The achievements of a few highly successful economies are highly admirable and conspicuous. Consistent growth in incomes and output over many decades has eliminated poverty. The growth has been accompanied by growing tax revenues that are easily collected, without much disturbing the engines of growth. And are then redistributed in cash and kind to provide a high measure of security for all its citizens against the accidents to which individuals and their families are always vulnerable. Growth provides the means to fight crime, protect borders, provide roads, sewers and vaccinations, of equal value to all. The caveat is that this historically unprecedented abundance is not better appreciated and more popular than it appears to be. Continued success can never be taken for granted.
Open access to the markets for all goods and services and for the resources, labour capital and natural resources with which to compete for custom, is a critical ingredient for success. Innovation threatens established interests and must be well recognised as a force for better. Rights that protect wealth and persons against fraudulent or violent assault and rule by predictable laws and transparent regulations are essential for success.
Competent and responsive government agencies are essential to the economic purpose. And a society, critical of government action, aware and unafraid of what a powerful government might arbitrarily do to them, makes for good government.
Harvard economists Acemoglu and Robison (A&R) have followed their influential “Why Nations Fail” with “The Narrow Corridor” [1]It explains in fascinating detail why it has been so difficult for nations to do what it so obviously takes to enter and stay in the narrow corridor that leads to economic success.
They explain the advantages of the “Shackled Leviathan” when the potential abuse of state power is effectively constrained by an empowered and critical civil society. A state very unlike the “Despotic Leviathan” that maintains essential order but does so at huge disadvantage for a cowered and vulnerable people. China, old and new, is cited as one such example. Another alternative may well be the “Paper Leviathan” an expensive and incompetent government, but only in name not in action. South America provides more than a few hapless cases of governments that serve only the people on their payrolls.
In all the many cases of national failure there is an elite who have a powerful interest in the stagnant status quo – and who resist the obvious reforms that would stimulate and sustain faster growth. Zimbabwe comes to obvious mind.
A&R also examine the potentially suffocating role of the “Cage of Norms” – well entrenched customs- that stultify access to markets and inhibit competitive forces. The caste system in India is still such an inhibitor of economic progress. Traditional land rights are a serious obstruction to producing more in SA.
South Africa, (A&R) argue, entered the narrow corridor that leads to success with the help of Nelson Mandela. They regard BEE as very helpful to economic success because it broadened the political interest in established enterprises and business practice enough to help protect them and the economy against destructive expropriation. That cutting a new elite into business success was necessary for stability and growth.
One wonders how A&R might now react to the revelations about state capture and corruption? And to the failures of the SA state to deliver satisfactory outcomes for the resources made available to it.
This raises an essential question. Will the highly transformed SA elite act in the general interest and encourage the invigorating forces of meritocratic competition for resources and customers? Or will they act to protect their gains and privileges against them?
The new elite should be aware that a failing economy will not be politically acceptable and any elite dependent on it will be highly vulnerable. They should be encouraged by our open and critical society to take the steps to get SA back into the narrow corridor that leads to economic success
[1] Daron Acemoglu and James A. Robinson, THE NARROW CORRIDOR, States, Societies and the Fate of Liberty, Penguin-Viking, 2019.