Golden opportunity for a new economic policy

In recent weeks, amid the turmoil in South Africa, there has a great deal of talk about economic policy. The nation focused its attention on economic policy as the ANC alliance concluded its economic policy summit on 18 October 2008.

Clearly, economic policy has been at the centre of the debate around development, particularly in a post-1996 context, where the lack of developmental progress is easily traced back to neo-liberal economic policies in the country. The post-apartheid economic boom that the rich and middle classes have enjoyed under Manuel's stewardship of the economy has not trickled down to the poor. So, is a change in economic policy necessarily a bad thing? Certainly not, I would argue.

Manuel himself, writing in The Mercury on July 8 argued that economic policies should be reviewed since the biggest failure of government has been in job creation.

While employment has expanded, this expansion has not been at the pace required to reduce unemployment and poverty dramatically.

"A thorough debate on economic policy is welcomed. We do not pretend to have the monopoly on wisdom", Manuel wrote.

There was a time, not very long ago, when neo-liberalism seemed to be the only game in town. But the era of neo-liberalism, of out and out market fundamentalism, is now over.

Reform

The first major challenge to the dominance of market fundamentalism came from South America where a host of countries, beginning with Venezuela and Bolivia, elected governments that have rejected the Washington Consensus. Key resources have been nationalised, key industries protected by tariffs and serious land reform has been undertaken. In these countries there has been rapid progress in the struggle against poverty.

Of course South Africa does not have the oil or natural gas on which Venezuela and Bolivia have based their decision to break with neo-liberalism. However there is now a critical mass of countries in the global south with which we could take a collective stand for a humane economic system.

The second major challenge to neo-liberalism has been the financial crisis in North America and Europe. The origins of the crisis lie, precisely, in the decision not to regulate credit markets. It is patently clear to all, even former neo-liberal ideologues that the solutions will have to break, radically, with market norms. Indeed, in a number of European countries, states have responded by nationalising banks.

A few years ago nationalising a bank would have been seen as impossible - a throw-back to communism. Now it is suddenly a completely normal policy choice. Neo-liberalism, with its greed-driven economic speculation, has destroyed itself. Suddenly the men in sober suits are making recommendations that are more or less the same as the anarchist kids that barricaded the meeting of the World Trade Organisation in Seattle in November 1999.

The emergence of a bloc of southern countries committed to more progressive economic policies, the failure of neo-liberalism in the rich countries of the north and the change of guard in our national body politic have presented us with a rare window of opportunity. We have, for the first time in the 14 years since apartheid, a real chance to implement a set of economic policies that puts society before the market. We must seize this moment.

There are all kinds of practical measures that we can consider. The first is the formation of a progressive alternative to the G8 lead by Venezuela and Bolivia, and including South Africa, Ecuador, Argentina and Brazil.

The second is protection for all our industries that are not able or are unwilling to compete with massively exploitative labour practices in China.

The third is higher taxation for corporates and the very rich.

Poverty

The fourth is pro-poor rural and urban land reform.

The fifth is state support for a democratically run national network of co-operative enterprises by which we could immediately begin to leverage the very poor out of their desperation.

The sixth is a way to prevent poverty from being a barrier to education via a system where people who cannot afford university fees can study at no cost and then pay a higher rate of tax once they start working.

The markets may not like these measures. But the people will, and the government is supposed to be by the people and for the people; not by the people and for the markets. A simple choice has to be made.

Of course there is one great danger with a greater role for the state in the economy - and that is state corruption. As we all know, in a post-Enron world, corporate power is hardly immune from corruption. It is certainly not the case that states have a necessary tendency to corruption. On the contrary, all forms of power need to be closely watched and to operate in as transparent a form as is possible.

But when we contemplate the opportunity for real economic policy change, we need to be aware that the cloud hanging over the arms deal will have to be dealt with decisively, before we can create of a developmental state with confidence.

Imraan Buccus is a university and research organisation-based researcher. He is also a PhD fellow in the Netherlands, looking at issues of poverty and civil society. He writes in his personal capacity. This article was first published in The Mercury and republished with permission from the author.