Who dared disobey Alec Erwin?
When the depth of the country’s electricity crisis became apparent in January this year, I noted with some amazement that Alec “The Bolt” Erwin, the minister in charge of public “enterprises”, told us it wouldn’t harm our economic growth. He seems to believe in the notion that if the collective decrees it, so it shall be. Why he didn’t just exclaim “fiat lux” we’ll never know. Surely, this would solve the perception problems South Africans seem to have in the dark?
I, on the other hand, called him an idiot who learnt nothing in economics lectures. I thought those who don’t believe Africans can run a competent government would claim vindication. I predicted severe inflation, and said that we’d be lucky if GDP stayed in positive territory. We can forget about poverty alleviation and job creation, I wrote elsewhere. Privately, I said, “by this time next year [meaning January 2009] we’ll be in recession”, but I couldn’t find anyone who’d accept even an even-odds bet on it.
Some commenters accused me of being overly negative, and several called me an afro-pessimist. I am pessimistic, yes, but it has nothing to do with people or geography. On the contrary, I have good reason to have faith in the ingenuity and productivity of free people, even in — or especially in — adverse conditions. My pessimism has to do with economics and government.
Maybe I was negative, but lo, just a month later, the first signs of the massive impact on growth in the mining sector became apparent.
Now, four months on, South Africa has double-digit inflation for the first time since our liberation. The central bank has jacked up interest rates by a massive 4.5 percentage points already, and its governor, Tito Mboweni, has just threatened a staggering further hike of two percentage points, which would bring it to 13.5%.
Our economic growth has crashed to not much more than 2% — thanks in part to a staggering 22% decline in the mining sector. The proximate cause? Power cuts, of course.
So now we face that dread curse of inflation that doesn’t buy growth: stagflation. Even the unions now argue that we’re heading for recession.
In response, finance minister Trevor Manuel seems intent on jumping off the same rhetorical cliff as The Bolt. He told parliament not to worry, “The slowdown we are experiencing is of a short-term nature.” He describes the causes of this deepening economic crisis as “short-term turbulences”. There will be growth! Fiat auctus!
Is delusion of competence a contagious condition? Is this what Thabo Mbeki means when he said that cabinet takes “collective responsibility for the decisions taken over 14 years”?
My initial response to Mbeki’s apology was, “Well, off you go then, the lot of you! One takes responsibility by resigning.” I had not considered that all Mbeki meant was that cabinet would get its collective story straight, and collectively play God, because what they say is all that matters. The rest is just racism or neo-colonialism or afro-pessimism or negativity or sensationalism or media hyperbole. Reality is created on command. Truth is what the government declares it to be. Hence its attempts to censor the media and establish its own party-run newspaper.
Don’t get me wrong. I’m not writing this to say I told you so (though I did). I’m not gloating that I know more about elementary economics than our minister of public enterprises (though I do). I’m the most modest person I know, after all (though besides that I have few failings).
I’m just wondering who dared disobey the honourable Alec Erwin’s command that growth would not be affected. I want to find the faithless exploiters of our collectivist misery, and expose them to public denunciation. Put them in the pillory and throw stuff at them, counter-revolutionary traitors that they are.
Ha, nicely said, Ivo.
Be careful, though, when talking about interest-rate hikes, not to confuse percent with percentage points. A two percentage point (or 200 basis point) hike in prime of 15% (taking it to 17%) is considerably more than a 2% hike, which would take prime to 15,3%.
I was going to write 200 basis points, but figured I’d opt for plain English. You’re right, that does introduce some ambiguity, although I’d be surprised if anyone (other than maybe The Bolt) would think it makes sense to talk of a 2% hike in interest rates from 11.5% to 11.73%. I have rephrased it to remove the ambiguity, though.
What about the fuel price, imported inflation and the credit crunch? Recession or near recession in the major economies?
It is good to write about the government’s incompetence, but it seems over the top to ignore these external factors.
A working class party unafraid to say that it will nationalise the cement industry in order of people living a life of squalor on the periphery of society, to provide a uniform, quality education for all students, etc, etc.
“by this time next year [meaning January 2009] we’ll be in recession”, but I couldn’t find anyone who’d accept even an even-odds bet on it.
