President Thabo Mbeki, in “Markets can’t do it alone” (July 18), identifies the defeat of global poverty as the biggest challenge facing the world economy.
The aim is laudable. But Mbeki trains his guns on (neo-liberal) economists who are allegedly guilty of giving state intervention a bad name and exacerbating poverty, and looks to the European Union for a solution.
Mbeki has the wrong targets and the wrong model. Even economists infatuated with the workings of markets acknowledge market failures, including that of under-investment in such areas as primary education and technological innovation. In these cases governments must intervene to put things right — providing they know what they are doing, and involvement does not end up costing more than the initial ill they wanted to address. Hence, going after “market economics” barks up the wrong tree.
The vulgar economics Mbeki pillories does not describe what is going on in the world’s most successful economies, which win the yearly contests of global competitiveness. They are pretty good at shaping market outcomes to political objectives.
Take your pick from welfare policies in Finland, innovation policy in Singapore or — remember steel tariffs? — trade policy in the United States.
Also, strategies modelled on the EU’s structural policies are unlikely to work wonders in Africa.
Doubters might want to take a tour of bridges leading nowhere in Greece, or dams on empty reservoirs in southern Italy. Structural policies do not deliver in a context rife with incompetence and corruption.
The real challenge for progressive politics is to look closer to home for remedies for poverty. It means steering economic growth so that it benefits the poor directly by giving them the means to participate in the market and, indirectly, through redistribution.
Making life easier for the weaver of eminently exportable fabrics in KwaZulu-Natal’s Valley of a Thousand Hills, and whacking the official who countered her application for access to finance with a request for sexual favours, would be a good start.
Neither the growth nor the redistribution of income is an easy feat. Attacking the latter without the former is not impossible, but may undermine the sources of growth and be prohibitively costly.
The absence of ready solutions suggests it makes sense to shelve ideological rhetoric and to learn from other improbable success stories. How did Costa Rica, with no electronics track record and against heavyweight rivals, attract a huge investment by the world’s top manufacturer of memory chips, Intel? What policy instruments helped Cuba incubate, against all odds, a biotechnology industry that produces the world’s only vaccines for Type B meningococcal meningitis? Why is it that select central European enterprises, caged in an economic Jurassic Park until a decade ago, have become sought-after research and development providers to global firms?
These and similar tales would not have happened without highly skilled people. Understanding these examples is an important step in stemming the brain drain from Southern Africa and attracting human capital to the area, in tertiary education, services and manufacturing.
More than ever, long-term growth depends on the local availability of high-calibre knowledge. And what matters most is the quality and the commitment of the people behind this knowledge, not their skin colour or what passport they hold.
South Africa’s poor can only benefit sustainably from economic growth if they can read and write. This means the education system fails a quarter of the population and the kids that are not where they should be: in school.
Only school can prepare them for a world that no amount of official whining about global injustice is going to change in their favour. Let’s face it — the aggregate gains that more favourable market access to rich countries would bring developing countries will not make much difference to an illiterate farmhand who provides for her jobless family.
In any event, rich-country hypocrisy, especially protectionism and restrictive migration control, is here to stay. The developed countries’ leaders ultimately have their home constituencies at heart. Exposing the double standards of the global economy should be left to the likes of Oxfam, which draws on better analytical resources and is more credible than politicians of any colour.
Progressive politics must be imaginative and realistic. The New Partnership for Africa’s Development will not go anywhere in a sea of ignorance — comprehensive and inclusive education is key to poverty alleviation and economic development.
Lessons can be learned from the East Asian experience of the transformation from rural economies in the 1950s to industrial powerhouses in the 1990s. There, being poor was not an unsurmountable obstacle to going to school and acquiring useful skills.
Africa’s poor have no sweet deal in the offing. Developing-country leaders are failing their populations unless they give up sparring with straw men in favour of putting in place effective pro-poor policies, cost what they may.
Jo Lorentzen is a visiting research fellow at the school of development studies at the University of Natal.