It’s the economy, stupid!

"It's the economy, stupid!". This famous adage from Clinton's first Presidential campaign placed economic issues at the centre of elections. It is quoted in last week's WM&G to correctly raise a concern about the absence of intelligent debate in our elections around core economic issues. Unfortunately neither Howard Barrell ('Making an art of avoiding the issues') nor Edward Cottle ('The ANC election manifesto is a decoy') contribute to taking this debate forward. They fail to make any serious analysis of the economic platform advanced by the ANC in its manifesto. Barrell, from the right, and Cottle, from the ultra-left, claim that the centrality of the RDP in the ANC manifesto, and the absence of GEAR, is some sort of confidence trick. In entrenching their own ideological prejudices, they fail to notice the important package of economic policy proposals put to the electorate.

Armchair critics typically rely more on the neat categories contained in their economic bibles, than on the nuance of evolving debate and policy. This is the 'cognitive dissonance' Barrell needs to address - reality is far more complex than the simplistic prescriptions of neo-liberal economics with which he appears awestruck. Likewise, Cottle is unable to recognise important advances made in beginning to address precisely the concerns which he claims to espouse. Perhaps these developments disturb his neat world view that the ANC is the 'party of the bourgeoisie', or that any notion of a post-GEAR consensus is 'treachery of the worst kind'?

Important developments which form a backdrop to current economic debates include: the crisis of neo-liberal economics internationally; recognition in the ANC and the Alliance of the need to prioritise active reduction of the 'social deficit'; the emergence of a new basis for discussion of macro-economic policy in the Job Summit; the recognition that GEAR targets are not cast in stone and need to be reviewed; and reopening the process of meaningful engagement in the Public Finance and Monetary Policy Chamber of NEDLAC.

One reason for the lack of intelligent economic debate is that commentators are stuck in a time-warp, while the world continues to change at a rapid pace. Many want us to retrogress to the debates of a few years ago, seemingly oblivious to developments in our country and the world. Imagine a few years ago if we had said that a chief executive of the World Bank, one of the major architects of the "Washington Consensus", would issue a comprehensive critique of the economic orthodoxy espoused by the IMF and his institution? Yet the seminal intervention by Stieglitz after the Asian crisis, is now vying with the old orthodoxy to create a new consensus.

Similarly, contractionary fiscal and monetary policies practised in Europe for over a decade have been roundly rejected. A new path is being charted in the EU to align macro-economic policies with development and employment imperatives. The much-vaunted US model is being increasingly criticised for growing numbers of working poor, rising levels of inequality, dismantling of social welfare, and the costs this is imposing on society, including rising violence and crime.

Although it may have escaped Barrell's attention, the 'slash and burn' economic philosophy of deregulation, cutting the state, and blind liberalisation of the financial and trade regime, is now thoroughly discredited, not least after the Asian crisis, which resulted largely from the deregulation of their financial system.

Looking back on the twentieth century, not a single experience of large scale reconstruction of societies ravaged by poverty or war, has been successful without decisive state intervention. This truism is evident in the USA's New Deal, post-war reconstruction in Europe, and the 'miracle economies' of East Asia. The era of the free marketeers, on the other hand, will mainly be remembered for their legacy of poverty and de-industrialisation. It defies comprehension that some still think we can rescue ourselves from poverty and underdevelopment, through applying policies which have led to disaster in other parts of the globe.

Having said this, the question is not whether, but how to construct a successful development path in the era of globalisation, which increasingly limits the sovereignty of nations wanting to chart their own economic destiny.

These are issues which have been exercising the minds of the ANC leadership, and the Alliance as a whole. It is no secret that there have been vigorous, but constructive, debates on how best to deal with these complex questions of reconstruction in the context of the changing international situation.

Far from being a "right wing plot to disarm militants ideologically" as claimed by Cottle, or "vague... in its refusal to raise contentious issues", the ANC Manifesto in fact raises the critical economic issues which our country has to confront.

Amongst other things, the manifesto proposes:

  • measures to reverse the current disastrous high interest rate regime, and to ensure effective co-ordination between the policies of government and the Reserve Bank;
  • tax and other measures to discourage speculative investment, and channel investment into productive, job-creating activity;
  • the use of fiscal, monetary and procurement policies to promote employment, particularly in labour-intensive sectors;
  • promotion of targeted investment by the public and private sector in social and economic infrastructure;
  • the creation of a comprehensive social security system;
  • regulation of the financial sector to ensure access to affordable finance;
  • measures to support self-employment and co-operatives; and
  • the development of sectoral and regional industrial strategies.

Some of the proposals in the Manifesto consolidate existing policies and programmes. Others indicate new policy directions to address the critical problems of under-investment, unemployment, poverty and inequality. Many of them were agreed through a lengthy process of negotiations in the run-up to the October Jobs Summit.

It is a myth that the real economic debate is between the proponents of 'macro-economic stability', and economic 'populism' - the latter allegedly involving reckless spending, runaway inflation, and instability. Despite the country having done everything demanded by the former school, some of these policies have resulted in serious macro-economic destabilisation. Pursuing lower inflation at all costs, the country has had to deal with sky-high, volatile interest rates, declining investment, firm closures, contracting growth, and large-scale job loss (all this despite rising productivity and falling unit labour costs). Is this the 'stable macro-economic climate' within which to pursue developmental policies? Macro-economic policies are not neutral, technical policy instruments.

The Job Summit declaration calls for employment creating, developmental, and growth generating macro-economic policies. This is the responsible and stable framework we need. The Manifesto proposes a strategy to co-ordinate fiscal and monetary policy, investment, trade, industrial and other policies, in a way which prioritises development and employment creation. This in contrast to the right-wing version of 'stability'- slashing the state, wholesale privatisation, and deregulation.

This formula, promoted by Barrell, would intensify social disintegration, economic stagnation, and poverty. Slashing the public sector and privatisation would deny the majority of people access to affordable public services. 'Deregulation of the labour market' (read removal of basic protection for workers), would exacerbate poverty and inequality. Already 2,8 million workers, according to official statistics, live below the Minimum Subsistence Level. Such policies would worsen their plight, and push increasing numbers of the working poor and their dependants into absolute poverty. This would in turn place more stress on the limited social security system, push more people into crime, and raise the already unacceptably high levels of inequality.

Cottle and Barrell allege that the Manifesto lacks detail. The Alliance has recognised that a weakness in 1994 was the failure to elaborate a detailed programme for implementation of the RDP. The 1999 Manifesto undertakes to initiate a process to elaborate a detailed programme for the next five years of governance. This is currently being done.

The critical challenge facing the ANC and the Alliance is to translate the Manifesto into implementable government programmes. The country has already seen the effect of conservative economists and technocrats, particularly in the South Africa Reserve Bank, but also other government department and institutions, systematically frustrating the programmes and policies of the ruling party.

To the extent that we abandon engagement on the terrain of economic policy formulation, to tilt at ideological windmills, we will have been responsible for placing the future of our country in the hands of those who are unaccountable to any constituency, and insulated from the effect of their actions. To use Cottle's dramatic term, this would be 'treachery of the worst kind'.

Neil Coleman is head of the COSATU Parliamentary Office, and labour convenor of NEDLAC's Public Finance and Monetary Policy Chamber.

Support South African History Online

Donate and Make African History Matter

South African History Online is a non profit organisation. We depend on public support to build our website into the most comprehensive educational resource and encyclopaedia on African history.

Your support will help us to build and maintain partnerships with educational institutions in order to strengthen teaching, research and free access to our content.