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Africa Brief                                                                             2 January 2017

Proliferating non-usuals     

by Cees Bruggemans                    words 1500

The non-usual. Events that change our trajectories. Can be natural disasters. Or man-made windfalls. Sometimes it is just the uncertainty created by powerful politicians leaving us in the dark about their true intensions. Or the inability of complex systems to keep pace with change, their own inflexibility contributing to a deepening structural rigidity which accumulates over time.

Brexit wasn't expected, yet has huge ramifications. After that vote in late June, little was the same again for many in Britain, even if the consequences would take time arriving. But even politicians like Trump or Zuma can put us in binds with their uncertainties and choices. Overseeing systems that are no longer functioning as efficiently as they should, if they ever did, in times of rising population expectations giving rise to explosive pressures seeking outlets.

 

So don't so much ask at first what leading politicians will do, as what confronts them. Only secondly ask what they think they are doing and will be doing. And finally reckon the chance of success or failure and where that might lead.

These series of questions may be different for Italy or France, America or Asian exporters, or African commodity producers.

It isn't easy to recognise the past in the present structures (institutions) and understand where the mistakes were made giving rise to rigidities that can be observed in present performances. There is a wave of populism passing across the world where in many (apparently not all) countries the steam of discontent has build up to a point of lifting the lid, in places explosively, sometimes after long gestation periods.

For long discontent may have been simmering, but on the fringes, not strong enough to really burst through the surface and become a majority event, yet still quietly gathering mass. What did Alex de Tocqueville say about 1789? It was an event as inevitable as it was unforeseen. That has been repeated a few times by now, and we are seeing a fresh wave of it right here in our own time.

I haven't the knowledge to comment on Italian or French manifestations today, but we are daily being educated about what is at bottom of the American experience at present. As to South Africa, it has its own dynamic, an old one.

This wave of discontent is more important in some regions than in others, given size and relevance for world society. Nobody frankly cares too much about how SA fares, except South Africans. Or at least they should do so, bearing in mind the penalties of not doing so. Perhaps strange, that, for in recent decades (is that really centuries?) this country has carried on in ways that in its own time did a lot of damage but which cumulatively could prove very expensive for succeeding generations, too.

But that won't change the global picture and how it affects us an iota. It is that larger picture that is currently so interesting, with so many beating their heads in trying to understand the logic at work. Particularly in America. But in Europe, too, if more on a fragmented scale, given its fragmented history and structures.

The thing to recognise is complexity and how it can get the better of us.

Troops of monkeys, or wolf packs or prides of lions can only get as big as we observe in the wild, which is really extremely small. It is a function of what can be communicated and how the Alpha keeps control in a sustainable way over the generations.

Humans are different. We developed higher communication and cooperation, coerced or voluntary, and have succeeded in creating systems harbouring millions and of late even billions. But that doesn't mean all that soft ware will always stay efficient, allowing continuation. Instead, our fallibility shows up regularly in failing systems, discontinuities, and the river of life seeking new outlets to reach the sea.

On this scale, what's going on in America today is only a minor shift. It is unlikely that its Constitution will fail and be altered. Its key institutions (law and order, finance, work place, social conventions) have a hardiness that suggest longevity.

Yet Trump is still seen as a disrupter, a standard bearer who has stood up for a long neglected class of people (of many denominations). And in the process he is about to the make the earth move, in shifting policy emphasis with consequences that could even reach us down south.

But so far, nearly two months after his election, and three weeks before his inauguration, it isn't always obvious how Trump reads the brief given him, and how he will respond.

Firstly, he talks (and twitters) a lot, but in conversation hardly ever finishes his sentences, shifting ground and moving on. It is easy to make noise. It is far more difficult doing so and having a majority of people recognising you as their newly found spokesperson. That requires footwork reminding of Mohamed Ali, the world champ boxing (dance like a butterfly, sting like a bee).

What Trump followers appear to have in common is economic and social concerns. Give us back our middle class security (and restore growing incomes), and give us back respect. Don't let anyone look down upon us, because we may be without work, or be less successful, or have different (conservative) values.

One doesn't ask a mob how to restore middle class security, because they may not have the knowledge to do so. This appears true today in America, but also in Europe. Reduce foreign competition taking away our jobs (where we are unable to stay the pace cost, technology and skill-wise). And prevent foreigners from coming in and taking our livelihoods, besides which disrupting our life styles and neighbourhoods. We in any case don't like too many foreigners.

This is problematic, for mobs hardly ever read this right. Foreigners have never impoverished a country (except Latino drug cartels, Russian mafia and similar ilk, whether Asian, African, or Western).

So welcome the right kind of foreigners, the more the better, for they add to societal wealth and job creation.

The same goes for trade, if not for trade “dumping”, or as the Japanese liked to call it in the 1970s (“cloudburst marketing”).

Trade and immigration will lead to structural change, but provided digestible, it will be acceptable to the majority and enriching.

Ah, cry the minority turning into a majority, it is no longer digestible. It is too much, and we who fall behind, never to recover again, even though our elites sit on roses, and their children take over from them.

Given the scale of things, the forced diet might have become indigestible in places (“with existing institutions”). Meaning what? That a very large number of people cannot keep pace with needed education and skill accumulation, to withstand the structural changes forced by rapid trade growth, migration and technological challenges.

Does it mean the convoy has to lower its speed, so that the slowest ships can keep pace? Or do the old ships need to be refitted, and kept up to date, so that convoy speed may be higher?

This cannot be captured in a slogan or expletive. The anger may be but not the solutions. And thus there is Trump, the mile-a-minute talker, wanting to make America Great Again, capturing what we the people are experiencing. But when we try to understand what kind of policy change this will give, things become far more difficult. As much on Homefront as geopolitically.

What will probably happen is to address the things as pointed out by the crowd.

Give us fewer Mexicans and Muslims. Immigration policy will change shortly.

Give us more jobs and income growth. What awaits is more Reaganomics trickle-down stuff. Tax cuts (for the rich?). Deregulation (for rich companies?). Also more infrastructure, but probably as high value public-private partnerships.

Give us less competition, from migrants and foreign trade (leading to migratory and trade interventions).

There will also be an attempt at an education mind-shift. But it won't be as easy to achieve as a trickle-down kick-in-the-pants stimulating the US economy, giving better results for awhile (but not higher productivity growth?).

What we might see is faster US growth, stronger Dollar, and more capital flow disruption. But will we see new sources of structural growth unlocked (like adding a billion Asians to the world economy this past generation)?

Sorry, mob rule is bad economics, as much in the US as in SA.

Yes, we should identify where structures are going wrong, giving rise to so many unfulfilled expectations and aspirations. And then do the right things, if we want sustainable solutions giving greater wealth generation, with many more people contributing in society according to their ability (and willingness to do so).

Key global regions are dropping pilots, acquiring new ones, and setting new courses. It might yield more growth in places, but also more migrant, trade and capital flow disruption, sometimes detracting from the overall achievement.

Real structural change you can't capture in a Tweet. But try explaining that to baying crowds. Instead, go with the flow, hope for the best, something will turn up that will give us new booster power.

High challenging seas, too.

 

Cees Bruggemans                                                                         

Bruggemans & Associates Consulting Economists

 

Website www.bruggemans.co.za

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