THE SECOND DANCE OF FREEDOM: DO SOUTH AFRICAN ECONOMISTS HAVE RHYTHM?

Outline of an address by Bobby Godsell to the Biennial Conference of the Economic Society of South Africa, 11th September, 2007, Johannesburg

The thoughts I offer you tonight are organized around two ideas. The first is that South Africa (and indeed large parts of our world) is entering a critical new period, as we approach the end of the first decade of the new millennium. Transition is coming to an end. We South Africans must now decide not just how to deal with the legacy of the past but much more what kind of future we want to build for ourselves, our families, our communities and indeed our nation.

We are coming to the end of the end. Hopefully we are entering the beginning of the beginning. South Africa is not alone in this. After the Second World War the world witnessed the end of colonialism and empire. This gave title to Martin Meredith's sad and sombre book about the first half century of African independence, the First Dance of Freedom. The 1990's saw the collapse of communism. The first decade of this millennium has seen the terror attacks on the United States, and the emergence of India, China and also Brazil as growing regional and global players.

Not just South Africa, but also Russia, China, Brazil, all of Africa, much of Europe and Asia must decide what sort of players they want to be in our now very global world. This is what I mean by the second dance of freedom. The break with the past has occurred. We must now design and build what comes next. Perhaps the tag line for our times should be: beyond transition.

South Africa is currently busy with what is described inaccurately as the politics of succession. In December the African National Congress will choose its first post liberation leader.

What interests me is much less who this new leader will be, but rather what kind of country he will set out to lead. Put differently the how and what of government seem more interesting than the who.

Democracy is government by the people. This involves so very much more than periodic elections or representative institutions. It involves a deep psychological transition whereby the inhabitants of a country go from being subjects to becoming citizens. It was this painful and dangerous change, in which very many people literally lost their heads, which caused the British historian Simon Schama to entitle his majestic history of the French Revolutions by the single word: Citizen.

Are South Africa's politicians looking for subjects or citizens? And what do South Africa's voters seek from those who govern? I was most encouraged by the ANC's choice of election slogans in 2004. The concept of a people's contract for development held out the promise of a partnership between politicians and citizens in which each would play a role in creating a better life: achieving not only higher economic growth but also greater social solidarity. The so called delivery protests which are closing roads and shutting off townships with burning tyres suggest that this hope was premature.

Let us stray beyond our national borders for just a few minutes. In a thoughtful article by Chakravarthi Ram-Prasad, published in the September edition of Prospect, the author bemoans the failure of India's middle class. Ram-Prasad documents the rise of India as an economic, military and political power both regionally and globally. However he contrasts these achievements with the largely absent political role of India's middle class, representing now some 20% of that country's population, or some 200 million people. The author notes the critical role that the bourgeois class played in modernizing European societies. In contrast Indian's middle class is the product rather than the cause of liberalization. It is also politically weak, if not politically absent.

"Middle-class Indians who feel little obligation to the poor tend to believe that they have made their contribution" (to the nation) "simply by becoming middle class. They focus on their own needs because they have overcome a great deal to get where they are and still fear slipping back. Moreover, they say, why give to the state when the money will just be wasted."

The article paints a picture of a politically apathetic and cynical middle class, detached from the vital debates of the day. These debates have been surrendered to religious and caste nationalists on the one hand, and left wing populists on the other.

All of this asks will the second dance of Freedom be more effective than the first?

My second organizing concept is what role economists will play in the construction of a post transition South Africa. I have somewhat cheekily sub-titled this: do economists have rhythm? How well can they dance?

The two questions I wish to put to this very important group of thought leaders in our country are these: are economists asking the right questions? And are you asking them in the right way?

Let us start with the right questions. In post transition South Africa we have an urgent need for political economists. Allow me, as an outsider, to remind you of the honourable tradition of political economy. The Shorter Oxford English Dictionary records its first use (by Adam Smith) as meaning ‘the art of managing the resources of a people and of its government' In part the term was used in contrast to the school of the (French) Physiocrats, who attributed land as the only source of wealth. Ricardo, Smith and Marx all saw labour, and to lesser and greater extents technology as equal sources of wealth. A chair in Political Economy was first established in 1763 at the University of Vienna; at the College of William and Mary in the US in 1784; and at the East India Company College at Haileybury in England in 1805 with Thomas Malthus as Professor.

What is significant to me in regard to the term "political economy" is that it clearly envisages an engagement with the big picture. Indeed clearly an attempt to understand how national economies work. And centrally an investigation as to how the working of economies impact on both public order and the public good.

That it is possible to do this in economics is clearly evident by a review of some of the economic work which has been rewarded with Nobel prizes. For example the 1972 prize was awarded to Arrow and Hicks for their contribution to general economic equilibrium theory and welfare theory. Gunnar Myrdal shared the 1974 prize with Hayek. Myrdal's work on what was described at the time as "the Negro problem" was invoked by the US Supreme Court in outlawing segregation. Lewis and Schultz were recognized in 1979 for their research on economic development with reference to developing countries. Tobin received the prize in 1981 for his analysis of financial markets and their relation to expenditure decisions, employment, production and prices. Solow gained the award in 1987 for building a mathematical model as to how capital accumulation generates rising productivity. Amartya Sen received the prize in 1998 for his work on welfare economics. Mundell was recognized in 1999 inter alia for his work on the advantage and disadvantages of countries relinquishing monetary sovereignty in favour of a common currency.