You are not alone, Ivo.
I am presented with incredulous stares when I punt this and your other ‘preposterous’ predictions to the plebeians at the pub.
Another expatriate blogger who escaped to the (relative) safety of York wants to nationalize our cement industry “to provide adequate, decent housing for the majority”
He suggests “a wealth tax on the stinking rich fat cats” will solve the shambles of our state education system. Yeah right, since he will not have to live with the consequences of his collectivist delusions!
Perhaps you should consider writing another blog, “Vindication of the Nats”
Perhaps they were on to something when they shot communists!
I feel I’m living on Animal Farm, where reality is a fiat ‘Matrix’ of aberrations and fantasy.
@ alleman: When the global economy was booming, we managed to eke out a few percentage points growth. When emerging-market growth was twice that of developed countries, ours was actually substantially below the world average. Not to grow in that kind of benign global market was practically impossible, no matter how badly you screwed up. True, now we’re in a rather harsher global environment, thanks largely to the failures of certain Western governments, particularly in energy regulation and monetary policy (central bank interest rates are essentially price controls on credit). So the failures of our government, previously masked by the spectacularly favourable global environment, are now becoming all too apparent, and our economy has no leeway. So I do blame it on the government’s economic policies. All of it. We all have to live in the same world. It’s what you do with what you have and the circumstances you’re in that makes the difference.
@ Perry: Agreed, the Nats were right to oppose communism, but such accidents of history are hardly vindication. Hitler was opposed to Stalinism, but that doesn’t exactly vindicate him, or even just vindicate his economic polices viewed in isolation. I won’t credit the Nats with opposing communism because they were smart, or because their own economic thinking was superior. They simply chose out of narrow religious and geopolitical interests. After all, their own policy was a mix of state capitalism and national socialism, both of which require extensive government intervention, price controls and licencing. Our agricultural boards, government departments and various national monopolies weren’t much different, in principle, from the central planning bureaux of communist states. So even if I didn’t have a grave moral problem with the Nats’s racial policies, which denied the basic human rights and liberties due to free citizens, I couldn’t defend their economic policies. After all, they’re the very same economic policies — state capitalism and national socialism — which the ANC to a significant extent took over, without much thought given to the principles (or lack thereof) on which they were based.
Agreed Ivo, I was being a tad facetious in suggesting anyone be actually vindicated or shot.
As a ‘libertarian’ I too have a “grave moral problem” with a state which presumes to intervene and sell me ‘permission’ to do stuff which I have every right to do anyway, or
confiscate my stuff because they decide others need it more, or decide what rights and liberties, by the grace of state, they will concede to ‘grant’ me, all for the collective good, of course!
They justify these ‘interventions’ by pointing out I would never have survived without the environment created by their ’protection’, basically a Mafia racket.
My flesh crawls when a ‘collectivist’ asserts that my birth marks the point at which I start owing him something, that my value is only that which I contribute to the collective, and my need is whatever he decides is fair. The only ‘unfair’ filth that underlies riches is that which is coerced through political juncture. A free market cannot, by definition, be exploitative.
Who says winning an election means the incumbent public servants suddenly own all the bandwidth and airwaves, all the mineral rights, most of people’s money and control over how these may be disposed of? Such nouveau megalomaniacs may indeed believe they can command reality itself. “Africa belongs to me” Mbeki reportedly expressed. Perhaps he believes he can make the laws of economics do his bidding,too.
My problem is with those who would believe him.
Ah, fair enough. Apologies for misinterpreting your comment. And well said, in defence of individual liberty.
Hah! My own government clearly vindicates the potential for successful African-led governorship even as I articulate to the world’s powers how they can save their pathetic citizenry from hunger. Now, if you, Ivo, could help to speed along the process of returning my children to me by turning your articulation to a topic of some substance, then I could prove once more that Zimbabzania is, and always shall be, the bread basket of Africa.
I look forward to sometime reading an editorial of substance on this site instead of this fiscal mumbo jumbo and inciteful Afro-penitentianariasm that lingers on the back of a hops and barley after taste.
Your friend in waiting,
Big Bad Bob