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Comment                                                                                22 February 2017

Transition dynamics    

by Cees Bruggemans                 words 620

The past 100 years have witnessed two great societal experiments globally:  (1) the systematic attempt to forcibly replace decentralised market capitalism and its increasingly democratic polity with a centrally/command socialist economy and its totalitarian/authoritarian polity (I think they were named communism and fascism in Europe, Asia, parts of Latin America); and (2) the almost universal effort of the countries so affected to eventually undo the first experiment, transforming its outcome back to some form of market economic system and generally a more democratic polity.

Africa, too, jettisoned Western colonialism and imperialism and its associated capitalism (experiment 1), except that where they didn't end up communist they ended up with Big Men patronage networks. Some then later on also entered into experiment 2, while some have as yet stayed stuck. Only a few exceptions started experiment (2) early without detours (Botswana?).

 

So what? Where is SA in this line-up?

Being early in dumping Western imperialism & colonialism (100 years ago), SA opted for something else. There was an indigenous (minority) takeover, which elected to stay Western and capitalist in orientation, while the (majority) indigenous population was forcibly kept to the sidelines, having to wait until the end of the 20th century to get its chance.

That changeover 23 years ago was supposed to be a peaceful compromise, a deal steeped in modern Constitutionalism, underwriting both social-market capitalism & democracy. Except that as time went by, and leaderships evolved, we seem to be belatedly reverting back to the global century standard: we seem to be only now entering experiment (1), and who knows how long it will take to be ready for experiment (2), if ever, as we seem to also have encountered a Big Man detour, with who-knows-what ahead?

Too pessimistic, or not realistic enough? Is that the question?

As to these transitions, experiment (2) tends to run into resistance (from institutional legacies – communist systems are notoriously difficult to modernize in quick time). Also, it isn't just “technical” reforms that are required to address needed institutional development. The political support of appropriate coalitions is also critical. Finally, it is worth mentioning that there is the impact of labour market institutions, and newly introduced labour policies, on unemployment and labour participation rates.

Of course, any reversals (from experiment 2 back to experiment 1) tend to be equally difficult to achieve in terms of institutional legacies, the need for broad political alliances and the presence of deep structural shortcomings.

Experiment (1) is generally started at times of global war or revolution. This allows a quick demolition of the old order, and the start of communist, fascist or Big Man patronage networks.

It is in this crucial sense that SA, like Venezuela and Argentina before her, are different. They are slow motion reversals of the Old Order making way for the new. On this score, Venezuela is stuck at the bottom of the experiment (1) curve (and still spiraling out of control?) while Argentina has had false starts at commencing experiment (2) but may only currently be into the real thing?

As to SA, she seemingly is steadily tipping over only now (a century late) into experiment (1) under the august and serene leadership of her present elite, some of whom diehard nationalists, while others are merely in it for own account.

All of this with support of her majority population believing they are being led to a better life for all, apparently not as yet having enough trust to commence experiment (2) whose false start 100 years ago so cruelly penalised them.

And so we live another generation or two or three, right, until history finally gets us by the short and curlies….?

Reference: Paul Hare & Gerhard Turley, “Handbook of the Economics and Political Economy of Transition”, 2013, reviewed by Richard Ericson, in the Journal of Economic Literature, vol LIV September 2016

Acknowledgement: Prof Peet Strydom, for getting my juices running….

 

Cees Bruggemans

Bruggemans & Associates, Consulting Economists

 

Website www.bruggemans.co.za

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