Saturday, 23 November 2013

Review: The Long View

I thought that I am too slow in getting started with a post about JP Landman’s The Long View, but yesterday The Economist posted an article about South Africa (Braai, the beloved country) that has Twitter up in arms, so that makes my timing perfect.

In his new book JP Landman argues that if you look at the newspaper headlines, you are very likely to get swept up by this week’s drama (this week it is Nkandla).  Very quickly you will become very negative about the country and its future prospects. We should rather take the long view.

He asks what makes a modern successful society and evaluates the progress made since 1994 and future prospects against each of these requirements.

The first is a growing economy and he throws out some numbers: Over the last 19 years the SA economy grew by 77% in real terms, there has been social development and investment in infrastructure. The successes are ascribed to the end of sanctions, the opening up of the economy, prudent fiscal and monetary policies and increases in productivity. I would qualify this “success” and ask why did South Africa not receive much FDI, why have many sectors struggled to compete in an open economy (and are now asking for protection), how capital intensive is the growth in productivity? But the book just goes on to argue that South Africa has reached a level of economic development where democracy has a reasonable chance of surviving.

The second argument is that demography is pushing us towards modernity: population is growing slower than the economy, but it is still a young population, though not that young that it could cause instability.

The third requirement for a modern, successful economy is employment. The book first unpacks some numbers, showing that South Africa has not experienced jobless growth as some have argued. We have had low rates of economic growth and low rates of job creation – this has a lot to do with the capital intensity of growth. Then there are three sets of constraints to faster job creation and the NDP are said to address them: NDP for faster growth, NDP for improved transport and dense cities to bring people and jobs together, NDP for better health and education! Here JP draws on Prof Frederick Fourie’s Three Discourses article and it is worth it to have a good look at the original work or at least the econ3x3 post – his is a much more nuanced story. The book goes on to argue that there are no quick fixes and we should systematically chip away at the obstacles. The structural measures include better education (also FET), expanded measures to link work seekers with jobs, improved public transport etc. The so-called elastoplast measures include the expanded public works programme and the jobs fund.

I feel that “taking the long view” and doing some hand waving about education, transport or public works may understate the depth of the challenges facing South Africa. Prof Servaas van der Berg and the RESEP group’s work on education paints a more somber picture.

The other requirements for a modern successful society include open societies, creative individuals, learning and social capital. With these you are either an optimist, pointing at the Constitution, the success of the World Cup and talking about leadership. Or you are a pessimist listing fraud and corruption, talking about extractive institutions. The Long View strikes a positive note, but with few examples and no evidence.

In the final sections JP presents a balance sheet of forces pushing growth up and down. The down-side forces are the familiar challenges of political uncertainty, strikes, social unrest, poverty, inequality, crime, weak public sector institutions, low productivity. The up-side forces that are listed include planned infrastructure investment, rising employment, property rights and a sound legal system, the ability to adopt new technologies, increasing relations with the BRIC countries and integration into sub-Saharan Africa. It is argued that we can muddle through with growth of 3%, that “even low growth weaves its magic”. The long view is that our bigger ambitions lie in the NDP. The stepping stones to this are massive infrastructure development, the Industrial Policy Action Plan and “various proposals under the NDP”, including promoting exports, support for SMEs and a more responsive labour market. Moving beyond economics, the arguments are that government and the private sector need to trust one another, that we need an ambition to perform and that leadership is critical.

Overall I think that there is a lot that recommends the book, but we probably don't need another one like it. Amongst policymakers and pundits there is agreement on the challenges and the possible solutions, also about the fact that it will take time. I wonder about the political sustainability of a middle-income, low-growth trap. Will we muddle through, or just muddle? Are there examples of countries that have muddled through? What did they do, how did they do it? Why will the NDP be different from all the previous plans? Are there examples of an NDP making all the difference? How exactly will the social capital-trust-leadership thing work? Who are those future leaders? How can we make institutions and growth inclusive?

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