The sudden disintegration of the so-called socialist Eastern Bloc in the late 1980s & early 1990s created a short-lived and euphoric sense of victory by the market-dominant political economy of the West! It was not long before the free-market capitalism of the West ran into deep-rooted systemic crises of its own. The 1990s and 2000s were the years of compounding crises of the market economies of the West. The financial crisis of 2008 in many respects was the tipping point of the fall of a great pretence. The process is still unfolding, and will remain so for a while to come.
From this cursory and sketchy review of the comparative systemic evolution of our past century of social engineering, I like to draw three key points relevant to our task in hand today in South Africa, i.e. the launch of The Great African Society.
a) First and foremost is the fact that these two opposing systems of social configuration, i.e. capitalism and socialism, had one thing in common, namely they both emphasized, indeed focused on, the secular or materialistic development indicators of social progress.
b) Second is the fact that the role of “the initial conditions,” as it is known in economic jargons, was by and large ignored by both systems.
c) The third lesson arising from our recent past is the importance of time, or timely action, or differently put is the critical role of the opportunity cost of timely and integrated action! Allow me to expand on these three issues.
The rise of secularism and its rapid transmutation into materialism has had deep systemic consequences. It is a historic fact that all modalities of social governance, ie capitalism, socialism and communism, defined progress and the ultimate goals of socio-economic development in terms of materialistic indicators alone. These systems of governance differed only in terms of the means of delivery; that is some relied on the machinery of the state to achieve the developmental goals whilst others propagated a mixed economy made of both the state and the market structures.
In effect, “development defined in terms of certain patterns of “modernization,” however, seems to refer exactly to those processes, which promote the domination of people’s material ambitions over their spiritual goals. While the search of a scientific and technologically modern society is a central goal of human development, it must base its educational, economic, political, and cultural structures on the concept of the spiritual nature of the human being and not only on his or her material needs.”
This over-emphasis on material indicators has deep systemic consequences. One critical of these is what I call “value duality.” Generally speaking, in South Africa, as in almost all other countries, over the past few decades, a gradual but tangible rift has emerged between the country’s socio-economic ‘formal (professed)’ as opposed to ‘informal (practised)’ ethics. For example, in the business sector, business executives and corporations formally subscribe to the ‘codes of good corporate governance.’ Their annual ‘glossy’ reports are decorated with “impressive evidences” of their socially responsible citizenship. Yet operationally they do not hesitate to collude and/or abuse their market powers.
Evidences of price fixing amongst pharmaceutical companies, construction companies, cement manufacturers, bread producers and steel manufacturers have been high profile cases over the past few years in South Africa. Sasol, South Africa’s most celebrated petrochemical corporation, has been heavily fined, both locally and internationally in the EU, for its extensive anti-competitive practices. The country’s banking sector is also accused of malpractices and a report in this regard is yet to be made public by the Competition Commission. The banking sector is alleged to be exerting every pressure to halt its publication. The cellular phone companies are likewise accused of collusion to fleece the consumers in South Africa. There are also allegations against tyre manufacturers in the country, and so on.
The gap between the formal and informal ethics within the government sector is even more pervasive and pronounced. Frequently, government ministers and departmental executives espouse ‘global best practices,’ and yet operationally in their organizational and managerial behavior, there is little evidence of the values, standards, or practices that conform to their formal statements. Whilst the Batho Pele principles are stuck on every wall in every government department, the experience of the citizens speaks of a contrary and divergent conduct. Duality of the values is equally prevalent in labour unions, the media sector and other social structures and organisations.
Pervasive duality of values within the society leads to a vast array of social ills. The most visible of these is the spread of corruption in both the private and the public sectors. There are convincing and growing evidence that the facts as well as the allegations of corruption in South Africa have gradually tarnished the internal and external perceptions of the state operations as well as the political authority of the government. It has harmed the business sector too. As a result, social trust in government has been considerably undermined.
Whilst the economy and the society at large suffer the consequences of widespread corruption, the poor within the society bear the brunt of its impact. After all, the poor are far more dependent on the performance of the public sector. The rising disparity of income, the growing gap between the rich and the poor over the past decade is in part due to the growing spread of corruption across all sectors and spheres of the economy.
Given the historic inequalities inherited from the previous dispensation, it is South Africa’s manifest moral failure ever since the dawn of democracy in 1994 that it has failed to curb the scourge of corruption in public and private sectors. This systemic bias against the poor remains most problematic in today’s South Africa.
