The theatrics of Julius Malema have raised, once more, the spectre of a radical change in economic policy in South Africa. It’s not as if this is new, however. Nationalisation has been on the African agenda before; it was carried out across the continent in the 1960s and 1970s as African states asserted their independence and desire for sovereign control of assets.
But then, as now, it was driven by a variety of urges: in part by ideology, given the intellectual competition at that time between capitalism and socialism at the height of the Cold War; in part by the sense that compensation was necessary for past wrongs; but also by possessive greed, as African leaders sought to gain control of apparently rich natural resources.
It was also driven by the political imperative to leverage something other than the one-time redistributive impact of public service jobs of the immediate post-colonial period. In essence, it was the outcome of a search for a quick fix to growing political disquiet and economic turbulence in many African countries, then, again as now, essentially a marketing ploy employed by desperate or ambitious politicians.
Populism is linked to political and policy failure. And it has been driven by a desire for leadership to assert itself in managing nationalism through nationalisation.
It’s not as if early nationalisation was always a chaotic or even larcenous process. The enforced sale of its share of the Zambian mines in the late 1960s was the seed capital that led to Anglo American’s development of its enormously successful Chilean operation. It’s just that its aftermath was invariably chaotic and larcenous, because governments lacked the knowledge and skills to run these businesses properly. By the 1990s, at the moment it began to privatise, Zambian copper production was less than one-third of its 1970s peak.
Today’s populist initiatives in Africa take the form not of nationalisation, but rather of the language of empowerment and indigenisation.
Global populist wave?
But Africa is not alone. Now, with the rise of Hugo Chávez’s Bolivarian revolution in Venezuela and the emergence of his allies in Nicaragua, Ecuador and Bolivia, the economic stage is apparently set for a second global populist wave.
But closer examination of Latin America reveals at least as many differences as similarities.
In Venezuela Chávez has used a swell of oil income (more than $350-billion net in the past decade) to redistribute money off-budget, both to his preferred domestic constituents and to followers in the region. Nicaragua today receives one-quarter of its budget from Chávez.
The Bolivarian revolution is actually limited to a minority of Latin American countries, and other supposedly leftist governments (notably Brazil) are in some policies (but not polemic) probably more to the right than those deemed at the centre (for instance, Peru or Chile).
In Africa some countries (Ghana, South Africa, Angola, Mozambique, Kenya, Tanzania, Angola, Nigeria, among others) are engaged in processes stipulating compulsory local ownership or participation. Where existing ownership is under review, compensation is offered. Of course there are exceptions: Zimbabwe is one, in which dire political circumstances and few attractive alternatives led to Robert Mugabe’s land grab. In his Zimbabwe economics is not politics, to paraphrase Prussian military philosopher Clausewitz, but rather war by other means.
One commonality, however, is the failure of past policy to deliver to the majority, to lift people out of conditions of endemic poverty. In 2004 Nicaragua’s per capita gross national product was half of that of 1978; El Salvadoror’s was, in 1989, less than that of 1970; and Venezuela’s shrank from $2 300 in 1974 to $1 400, 20 years later.
Sub-Saharan Africans are today poorer than they were, on average, in the early 1970s. One-third of Latin Americans and one-half of sub-Saharan Africans today live in poverty.
But such pressures for change are not driven necessarily by the poor. They are often reflective of elite political ambitions (and of the retention of middle-class, often public sector, worker privileges).
Abuse of democratic institutions
Another commonality is in the abuse of democratic institutions, which has gone hand-in-hand with the populist journey in the first and more contemporary waves.
There is another common thread: the notion that there is somebody else who is the principal reason why you are not rich, that someone is doing you out of your birthright. The presence of natural resources helps to fuel this mindset, even though most African countries, are today, like many of their Latin American counterparts: there is no (racial or ethnic) “other” to redistribute from, apart from foreign companies and elites within their societies.
Analytically, it is also about the point at which the state ends and the market begins. That is not necessarily a bad thing per se, unless this border shifts too far in either direction.
And there is a common thread, too, in terms of practical policy: the stress on cash transfers to the poorest or most vulnerable, from the Bolsa Familia (“family grant”) in Brazil to similar schemes in Bolivia, Nicaragua and Venezuela, among other Latin American examples, and the sole African country that can probably afford this on such a scale at present moment — South Africa.
Empowerment in Africa is not only morally correct but politically necessary and economic common sense. Yet, the failure of the transfer of ownership equity to be sufficiently broad-based (in, for example, South Africa) in its impact, and its failure to satisfy more than a clutch of elites, is indicates how difficult it is to manage its more complex alternative requirements, including procurement.
Growth
Growth with equity remains problematic in many developing societies, not least in Africa, but that should not discount the need for growth.
Populist and redistributive urges should thus be separated from sound development practices. The connection between Latin America and Africa is about how to alleviate poverty, how to bridge the gap between the social and political exclusion and frustration of joblessness and inclusion in formal employment, and how to satisfy the expectations of a burgeoning population. It is also critically about ensuring development policies that don’t only work for the very rich (empowerment) and very poor (cash transfers), but for the middle class (sustained growth).
Those countries that have done well in the past three decades are those that have grown steadily and constantly.
A review of contemporary experiences illustrates that the answer to development challenges is not about the isolation that populism implies and inevitably constructs, but rather about constant application and growth, which is, in turn, dependent on sensible insertion and positioning in the global economy.
Dr Greg Mills heads the Johannesburg-based Brenthurst Foundation, co-organiser with the Konrad Adenauer Foundation and the M&G of the discussion on the lessons of economic populism in Latin America.