MICHAEL MORRIS: The right economic choice will be decisive - Business Day
Michael Morris
The other morning my early-rising wife addressed herself to the somnolent bulge that was my gloomy side of the bed, recommending, with lovable if jarring enthusiasm, that instead of “burrowing deeper, like a mole ... you should just leap up and tell yourself, ‘I’ve got this!’”
Not feeling especially leapy in the moment, I didn’t think it was a great idea — though I did warm to it later, even fleetingly sensing its larger relevance given our dismal national condition. However, at country level it’s not optimism that’s wanted but a bold choice.
Courtesy of fellow Daily Friend writer Ivo Vegter, I was recently acquainted with economist Friedrich A Hayek’s chastening idea that the “curious task of economics is to demonstrate to men how little they really know about what they imagine they can design”.
This exposes the choice we must make between those who say the free market, immune to “design”, is the key to growth, jobs, economic inclusion, socioeconomic wellbeing, and a better life for all, and those who say the state must be, and only the state can be, the director, the enabler, the provider and the guarantor of all good things for all its subjects, by design.
The divide is crisply drawn in considering the sentiments of fellow columnist Duma Gqubule (“Why the ANC cannot apologise for the jobs disaster”, August 22) in contrast to the liberal view. Liberals agree that (given “the scale of the crisis”), SA “must have a GDP growth rate that is high enough” to create new jobs for new entrants into the labour market, plus the unemployed, and that “we must have a new vision and plan for the economy that has a 6% GDP growth target”. But they would reject Gqubule’s statist prescription of a government-funded “Marshall Plan” as the route to lifting growth and employment and reducing poverty.
The pressing question, as senior colleague and Institute of Race Relations (IRR) CEO John Endres told me last week, is which side will manage to convince decisionmakers. “Government actions over the next five to 10 years,” he remarked, “lie at the very heart of SA’s prospects. Get this wrong and we’re done for.”
It so happens that Endres is the author of the IRR Growth Strategy document — it was among the submissions to the Multi-Party National Convention — which proposes inexpensive and easily implementable reforms that could make “a credible foundation for sustainable growth rates of 7% of GDP within a decade”, enabling SA “to combat unemployment, poverty and inequality ... and emerge as a prosperous middle-income economy by the 2030s”.
But this expressly hinges on free enterprise. The thesis is plain in the Fraser Institute’s most recent report on global economic freedom. It showed, as colleague Anthea Jeffery wrote last week, that “the ‘most free’ countries — where governments intervene little and allow free markets to function — had average per-capita GDP of about $48,500 in 2020 ... more than seven times higher than the $6,500 average in the ‘least free’ nations”.
It also found that “the average annual income of the poorest 10% in the freest countries was $14,200, as opposed to $1,700 in the least free nations, (while) the proportion of the population living in extreme poverty ($1.90 a day) was 2% in the freest countries, but 31% in the least free ones”.
Vigour and optimism will be handy in hauling SA back from the brink, but making the right fundamental economic choice will be the decisive factor.
Morris is head of media at the SA Institute of Race Relations.