The duality of values has been accentuated by the processes of socio-political transformation. In general, it is much easier to create convergence of values in homogeneous societies as opposed to communities where tribal, cultural, religious and ideological differences prevail. Interestingly enough for the classical economists, the consistency of values was almost axiomatic. For example, on the socio-economic significance of honesty, Adam Smith in his Theory of Moral Sentiments argued that a well-functioning society was dependent on compliance with what he termed a “code of honour.” The absence of a ‘code of honour’ ultimately leads to inefficiency, under-performance, and corruption in one or other form.
Corruption in the society acts much like cancer in the human body-if not stopped, for sure it will spread! Whilst initially some acts of corruption may even be deemed to be expedient, their ultimate and cumulative effects will be only detrimental to the developmental path of the society. Most significantly, corruption erodes the moral authority of the state and the party in power.
Given the absolute and pivotal role of “internalised values” for social progress, I submit that conspicuous by its absence in our current socio-political discourses is the need for a process to create sufficient consensus around a national code of honour that would, in time, guide our social conduct in all sectors and in all individual and collective behaviour.
In this respect, The Great African Society makes mention of ‘values,’ yet in my view such mentions are too incoherent and dispersed. As importantly, the book does not dwell on the ways and means of initiating and conducting a process of reaching sufficient consensus on this pivotal and foundational plank of social progress within our vastly diverse society.
The Significance of the Initial Conditions
The initial conditions are critical for the feasible paths that economic systems can pursue. The initial conditions, made up of a basket of private and social assets or endowments, define the feasible set of sustainable developmental path for the society. Here the initial configuration of individual, economic, social and institutional asset base or endowment is the key determinant of societal progress. The failed experimentations of the past century both in the East and in the West bear testimony to this fact.It is in this context that the “plan” articulated in The Great African Society places so much emphasis on changing the resource allocation pattern, by reconfiguring innovative interventions and doing all that it takes to re-engineer a more equitable and sustainable “initial endowments” of the currently marginalised and in particular the youths who are trapped in the vicious circle of poverty and dependency. This critical insight is fundamental to the achievement of all other socio-economic and political goals.
In the repetitive game of economic activity unless there is room for upward mobility, the compounding impact of accumulation over time rapidly expands income and wealth inequality. By changing the pattern of initial endowment we do not create equality but we improve equity. Systemic equity in the form of actual and perceived social justice is a key prerequisite for higher and sustainable growth. At present there are systemic limitations to the level, the nature and the sustainability of growth in the country.
One of the systemic anti-poor factors in today’s South Africa is the nature of economic growth and its inherent limitations. Since 1994 there has been a growing recognition that for the country to make a meaningful dent in poverty eradication and sustainable job creation, the average sustainable growth has to be lifted to a multiple of what it has registered so far. This means average GDP growth rate of between 6% to 9% sustained over a period of 15 to 20 years. For such growth levels to be a real possibility there is a need for a much higher level of social cohesion as well as stakeholder commitment towards a convergence on approaches to economic growth and development.
It must be said that Hlumelo’s proposed plan of action is visionary, and possibly unprecedented in modern global policy history. Its fundamental redistribution is of a much higher order of magnitude. As such, its championship with the society and its implementation will require an equally unprecedented leadership and technical capability. Even more so it will require an impeccable “code of honour” for it to gain legitimacy and currency. This too highlights my previous observation that we urgently need a discourse on an appropriate set of values to govern our conduct in general and behaviour when involved in public policy.
The Opportunity Cost of Integrated Action
Time is an important ingredient of success! More often than not, this simple factor is neglected at a major cost to the social welfare in general and loss of welfare of the poor in particular. Fractured and contested public policy making wastes time and squanders opportunities. One of the major casualties of South Africa’s contested public policy domain has been a near total neglect of the country’s industrialisation base. Despite numerous public policy statements and pronouncements, South Africa has experienced a real decline in its industrial base. More specifically, the key productive sectors of agriculture, mining and manufacturing have been neglected over the past decade or so. This process of de-industrialisation has been costly in terms of job losses and the loss of productive opportunities. In the manufacturing sector alone, over 500 000 jobs have been lost and the relative contribution of this sector has declined from 22% to 16% currently. A similar trend is true for the mining sector, agriculture and agri-businesses. The effects of these trends on poverty as well as income inequality have been considerable.
These sectors are vital for medium to long term success in the fight against poverty. A focus on rejuvenating the country’s industrial base within a framework of an integrated beneficiation of mineral and agricultural resources requires a much higher level of collaboration and stakeholder commitment than has been the case thus far since 1994.
