After the Bell: Will MK’s bizarre and catastrophic economic policies be a factor in coalition talks?

In economics, there is an enormous amount of room for debate, disagreement, friendly rivalries, principled opposition and scurrilous gossip. You know, all the good stuff. But my current theme is about how much of the economic debate in SA takes place outside of anything that looks even remotely like the international consensus. 

I can’t help wondering why that is. Is it rooted in SA’s poor education system? 

Then I sometimes wonder if, instead, SA’s massive income and wealth disparity is the root cause, encouraging ideas that would not be out of place in 1917 Russia. 

How is it possible that educated politicians can be so impervious to modern economics?

It must be said that the “international consensus”, as I describe it, is not really a consensus at all. Differences are extremely wide. Just to take one issue: industrial policy. 

Daily Maverick columnist Natale Labia this week recorded that a group of economists recently met outside Berlin at a conference called the New Economy Forum (no, this is not a “walked into a bar” joke). Participants included Dani Rodrik, Branko Milanovic, Mariana Mazzucato, Thomas Piketty, Olivier Blanchard, Jean Pisani-Ferry and Barry Eichengreen. 

There was a time when international economists were pretty much in agreement that the best industrial policy was not to have one. The economists themselves were astounded at the concept’s reemergence. 

Rodrick commented, “Six years ago, a conference like this would have been impossible. The agreement we now have on industrial policy, the lack of fundamental criticism … when I think about it, when I hear myself saying this out loud, I’m amazed.”

But, as always, it’s interesting to see not only what was discussed, but what was not. 

This is a group of broadly left-wing economists, and I don’t mean that in any pejorative sense. It’s just that if they are not discussing things like nationalisation, it illustrates how far out of the mainstream South African economics has slipped. 

I didn’t read the MK manifesto before the election, but I did read the news stories which, understandably, focused on the party’s desire to tear up the Constitution.  

But I recently went back and had a look; the party’s economic ideas are as bizarre and frightening as its political ideas. 

The whole impetus of the document is premised on the notion that the ANC has adopted “neoliberal policies” that have worsened unemployment, poverty and inequality.  

Historically, this is inaccurate. SA’s economic growth was going helter-skelter when the ANC was following not “neoliberalism”, but ideas we might call ‘‘within the spectrum of international economics”. 

It started to decline after the party moved away from these policies in 2009 when the “alliance of the disregarded” ousted Mbeki. This is not a partisan statement; it’s visible to anyone who cares to take the most cursory glance at SA’s growth statistics. 

SA was growing nicely under the presidencies of Nelson Mandela and Thabo Mbeki and then everything went south during the presidency of – surprise – the leader of the MK party, Jacob Zuma. 

I suppose you can’t admit that if you are the leader of a political party that’s in opposition to the government, but still, facts are facts. 

Unsurprisingly, MK is demanding the expropriation of all land without compensation. This is just table stakes for SA’s extremists. And the mines, of course.

But more surprisingly, it demands the nationalisation of not just the SA Reserve Bank and major commercial banks, but also insurance companies. Insurance companies? Really? Oh, yes. Dosh.

And then there is the bizarre fixation on ArcelorMittal and Sasol, which are also regarded as “strategic”. It seems the drafters of the manifesto haven’t (surprise!) been reading the financial press or they would know how badly ArcelorMittal is performing in SA. 

My guess is that if MK does become part of the governing alliance, the London-based bosses of the company might just decide that if the government wants its South African business, they are welcome to have it, along with its debts and all its losses. 

There is one particularly funny item which points out a notional contradiction that despite “high investor confidence”, significant fixed investment in national development has not materialised; instead, capital is leaving the country. 

The RMB/BER Business Confidence Index has been in negative territory for 15 years. The Sacci Business Confidence Index has a different methodology, but it is only squeaking into positive territory and has barely budged since 2014, except of course during Covid, when it collapsed. 

Lots of the statistics in the manifesto are correct, but for every correct stat, there is a humdinger imported directly from the University of Mars. All of it is wrapped in an analysis of racial struggle; what happened in the 30 years that have passed since the advent of democracy is barely mentioned. 

It’s all about reclaiming “our” economy from “them”. 

I (obviously) have no objection to the notion of South Africans reclaiming their dignity – economic or otherwise – but is it too much to ask that we stick with the facts and show some respect for what history tells us about economic development? Maybe so. DM