SA growth model perhaps not what it seems

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The article below is a guest contribution by Prof P.D.F. Strydom.

When thinking about South Africa’s growth potential and the presently favoured policy approach, it may assist our understanding by not following conventional channels of systemisation.

The South African government appears to have a clear sense of what the majority of the population wants to see changed. The President’s frequent speeches reflect this, and especially the opening cadences of the Budget Speech by the Minister of Finance last week could not have been clearer.

Yet this doesn’t necessarily mean that there is clarity or general understanding about the economic model to be used in pursuing such national ends.

It may in this respect be helpful to take a closer look at China and its increasing alignment with Africa, and South Africa in particular.

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When considering the Chinese tenacity in holding on to their development model of the past three decades, it would appear that the Chinese are actually implementing what appears to be a ‘new’ model of economic development that in principle is anti-Western.

In essence, this is a mercantilist model favouring domestic saving and investment over consumption, using exports as an important growth engine.

It also generates external surpluses, allowing the built up of a strategic global presence.

Thus short-term domestic welfare is progressively sacrificed for greater strategic interests, which is a form of long-term geopolitical investment.

This Chinese approach has specific characteristics such as a fixation with exports, partly with defensive and partly with offensive objectives in mind.

Defensively, it has its origin in their interpretation of the 1998 Asian crisis (and much earlier events stretching back centuries, also taking a leaf out of Japan and Korea’s modern development approaches that preceded China’s modern development).

Offensively, it provides Chinese state companies with capital without apparent limit to invest in emerging Asia, Africa and Latin America.

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When we turn to Africa and South Africa specifically, it would appear that our political leadership also wants to adopt an anti-Western development model.

For this reason GEAR is finished, driven as it was by Washington Consensus thinking. Similarly overtaken is ASGISA, Harvard-driven, now being superseded by the New Growth Path with its typical non-Western ideas.

Thus Africa and China probably see themselves as big players in this new world in which they and their fast growth performances gain much global publicity, and now apparently increasingly thinking they can do things their own way.

Co-operation between Africa and China suits both parties as the capital surplus characteristic of China places it in a position to complement Africa’s redistribution emphasis.

It is going very well with these non-Western models. For this reason, South Africa is probably so eager to be seen as a member of the BRICs brotherhood.

Rather than interpreting many of our new development characteristics as being old-fashioned socialistic in nature, our systemization should rather be non-Western.

Even so, the non-Western model is gaining momentum in Africa, with China assisting mightily with this.

So the accumulating impressions of recent times should rather be interpreted as a non-Western approach, with its African variant having a strong redistribution component that looks like socialism (which in fact it is).

But it is not being sold as ‘old’ socialism but rather as a NEW approach – the New Growth Path.

Both these approaches (anti-Western mercantilism and old-fashioned redistribution) hold currently great promise for its intellectual originators, but this doesn’t take account of a changing world.

For China, an export strategy based on an undervalued currency is fast becoming outdated. This is not only a matter of their trading partners refusing to accept such behaviour indefinitely.

Increasingly, such a currency strategy contradicts China’s long-term aims.

China wants to make its Renminbi an international currency, yet also hold on to capital and exchange constraints along with an underdeveloped financial sector.

China wants to be taken serious in the world at large, but suffers a fundamental lack of human freedom at home.

China wants to benefit from credit demand in the countries to which its exports, yet whose financial sectors are changing radically.

Different contradictions can be observed in South Africa.

South Africa seems to think it can continue without adequately investing in public infrastructure. That it can continue with inefficient public administration. That it can continue with its inefficient allocation of resources such as affirmative action and BEE.

South Africa seems to think it can each time refer to Malaysia as “the” great (non-Western) successful model in this regard without taking into account that this model in Malaysia is busy unraveling.

South Africa seems to think that it can allow Mugabe to continue in Zim because it actually admires his non-Western model variant without apparently taking note that this model is a total disaster.

South Africa seems to think it can remain internationally competitive with wages that rise at twice to three times the inflation rate.

South Africa seems to be blind to the failure of its policies, yet happy about the non-Western nature thereof.

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Would the Arab World today perhaps tell us a different story about such policy choices?

In country after country in North Africa and the Middle East today, it would seem the population is choosing in favour of a Western development model, rejecting the typical existing non-Western Arab models.

The question in that part of the world is whether Islam will allow it to happen.

What is the real question in our part of the world?

Source: FNB, March 4, 2011.

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