In addition, success in the re-industrialisation strategy calls for refinements in a range of policies associated with education and skills, infrastructure financing, and public policy implementation. To this end time is important. Introducing the wrong policies in the right time is as ineffective as implementing the appropriate policies but in the wrong time period. Procrastination of a set of well-considered and integrated policies is a major tax on the poor. In effect, the current policy paradigm within the prevailing global environment embodies considerable anti-poor biases.
This is particularly ironic at a time when our continent, and in particular the Sub-Saharan region, for the first time in its modern developmental history is registering high and sustainable growth. South Africa’s participation in this process is vital for its own and for the region’s global competitiveness, and success in poverty eradication.
The march towards the great African society needs urgent attention by leaders across all walks of life in the country. The opportunity cost of any delay will augment the human and financial cost of embarking on it at a later stage. However, the prevailing culture of public policy making in the country is a matter of great concern. The contested and fractured approaches to economic policy making since 1994 has become almost one of the defining features of public policy making in South Africa. No sooner is a policy announced than either the organised labour or the business organisations cast serious doubts on its motive, legitimacy and validity, never mind its success.
Thereafter, every effort is made to discredit the announced policy and ensure its procrastination and delays in implementation. Whilst open engagement with policy approaches and their technical underpinnings and objectives is an integral part of democracy, a protracted contestation and ongoing adversarial ideological battles over policy is not conducive to sustained high growth levels. In essence, these adversarial approaches ultimately divert attention from the medium to long term issues and channel resources and energies toward short term crisis management. The opportunity cost of this modus operandi is considerable, and for the poor it is unbearable.
In essence what appears to be in short supply is a healthy dose of ‘idealism.”There is too much emphasis on “the prevailing reality”, which in itself is nothing but a perversion of the reality! For example, how often we hear that : “the reality is that labour is disruptive, the politician is corrupt, and the businessman is greedy and uncaring”! The fact is that these realities need to be brushed away by another reality which is the pulsating urge within the society for a different and more humane “reality.”
To get from the reality we live to the reality we like to experience, we all need to rethink and re-envision our ambitions. In the lingo of modern technology, we need to reboot (control-alt-delete) and work towards creating a new society, underpinned by a new set of values, predicated upon the oneness of our humanity, aspiring to reconstruct the society filled with reciprocity and individual pride in hard work and achievements. But idealist plans require pragmatic programmes and interventions. Hlumelo’s proposed plan is idealistic in nature but underpinned by pragmatic interventions. In this Hlumelo distinguishes himself from all others who have offered policy alternatives.
Another distinguishing feature of Hlemelo’s plan of action is its integrated nature. It is one of the few books where sociology, psychology, politics, economics, business, history and even corporate finance are blended masterfully. This fusion of insights is remarkable in its depth and the Book’s gem-like insights bring to light a reality that we can all strive for, participate in and help transform our “lived reality” to a superior and more humane reality.
Before I end, and by way of conclusion, my assessment of the book would be incomplete without a technical critique on a specific, but significant, point. Far too often over the past decade commentators and political ideologues have made mention of the so-called “South Africa’s jobless growth.” The term has received currency, it so appears, based on the premise that if something is repeated frequently enough, it will become a fact! To my surprise, Hlumelo also employs this term as a statement of fact!
The truth of the matter is that South Africa’s growth ever since mid-1990s has never been jobless! Technically, it is a concomitant of any sustained growth to create jobs, but such jobs may not be of the level of skills that can employ the unemployed. It is true that with modernization of the SA economy post 1994, the employment creation capacity of the economy has been transformed due to mechanization and skill-intensity. Fewer jobs are produced per unit of GDP, and these job opportunities are far more skill-intensive than before. But it is not true that jobs are not created in the process. The fact that even in these days of falling growth rates, there are large numbers of employment opportunities vacant, both in the public and the private entities, bears testimony to my argument. In fact, we have a classic case of skills mismatch as opposed to jobless growth.
This argument further strengthens Hlumelo’s proposed plan of action for urgent, meaningful and accelerated up-skilling of our youths. This becomes even more urgent given that the process of skills intensification of the economy is irreversible, and as time goes by skills intensity will only deepen and widen. South Africa has not yet received the full benefit of digital technology, so in the next few years the level of skills mismatch is likely to rise.
In closing, it is my pleasure to congratulate Mr Hlumelo Biko, for his excellent, honest and constructive engagement with some of the most complex issues of our time in South Africa. His proposed plan is ambitious but highly relevant. I wish you well with the distribution of the book, and sincerely hope that our fellow South Africans will arise to engage with the vital plan of action proposed in your book!
By Dr Iraj Abedian
At the Great African Society book launch event at UJ Soweto.