Economics, BEE and Mr Zuma's successor

“The curious task of economics is to demonstrate
To men [sic] how little they really know
About what they can design.”

FA Hayek*.

Quoted by the long-established, reactionary newspaperman:
Stephen Mulholland: Citizen Newspaper
5/12/07

[The article generally was one of his predictable rants
against our beloved Thabo. The quote however is from an economist who was/is reviled by the left since forever; but who nonetheless was awarded the Nobel Prize for Economics, way back before knowledge about him was craftily suppressed in the interests of political correctness. His quote exemplifies why economics was always referred to as the dismal science; alternatively: why things never quite work out the way you, the wannabee change agent, expect them to]

How do we design with hope and grope?

Our particular violation of the iron laws of economics is called BEE.
The previous violation was called Job Reservation.
We know that job reservation failed.
Both had their own particular and rationalised motivations and both set in motion a process of performance substitution that incrementally drove us out of business.
In the 1950’s SA ranked in the world’s top ten for per capita income.

Then as we all know to our regret we
Embarked on a forty year exercise in futility and
We’ve been on a losing curve ever since: masked by lies evasions and general self serving bullshit.
Per capita then was, as now, referring to everyone.
For those readers who want to rush and talk about the oppressed
And dispossessed poor who fully lost their
Place after the fifties.

Today our per capita income puts us in the third division in the
Planetary league [ although under the leadership of the beloved Thabo we have punched way up in the first division even while slowly slipping inexorably down.]

Averaging 4% growth in an economy operating at an official 7.5% inflation rate that many of us down in the lower income levels know to be higher
Means that we are in effect shrinking [as an economy] and the overall pie is becoming less. Naturally those getting the thin end of less which isd most people
Are understandably pissed.

Like most concerned and informed citizens I listen to the uncle fluff balls who have achieved the status
Of official economics gurus
And I hear them all trot out the dreary disingenuous maxim that our inflation is caused by rising oil prices and the competition for food stocks caused by some sudden huge shift to the production of Biofuels…

Consider that we are not unique. Everyone in the world is paying more for these things but with the exception of China which has rapidly rising food inflation issues,
the rest of the world has hardly more inflation than they had a few years ago, places like Japan are still actually deflating [or disinflation if you prefer] and mony is so cheap there that it is being given away for nothing.

Generally though inflation is still well below the rate of economic expansion in almost everywhere Zimbabwe excluded. [The inflation in Zimbabwe for that matter is rooted in a similar albeit more dramatic emphasis on indigenisation as they call their version of BEE.] The fact that it is so low is something of a puzzle to many people.

Therefore to argue that our inflation is mainly due to rising petrol costs and food is disingenuous. The real reason is the usual one: Too much money chasing too few goods in a non-competitive environment where too few [ rapidly transforming ] businesses control far too much of the economy. In a nutshell our rate of productivity growth is failing to keep pace with the generation of roving capital being loosened by the tidal wave of empowerment deals being legislated into compliance.

Our President’s brother raised this concern some years ago when he complained in a controversial newspaper article that the newly emerging business owning class were not entrepreneurial enough to drive additional growth, and his observation is proving valid, as any Hayek driven economist would have noted. BEE is a gamble that can work given draconian impetus as Malaysia has demonstrated.
It worked for Malaysia because it was embarked on in an era when the philosophy that governments commanded the economy was still fashionable in many quarters.

The disintegration of the Malaysian motor industry under the relentless pressure of a more competitive world however underscore that Malaysian affirmative action longevity is in question though.

Our inflation rate
is our signal. When inflation outpaces economic growth then it indicates that we are spending more money than we are earning and that is always problematic.

This is why the left is unhappy. Wealth is being unpacked and handed out to buddies who are having the ball of their lives spending like crazy while it lasts…and …it never lasts. So I’m with them… spend, spend, spend: for there is no tomorrow. However soon or later its payback time… that is Hayek’s uncool but almost unvarying message.

Which brings us to Thabo’s third term [bid].

The vexed question about the choice of leader tonite [Sunday 16, previously known as Dingaan’s Day] is really something of Hobson’s choice, and although I am not one of Desmond Tutu’s fans, I have to concur with his summation that neither man is ideal anymore for the task of leading the country.

Thabo has been good for our country in spite of all the opprobrium he seems to generate. In many ways we have never had it so good, as the saying goes, subject to the caveats noted above. By the same token Putin has been wonderful for restoring Russia to a semblance of Statehood.

As the ad says: ‘Winners know when to quit’. Broadly speaking the available historical evidence indicates that when a leader’s second term in office arrives at its penultimate moment the populace, fearing change will respond positively to the actions of incumbent insiders who seek to extend their personal sell-by dates, and their jobs, by voting to keep the incumbent in.

