We need to talk... about economic growth
Today is a sad day, as we mourn the passing of Tito Mboweni, the former Governor of the South African Reserve Bank, Minister of Finance and Minister of Labour. An official view on his life is available here. I will put together a post soon about what he taught me - mainly about communicating complicated economic ideas (hint: use things like aloes, shoes and bare cupboards, and use short simple words). In the meantime, I was deeply honoured that he agreed to write a preface to my book. Here it is.
From How to Fix (or UnfXck) A Country, Six Things to Reboot South Africa by Roy Havemann
Tito Mboweni
One of the very first things I did when I became Minister of Finance, in 2018, was to bravely put together a party made up of economists – and one farmer. I called it the “Economic Growth Colloquium” and I hosted it at the South African Reserve Bank Conference Centre. I am particularly proud of the Conference Centre as it was added when I was the Eighth Governor. So you could say I had some home-ground advantage.
I needed that home-ground advantage! Economists are a cantankerous and argumentative bunch. To have one of them at a party might be seen as carelessness; to invite two of them would be a misfortune. We had a room full of them! Can you imagine what it was like? Michael Sachs, who is one of the smartest economists in the country – despite been brought up by a lawyer – famously quipped afterwards that the only thing he learnt after two days was how to spell the word “colloquium”.
But Michael was just being his usual contrarian self. It was not the only thing we learnt. The first lesson is an enduring one – that is that economists are full of ideas, they have all thought long and hard about growth, but that they actually largely agree. Well, almost all of them. Indeed, afterwards a group of economists wrote a letter complaining that they were not invited to the Colloquium – despite some of the signatories being in the actual room and presenting! These people!
What is the collective noun for economists? A babble! If you put a babble of economists together on a topic as broad and wide as economic growth, you might find discussion with them quite tedious. But that was not the case!
We covered many issues – the lack of a stable supply of electricity, the difficulties of getting an education system going, slow and complex logistics chains, and so forth.
To create a bit of vigorous debate, I brought along a farmer from my hometown in Magoebaskloof. We discovered that what a bunch of Johannesburg economists and Pretoria policymakers thought about economic growth was completely different to what life is actually like on the ground for someone trying to run a business in a deep rural area. The farmer brought a breath of fresh air. He spoke about the practical things. He needs roads to get his oranges to the local market. He needs a port to get his oranges to a global market. He needs electricity to run the farm. He needs skilled workers to deal with an increasingly sophisticated business.
Coming out of that Colloquium, the National Treasury published a paper, called Towards a Growth Agenda for South Africa. Ah, these bureaucrats love their long documents… In true Treasury tradition, the paper was a dense technocratic exercise that pulled together years and years of research on economic growth. The young guns in the economics team at the Treasury called it their MICROECONOMIC MANIFESTO, and like all good revolutionaries they were quick to explain it to anyone that listened. Of course, unlike other MANIFESTOS, it came with a long reference list, lots of footnotes, and lots of technocratic words likes “logistics chain” and “network industries”, “telecommunications reform” and, of course, that lovely phrase that economists bang on about incessantly: “structural reform”.
Of course, those of us that have read the secret dictionary of economists know what they mean by such fancy words. Economists love trying to sound cleverer than they really are. “Logistics chain” is really that road, train and port the farmer wants. “Telecommunications reform” really just means getting in cheaper wifi and a cell connection that works everywhere.
And “structural reform” is not some terrible medication. It is about keeping up with the rest of the world – expanding your cell phone network to deal with the latest advances, making sure that the way you provide electricity is not how they did it during the days of the Model T Ford, and building ports that work efficiently. This seems like bloody common sense – why economists have to befuddle it all by calling it “structural reform” is one of those great mysteries of the world that one might never solve.
We then put the paper out. Gosh! The hullabaloo!
Cabinet listened. The ANC National Executive Committee listened. Cabinet adopted the plan.
