RPP Guest post 1

RPP is our code for the weekly blog post, op-ed by the School’s celebrity economist / pundit / opinionista, but he will probably only start writing in August, so in the meantime we are filling in with some guest posts.

This week Waldo Krugell on South Africa as a NLC (Newly Latinamericanized Country):

During the past week the blogosphere has filled with analysis and interpretation of the recent events at Marikana. A labour dispute at Lonmin’s platinum mine turned into violent protest and escalated into the shooting of 34 miners by police. Since then a commission of enquiry has been appointed and there has been some effective politicking by former ANC Youth League leader Julius Malema. Pundits have asked whether this will be President Zuma’s Sharpeville and cartoonist Zapiro asked South Africans to set their clocks back 30 years.

At the same time we (well, mostly I) have been reading Acemoglu and Robinson’s new book Why Nations Fail in the ECON623 course. Now, the aim is not to do thorough analysis of the meaning of Marikana, or of the book in this post, but I do have a few ideas to voice and questions to ask.

In the book A&R aims to explain the differences in growth and inequality of levels of development that we observe today. The argue that the engines of prosperity are inclusive economic and political institutions. They write:

The ability of economic institutions to harness the potential of inclusive markets, encourage technological innovation, invest in people, and mobilize the talents and skills of a large number of individuals is critical for economic growth. Explaining why so many economic  institutions fail to meet these simple objectives is the central theme of this book.

They then explain the emergence of inclusive and extractive political institutions and how they interact with the economic institutions. This leads on to a story of extractive elites and how:

Fear of creative destruction is at the root of the opposition to inclusive economic and political institutions.

The question then becomes in what way do institutions matter. A&R argue that at critical junctures small differences made more inclusive institutions possible, or reinforced extractive institutions.

They go on the argue that the changes following a critical juncture were often not based on consensus, but were the result of conflict as different groups competed for power and attempted to structure institutions in their favour.

They call it institutional drift and the result is the so-called contingent path of history:

The outcomes of the events during critical junctures are shaped by the weight of history, as existing economic and political institutions shape the balance of power and delineate what is politically feasible.

You can see how all this can get one thinking about the events at Marikana and what The Atlantic calls South African exceptionalism since 1994. Luckily, Acemoglu and Robinson have already written a number of posts about South Africa on the Why Nations Fail blog.

Their take is that the democratic elections of 1994 brought about inclusive political institutions, but moving towards a new set of economic institutions has proven to be more difficult than expected. The ANC chose to follow a gradual approach and changes in economic institutions was slowed by a fear of collapse of the economy. So, macro policies were conservative, the central bank independent, land reform was undertaken according to the willing-buyer-willing-seller principle, modest redress was provided through the reprioritisation of government spending. There has been significant progress, but inequality between and within groups increased.

This they ascribe to the capture of the new black political elite by the white business elite:

Perhaps the major driver of the lack of effective reform in the extractive economic institutions of Apartheid is not just that the ANC elite were fearful of collapse but also because they started seeing their personal interests in the continuation of the same economic institutions.

In the “fear of populism” post A&R writes that the slow progress in changing economic institutions since 1994, might have created a populist backlash against the ANC, but concludes that populism seems only a distant threat. The last week’s events are clearly relevant.

In the final post they conclude that the real danger lies in South Africa becoming

a Newly Latinamericanized Country (similar to Columbia), one with high inequality and persistently poor economic performance as a result of the fact that the vast majority of its population will still be poor and excluded from economic opportunities. Some people, of course, will be doing extremely well.

So what does it all mean? First I should note that not everyone agrees with Acemoglu and Robinson. Johan Fourie makes an excellent case for the progress made since 1994. He writes:

The reason South Africans still face severe problems today are not due to the greediness of the ANC officials who negotiated peace in 1994, but because these leaders (and their successors) struggled to create or sustain the institutions required of a successful democracy: most notably, a public office that deliver the services their citizens require.

In an article in The Atlantic Daniel Magaziner and Sean Jacobs writes that the narrative of South African exceptionalism has limited the analysis.

Maybe the lessons are not so much about fulfilling the promise of post-apartheid as they are the less particular but even more daunting challenges of poverty and inequality, those faced by the entire international community.

I want to ask, are we again at a critical juncture? And what are the small differences that can make our institutions more inclusive? We should be investing in people. Having a look at the National Development Plan it is clear that there are in fact many things (big and small) that we will have to do right for an extended period of time. Are current leaders inclusive, or are we just seeing another round of struggle for power and attempts to gain control of extractive institutions? I hope not.

One comment

  1. Pingback: RPP Guest post « Skool vir Ekonomie

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