This has frequently turned out to be a bad move. There are exceptions … they do not disprove the rule. Could you imagine the ghastliness of George ‘Dubya” “Invasion Man” Bush taking on the USA for the rest of his life?

It may well be a bad move for Russia for Putin to sneak back into his job via the back door, as he is allegedly attempting to do. His aggressive strategy will inevitably go a threat too far and he will find that his unwilling targets will slide off elsewhere, and his market could evaporate.

And it may equally be bad for South Africa for the rapidly Zanufying ruling clique to retain their grasp on the levers of power. There has been a growing tendency on the part of the new aristocracy to consider the things of the State to be available for personal use. This, together with the legalised looting of the capital base through the so-called re-distributive strategies called affirmative action, while certainly less destructive than outright theft in the form of nationalisation, is nonetheless a flawed idea, notwithstanding its moral rightness..

This is the curse of economics, as Hayek noted.

Our democracy is sometimes referred to as a one party state, which is obviously absurd since there are plenty of parties barking about. However for all practical purposes and for the foreseeable future the country is effectively a non-punitive form of one party state.

Economics however teaches us that markets, like water, will always find a way and when the natural inclination to competitive opposition and creative change is locked up through some abnormality in the market structure, then like water running down a hill the ideas of others must manifest in different ways.

So it is with one-party states… The absence of pressure from outside the party means that those pressures are referred to the inside of the party. This is an interesting feature of democratic processes… they will out.

In the real tough days gone by, guys like Stalin, Mao and Adolf H would ruthlessly liquidate all opponents: including those in his own team.


So it is time for change.

Which brings us to Mr Zuma.

Should Mr Zuma win the election today, and this is not yet certain, then the country will experience a catharsis that can only be good for it in the short to medium term; and as for the long term… well Lord Keynes famously observed that “in the long term we are all dead”.

The source of this catharsis lies in what may be called creative chaos. There are
Plenty of people, in what the late Robert Kirby called the FOT class, who will be
shouldered aside by newcomers, with the same brutal disregard as though they had
just lost a general election.

Friends of Thabo [FOT] will be replaced by FOJ [Friends of Jacob] or maybe even
FoZZies [friends of Zuma]. Favours will move from a to b and so on and in the chaos that will ensue…. Find your wig.

Those shouldered aside should take their new found wealth and make it work while the newcomers get their shot at the trough.

The very act of changing a leader squeezes out some of the excess baggage from one administration to be replaced by new better-connected newer baggage.

Does this mean that I therefore advocate Mr Z for president? Like the Arch I feel that he is a flawed person. I am a flawed person and would have difficulty standing for office with my battery of impediments; and none of them are a severe as Mr Z’s.

However it wasn’t up to me to nominate him. He has obviously got powerful backing from people who all hope to prosper under his “rule”, and most importantly he seems to have the backing of the masses in the Party who all believe he will be the redeemer.

So he offers us an escape from our present Zanufying cul de sac: assuming the vote isn’t rigged or ….

He will find that Thabo is a hard act to follow for it is doubtful that the economic expansion promoted under the Mbeki era can sustain much beyond 2010: it is already taking strain: the BEE strategy is running low on available person power, which does seem odd. Perhaps the very fact that two such flawed men are the only ones vying for office is a testimony of kinds.

There is also the pending question about a date with the NPA [ National Prosecuting Authority] which may or may not conveniently vanish, like the endlessly postponed start to her prison term for Mrs Madikizela Mandela who was, years ago, convicted on numerous counts of defrauding members of the Women’s League, and is still free awaiting the outcome of an Appeal that never quite seems to be heard. On the other hand maybe she did quick time like Paris Hilton and i missed it.

Since therefore there is a small possibility that Mr Z’s shot at the Ring may be interrupted downline by some spoilsport national prosecutors one hopes the delegates pay careful attention to who is elected to be his deputy.

Keep on bloggin’

*F A Hayek: It has always been a source of amazement to me that I got all the way through an admittedly limited undergraduate course major in economics, monetary theory and banking policy at my old alma mater [Wits] without encountering either Hayek, or his mentor Ludwig von Mises: and their market fundamentalist school of Economics, aka The Vienna School. I always blamed the pleasures of the Sixties and the fact that I was invariably absent from class. I’ve asked other people more recently about this. These being people who have prestigious masters degrees from the same institution and la…they are puzzled at these names for they are unfamiliar to them.

The irony was that the head of the Faculty of Economics at the time I read the subject was also a product of the same Vienna school.