But in the last four years since the plan was published, a lot has happened.
This book is an opportunity for us to pause, regroup, and look forward. How much of that plan have we adopted? What more do we need to do?
The Treasury plan was an exercise in technocratic economic English, written by a set of super competent Treasury mandarins with a string of economics degrees from Harvard, Oxford, the London School of Economics and so forth.
This book is different. It is designed to be a much more accessible introduction for a general audience. Nevertheless, if it stokes your interest, please look at the endnotes, read the books cited, and engage with the ideas.
This book aims to be a bit controversial. It is not a detailed treatise on the latest deepest reaches of academic thinking, packed with dense ideas and complex academic formulae. Rather, it aims to provide the general reader with a bit of a tour of the big characters in growth theory, their big ideas, and then to put forward some simple ideas on how to get South Africa’s economy moving. It is ultimately a story about economic cooks and their recipes.
How is it that some countries advance so quickly, become wealthy and successful? Some countries, like China, have boomed periodically – in ancient times, in medieval times, and in modern times. Others, like Greece, boomed only in ancient times, and others, like South Korea, have only boomed in recent decades.
For our purposes, the question is: how is it that some poor countries suddenly take off?
This question has puzzled economists, anthropologist, sociologists and [?] for decades. Speaking at the prestigious Marshall Lecture in 1985, Robert Lucas, one of the fathers of modern growth theory, famously said: “Once one starts to think about [economic growth], it is hard to think about anything else.”[1]
Indeed – once one realises how absolutely central economic growth is to progress, it is really impossible to think about anything else!
The great thing about the world is that, in 2023, people across the world are living longer, are more well-off, better educated, and generally politically more free than in 1923, one hundred years ago.
Martin Luther King famously said that “the arc of the moral universe is long, but it bends toward justice”, meaning that there is an unrelenting drive towards a realisation of rights for millions. Similarly, given the great ingenuity of the people on this earth and in this country, there is a relentless drive forward in terms of economic progress. Through raising millions out of poverty, economic growth brings a type of economic justice. Although it is slow, the world economy continues to grow, and slowly year-by-year, millions are lifted out of poverty. With the right policies, the lives of our children and grandchildren can be much better than the lives of our grandparents and our great-grandparents.
You might interpret MLK’s words to mean that the arc of the universe is long, but that it bends toward justice, economic and otherwise.
So standing here in the early 2020s, this book takes a defiantly positive approach – just as the past century has seen great leaps forward in the world, so to the next century is likely to see great leaps in justice and material progress for everyone.
This might seem strange – while the great sweep of history has been a positive one, right now things are looking more than a little worrying.
In between all the short-term issues, there are also two long-term challenges: climate change and inequality.
On climate change, we urgently need to overhaul the production structure of the economy so that it stops harming the earth. We cannot go on pretending that pumping tonnes and tonnes of carbon into the atmosphere is a good thing. We must make a change. We have done this before – once upon a time, there was a hole in the ozone layer, but we banded together to close it. We can do the same with carbon emissions. Those that say that growth and climate reform work against each other? Wrong! We can build a growth agenda that protects the earth. It is not about stopping growth; it is about directing growth.
The challenge of inequality similarly bears down upon us – one of the themes in this book is the idea that when countries grow, some are left behind. Sometimes this is because of where they live, what their education levels are. Too often, even as the world is slowly becoming more and more democratic, people are left behind and do not benefit from economic growth due to their race or gender.
We cannot be complacent. While the great arc of history bends toward progress, it only bends because we choose to bend it. Everyone should work on bringing about a world and a country that aims to grow and succeed.
This book aims to SHAKE THE BAOBAB TREE and create a conversation.
My hope is that it stimulates a discussion on growth. We need it!
Tito Mboweni
Magoebaskloof
[1] Lucas Jr, R. E. (1988). On the mechanics of economic development. Journal of Monetary Economics, 22(1), 3-42.