NEOLIBERALISM
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outh Africa has been captured by orthodox economics, which has revealed time and time again not to work in our context. Unfortunately, those in power remain intent on continuing in the same vein, thus reproducing the status quo. For the economy and society to transform, we must remember how we got here, and how Vision 2030 is unlikely to manifest. At the dawn of democracy, South Africa’s economy was performing poorly after violent internal protests, international sanctions and post-cold war ideological changes. The ANC’s Department of Economic Planning (DEP), which would later become “Team Finance” in the National Treasury, drove the ideological underpinnings of the post-apartheid state’s fiscal institutions. The DEP’s employees were trained at Goldman Sachs in New York in 1992 in collaboration with the World Bank and the International Monetary Fund (IMF) – all considered the bulwarks of neoliberal economics. In 1996, in step with this, the National Treasury implemented the Growth, Employment and Redistribution (Gear) strategy, which was composed of neoliberal macroeconomic policies, the tenets of which can be summarised into four categories: stabilisation, liberalisation, privatisation, and rationalisation.
Busi Sibeko
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MUST GO
Now more than ever, we need an interventionist state that is bent on the reconfiguration of social and economic power, writes Busi Sibeko POLICY REFORMS, BUT LITTLE PROGRESS
Gear’s medium-term policies included “a relaxation of exchange controls, trade liberalisation, ‘regulated’ flexibility in labour markets, strict deficit reduction targets, and monetary policies aimed at stabilising the rand through market interest rates”. This supply-side approach was aimed at the rapid expansion of the private sector and the eventual shrinking of the state’s role. Similar to the World Bank and IMF Washington Consensus strategies, the belief was that the liberalisation of the economy would lead to accelerated economic growth and a reducion in poverty and inequality. At the same time, the labour constituency and others presented strong critiques of Gear. In the late 1990s and early 2000s, the dominant policy rhetoric became one of “microeconomic reforms” in an otherwise “stable” macroeconomic environment. Macroeconomic policy was to remain untouched – bar the formal introduction of inflation targeting in 2000 – and microeconomic interventions would resolve “blockages in the economy”. Certain progressive policy
changes were made, including moderately expansionary fiscal policies, recognition that government spending can “crowd in” (rather than “crowd out”) private sector investment, a rise in government social spending, and the recognition of the need for an active industrial policy. However, the macroeconomic policy framework remained largely unaltered, and different aspects of government economic policy became increasingly contradictory. The Accelerated and Shared Growth Initiative for South Africa (AsgiSA) was launched in 2006 with the desire for shared growth and to achieve its target of halving unemployment and poverty between 2004 and 2014. This goal would only be achieved if GDP grew at an average of 4.5 per cent between 2007 and 2009, and by an average of 6 per cent between 2010 and 2014. Before the global financial crisis, the economy grew, but did not yield these desired targets. In 2010, the New Growth Path (NGP) framework was released. The NGP was aimed at enhancing growth, employment creation and equity. The policy’s principal target was to create five million jobs over the next 10 years. The NGP combined with the Industrial Policy Action Plans (IPAP) would support the growth of industry, particularly manufacturing. The NGP represented the most progressive and interventionist policy framework to date. However, it also attempted to accommodate the conservative macroeconomic policy within a more developmental economic strategy. COSATU’s response to the NGP titled “Government’s New Growth Path Framework: One Step Forward, Two Steps Backward: A response from the Congress of South African Trade Unions” expressed
Building a new economy will take much more than the current proposals for structural reform. No matter how conducive the environment is for capital, we will not build a new economy with more of the same.
AFRICAN LEADER ISSUE 56 | MARCH 2022
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