and economy.

Our own history though has demonstrated the close proximity between political power and the nature of economic institutions. They have largely served an exclusive extractive model against the welfare of the general populace.

In South Africa, economic power is defined by patterns of ownership, political access, the monopoly over human capital and skills and control over the flow of capital. Those who control this, determine the architecture of the economy.

What we have is a de facto situation of inherited economic power from an old extractive system with new political masters seeking to align, at least rhetorically, its economic benefits to a wider constituency.

The intent is right but the project has failed because the alignment has been turned into an exclusionary project, which is gnawing at itself. The effect of which is that political power has lost its moorings and the centre of power itself is a source of competition for resources and access. The project of the inclusive economy has been lost in the process.

So what is missing from "Working for Change, Working for Jobs"? There are several things and here are the key issues:

Firstly, a redistribution model that doesn't just rely on the good fortunes of growth or private sector benevolence but is far more astute about the potential for rent seeking in both market and state, making it important for state intervention to be tailored to address abuses.

Secondly, a clear relationship between macro and micro-economic policy to ensure a managed approach to structural shifts based on our intrinsic endowments, needs to be clarified.

Thirdly, dealing with the financialisation of the South African economy (which the document hardly mentions) versus building a real economy where income is hard won rather than accumulated through rents from unearned income.

Fourthly, linking skills imports and investment flow to targeted sectors that enable structural shifts and ensure a more dynamic economy.

And finally, the document lacks sector specific growth and development strategies - it says little about mining, agriculture, the services sector, industrial exports and so on.

Let's hope that in chastising the ANC for 'turning companies into organs of government, the DA does not do the reverse: turning government and citizens' rights into organs of private companies and the market.

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