So, recently I’ve been reading a book called ‘Why Nations Fail’, which attempts to provide reasons for why certain countries in the world are more prosperous economically than other countries, and what factors within a country brings about the creation of wealth.
The theory proposed by the book centralizes on institutions, specifically political institutions and the subsequent economic institutions that are formed by it. The book posits two forms of institutions, inclusive and extractive. Extractive institutions are those institutions that are formed to serve only a narrow elite with power and wealth, while an inclusive institution is one that all members of a country can join in to, such as democracy and the free market economy. The book goes on to convincingly argue that inclusive institutions are more capable of growing a country’s economy than extractive institutions.
With these lessons in mind, I will set out to apply this theory to South African economic and political institutions.
South Africa’s political institutions appear to be quite inclusive. We have a well-established, proportional representative democracy. Alongside this, we have other strong inclusive political institutions. These include a Constitution, with an enshrined Bill of Rights to prevent Government’s abuse of power, as well as a Constitutional Court and Parliament which should, in theory, keep the executive power to account. Should all these institutions work as intended, which one could argue either way, we could with some confidence state that South Africa is politically inclusive.
Economically speaking, it is a whole different story. It doesn’t require many words to express why South Africa currently have an extractive economic institution, passed down throughout the ages. More news and articles on the current State Capture see the light every day. The elite, in this case particularly President Zuma and his Gupta chums, are milking the country for their own benefit. As one example of this, Zuma upgraded his private home to the tune of R248 million of taxpayers’ money in 2014. This is in a country where the unemployment rate currently sits at 27,7% and 12 million citizens live in extreme poverty. With this example in mind, as well as a cursory glance at the headlines of any major news publication, we can assert that the elites in the country are extracting wealth from the poorer citizens.
These two factors introduce us to another term coined in ‘Why Nations Fail.’ That term is ‘critical juncture.’ A critical juncture is defined as: “A major event or confluence of factors disrupting the existing economic or political balance in society.” South Africa is currently facing a critical juncture. More information regarding the extent of the extractive economic institutions set in place appear daily. South Africa is experiencing its first recession since the 2008 worldwide economic crisis, and its unemployment rate in at the highest in 13 years. Politically, the ruling party is being torn apart between pro-Zuma and anti-Zuma factions, vying for control.
These critical junctures can cause our current mix of institutions to go two ways. Zuma can be removed through our politically inclusive institutions, such as a vote of no confidence in Parliament, or Zuma can use his wealth and power to consolidate his control and form more extractive political institutions. This, for example, would take the form of a proxy Zuma presidency through his ex-wife, Dlamini-Zuma, or his refusal to step down after the end of his second term.
As such, South Africa currently stands at a crossroad, and the path it takes might determine its future for decades to come. Should Zuma and his cabal strengthen their political control, SA will probably see the formation of a dictatorship and more extractive political systems, as has been the case throughout other African countries. On the other hand, should Zuma be removed from power peacefully through South Africa’s established inclusive political systems, the future president might be able to dismantle some of the existing extractive economic institutions, such as the presiding system of State Capture, and create a more inclusive economic institution, to the benefit of all and not the few.