Max du Preez

Rent-seeking and populist rhetoric won’t kill poverty

2017-08-29 08:43
Opposition members shout slogans against Venezuela's President Nicolas Maduro during a National Assembly special session in Caracas, Venezuela. (Fernando Llano, AP)

Opposition members shout slogans against Venezuela's President Nicolas Maduro during a National Assembly special session in Caracas, Venezuela. (Fernando Llano, AP)

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How many legs does a dog have if you call the tail a leg? Four. Calling a tail a leg doesn't make it a leg. – US president Abraham Lincoln.

Few things in sunny South Africa are what they pretend to be nowadays.

Words and phrases have lost their original meaning. The Hawks are behaving more like Vultures. The Crime Intelligence Unit doesn’t fight crime, they conspire against the president’s enemies. The National Prosecuting Authority doesn’t really prosecute. 

The people shouting the loudest for radical economic transformation (RET) and against white monopoly capital (WMC) are in fact hell-bent on destroying economic growth, and so ensuring that all but themselves will get poorer.

Their political opponents, the so-called agents of WMC who are skeptical about the Bell Pottinger mantra of RET, are in fact our best option to make a serious dent in inequality and unemployment.

These “sell-outs” believe in clean and effective government and want to grow the economy so that more people can participate in it meaningfully and find jobs.

So, if you’re a delegate to the December elective conference of the ANC, be counter-intuitive: don’t vote for those populists who glibly promise you fabulous wealth, land and jobs. 

They won’t be able to keep their promises if the economy isn’t going to grow – there will simply be less to go around.

The fight against inequality and unemployment is a difficult one that has been researched by many clever people for years.

The four current textbook cases, countries that have had some success in this struggle, are Uruguay, Ecuador, Cambodia and Kazakhstan.

They have two things in common: they all had solid economic growth (higher than 4 percent) and focused on an effective bureaucracy, the eradication of corruption and on strong corporate governance.

An aggressive redistribution of property and wealth without economic growth and large-scale nationalisation – the plan of the Zuma-ANC’s fiscal populists – were not part of their recipe for success.

These were part of president Nicolás Maduro of Venezuela’s economic model, and look at what that has brought this once wealthy country: food shortages, collapse of health services, inflation close to 1000 percent, an undermining of democracy and the threat of a civil war.

This is the stark, undisputable reality: no society has ever successfully fought poverty, inequality or unemployment while their economies were stagnant or in recession.

Just last week, Statistics SA said that poverty had increased between 2011 and last year and that a quarter of our people now live in extreme poverty. 

This is contrary to the international trend, also the trend on our subcontinent.

Most of the blame for this can be put at the door of the Zuma government, led by the man now parading as the economic liberator of black people.

We can’t blame lower commodity prices on Zuma, and that was a factor hurting our economy.

But we can blame him and his inner circle for policy uncertainty, low investor confidence, the paralysis of the state due to faction fighting in the ruling party, state capture, corruption, maladministration and reckless statements and decisions, like firing an excellent minister of finance for no legitimate reason.

It was under the leadership of Zuma and his loud fellow supporters of RET that the Guptas and other rich crooks stole huge chunks of the state and sucked state-owned companies dry. 

In the process Eskom, SAA, PetroSA, Prasa, Transnet and the SABC became bottomless black holes into which billions of rands of taxpayer money are still being poured at the expense of service delivery, job creation, better education and health and general development.

Former finance minister Pravin Gordhan recently speculated that state capture had cost South Africa in the region of R80 billion, while former tourism minister Derek Hanekom put the figure closer to R100 billion.

The problem is not, as some free market fundamentalists believe, that we have so many state-owned enterprises.
State companies have helped China and Singapore to grow their economies and alleviate poverty significantly.

But this model worked in these countries because they followed a strict formula: a strong corporate governance culture, absolutely no tolerance for corruption and high technical ability and professionalism of employees.

These three elements are not present in the formula used in South Africa, because that would make it impossible to fleece these enterprises.

Rent-seeking and rhetoric won’t kill poverty and inequality.

Calling a tail a leg doesn't make it a leg.

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