What is at the heart of contemporary South Africa politics? Well remember the African National Congress has fought and handsomely won each of the three national elections since 1994 on the promise of a better life for all. Clearly improved material circumstances for our country's 47 or so million citizens are at the heart of this promise. To achieve this the government has committed through ASGISA to building South Africa's economic growth rate to 6%; and to ensuring that the benefits of this higher growth are shared in a socially equitable manner. South Africa, along with most countries, has endorsed and indeed adopted the Millennium Development Goals which inter alia require her to reduce both unemployment and poverty by half by 2014, now only 7 years away.

Surely this indicates that at the very heart of the national discourse is a set of fundamentally economic questions? How central has economic learning, research and insight been in the ongoing debate of these questions? I would suggest not central enough. Too few South African economists see themselves, and indeed behave as political economists.

My second question is are South Africa's economists raising the critical questions which need debate in the right way?

Here it is my conviction that it is the duty of the intellectual to seek knowledge and insight in a way that is broadly accessible. From Socrates onwards great thinkers have been able to express themselves in a way that can engage the literate, curious citizen. Indeed that exactly was their intention.

Here the track record of economics is less than impressive. The centre of gravity of modern economics is the market place. With the demise of the Soviet Union and the large scale abandonment of socialist economics by China, and virtually every other socialist society, few today would dispute, as Peter Berger has put it, that "Advanced industrial capitalism has generated, and continues to generate, the highest material standard of living for large masses of people in human history."

Notwithstanding this empirical track record of success capitalism, as Berger again has eloquently put it, is "mythopoetically deprived." Marx and Engels, and the tradition of socialists who followed them catalogued the evils of industrial capitalist society in vivid language; defined and focused class and caste hostilities, and captured an alternative vision of a better future society in phrases such as "from each according to his abilities, to each according to his needs." Adam Smith, Hayek and Friedman offered no such competing negative or positive visions. This truth was well captured for me in reading Mikhail Gorbachev's book: Perestroika. One chapter was entitled, heroically "On to full cost accounting". This does not do well on a T Shirt.

Populist politicians promise electorate things that ordinary voters know, with their common sense, they are unlikely to deliver. Yet in the absence of effective more honest communication voters are likely to be seduced by these promises at least until they exit the polling both. And the inability of those elected to deliver can well catapult a society into a downward spiral of irrational policies producing irrational protests and ending in anomie.

As a non economist the failure to communicate economic truths in a way that finds both popular understanding and acceptance puzzles me. Most people have a well developed sense of the possible. They doubt, even fear those that make grand promises. They know in fact that most of their own destiny does indeed lie in their own hands.

Let me illustrate this in one contemporary policy area. The government, particularly through the words of our Finance Minster has defined the need for a much more comprehensive social security system, both to defeat poverty and ensure the sustainability of government's social support. At the heart of this is the need for South Africans to defer the consumption of some significant part of each Rand they are to provide for their living (and especially healthcare) needs in their old age. Unless this truth is both understood and accepted any attempt to ‘fund' a bigger and broader social welfare net will fail, as the attempts of a previous government to ensure pension and provident preservation failed.

Too often economists have conceded the moral high ground to voices that make empty, easy, uncosted and unfunded promises. In politics, as in life, to drive out bad ideas what are needed generally are better ideas. If we believe that the basic income grant is a costly and ineffective way to combat poverty then we need to put next to BIG a better plan.

Indeed I would describe the broad challenge facing South Africa's economists in the following way. We as a nation urgently need you to enter the public square where South Africa's destiny is being decided. We need you to make your voices heard. We need you to help politicians and indeed leaders more broadly define and implement policies and actions that will produce a better life for all. Help us discern and define where real, value adding and therefore sustainable jobs can be created in our economy; how skills shortages can be addressed; how the design and delivery of public goods can be made more efficient; how the needs of consumers can be held in better balance with those of producers.

And do this in a language that all serious citizens can access and understand. This is not a plea for a sort of "economics lite". A good example of this done well is Martin Wolf's weekly column in the Financial Times where he addresses a key political and economic issue. I do not always agree with his analysis and conclusions. I can understand what he is saying. And very importantly his analysis empowers me as a citizen, a consumer, an investor and a businessman to better understand the consequences of the choices I make.

One final thought. Have we not left the important area of public discourse to a small group of foreign economists? Jeffrey Sachs very significantly determined the content of the Millennium Development Goals. A team of Harvard economists has had a more serious and continuing input into the design and implementation of ASGISA than any group of South Africans I know. Of course we must source wisdom wherever we find it. But surely those who are sons and daughters of this particular soil must have something useful to say. A glance at the titles of the papers being delivered at this conference suggests you have a great deal to contribute to deciding the kind of country South Africa wants to become. Your society was established in 1925, 49 years before the awarding of the first Nobel prize for Economics. You have a proud history. You are uniquely placed in this emerging market South Africa, a country with its own proud and independent voice both at home and in the corridors of global discourse. As a citizen of this most beloved country I very much hope you will rise to the challenge. Please join our second dance of freedom.