What do you do if you suddenly find yourself on the same side of a potentially ruinous political argument as Ace Magashule or, say, his aide, Carl Niehaus? That is where left-wing economist Neil Coleman found himself last Tuesday soon after he published an article in Daily Maverick proposing that we begin to think out of the box on the economy because, clearly, what we have now isn’t working.
A few hours after Coleman’s piece appeared, Magashule told a press conference that an ANC lekgotla the previous weekend had agreed to expand the mandate of the SA Reserve Bank so that it could take account of the need to encourage employment.
Probably without appreciating just how deviously that idea, plus quantitative easing, had entered into Magashule’s statement, Coleman seems to have accepted an invitation from eNCA to be interviewed on Skype by Vuyo Mvoko, on his piece in Maverick. I don’t blame Coleman for any of this. He may not have heard the Magashule press conference. I didn’t either.
Nonetheless he and Mvoko had an extremely long interview and the TV presenter introduced him to Magashule’s statement, most of which Coleman greeted with sincere enthusiasm.
That’s obviously a problem for people who write off business and the current ANC (read Cyril Ramaphosa) and journalists who support him (read me, among others) as conventional and, basically insane for trying to do the same thing even though you know what the result might be.
Or, to quote Coleman’s piece in Maverick, “A narrative is emerging, particularly in the business media, that there is ‘no need’ for a policy change. Rather, what we need is ‘better implementation’ of existing economic policies. A cynical response to this would be that the ‘no change lobby’ represents a tiny, privileged section of society quite comfortable with the trajectory of economic policy, because it benefits them.”
I’ve not seen that. In fact I agree with Coleman that there is a need for a policy change but I also see him for what he is — inflexible, dogmatic and ideological. He actually knows what to do to create growth and jobs in SA. I don’t. I think I may have an idea or two.
But then I’m not an economist. The scary thing about economics is that for some unfathomable reason it is regarded as a science — a dismal one to be sure but a science nonetheless. The problem with that is that unlike other sciences these guys can’t do little experiments to find out the only thing that matters — what works and what doesn’t.
No, they have to experiment with whole countries. And they have an endless array of excuses if the experiment goes wrong — it was an incapable state, business’s “investment strike” (that doesn’t exist), the international economy, Trump, Brexit, apartheid — anything but a bad idea in the first place.
Earlier this year finance minister Tito Mboweni invited some senior and clever international economists to a colloquium in Johannesburg. He’d had one in December as well. My favourite development economist, Ricardo Hausmann, head of the Centre for International Development at the Kennedy School of Government at Harvard University was there. Dani Rodrik, highly regarded, was there. Mboweni wanted to hear them talk about how to fix an economy like ours.
And it was really worth asking them. These people see more real experience, given the resources at their disposal, than most South Africans do (other than the South Africans working for them, one of whom is helping the Sri Lankan government understand exactly how to persuade people to invest in their country). The have measurements, results, outcomes and experiences in dozens of places.
Nonetheless Mboweni was hammered by about 40 or so local economists, (one of whom was Coleman) because they weren’t invited to his discussions. They were jealous. They couldn’t see the point of talking to the “establishment”, international or local. They were “progressive” (which is what left-wingers call themselves) and Mboweni should listen to them.
They collectively signed a letter to him just before the second colloquium in January. “We welcome the contribution and exchange of ideas from all quarters,” they said to Mboweni “including international scholars who are committed to the social transformation of our society. There is a lack of diversity, however, in the international contributions, privileging international scholars and policy-makers …”
The solution was to “entirely reconsider” the list of invitees, reconsider the role of international invitees (I presume to control what it was they could say or do) and, obviously, that “progressive economists be given a meaningful platform to present alternative policy proposals at the colloquia”.
Here for your interest is part 1 of Coleman’s column, published in Maverick last week. Embedded in it is the letter he and others wrote to Mboweni.
All very nice and I find myself agreeing with a lot of what Coleman (in his article, not the letter to Mboweni, which I thought was childish) has to say. We do need to think differently here. We have to find what works. I have never met Coleman but I think I know from grim experience that talking to “progressive” economists is a zero-sum game. They already know everything. Just like the ANC already knows everything. They’re not interested in new stuff (certainly nothing from lowly Harvard). They simply want their convictions confirmed.
Now, however, Magashule has gone and confirmed some of Coleman’s convictions. I would not put them in even remotely similar ethical boxes but the “progressive” economists in this country must better understand how they may be giving succour to a bunch of thieving, rent-seeking reprobates who would pervert our democratic order at the drop of a hat if they thought they could get away with it. The establishment, let it be said, have already done that but they got caught, or at least some of them did.
It is one thing to share a discussion about broadening the mandate of the Reserve Bank. And, yes, many other perfectly good central banks have an explicitly wider social mandate. You can even have a civilised discussion about whether inflation matters as much as the Reserve Bank thinks it does. But it is another thing to change the mandate under political pressure to do so.
The same applies to nationalisation of the Bank. To do it without compensating the current few private shareholders would be to invite international opprobrium. To compensate them would cost tens of billions of rands. So which group of desperate citizens does the state take that money from in order to pay off people who have no power over policy whatsoever and more money then they need already?
It is all very well to rail against the establishment but surely much more interesting to try to take it along with you. That’s what Ramaphosa has to try to do to meet his political and policy objectives over the next few years. It involves compromise. Trying to do no harm. Perhaps the progressives should try it. For the most part, I’ve no doubt, they’d prefer Ramaphosa to survive Magashule’s juvenile efforts to goad him into making a political mistake.
I also presume Coleman will be writing part 2 of his article this week. I can’t wait to see what he has to say about Magashule and that press statement and what he thinks of the bits Magashule added to the statement he was given by Luthuli House.
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