The National Assembly’s Finance Standing Committee Fakes It

On 14 August 2018, representatives of the World Bank presented their ‘systematic country diagnostic’ report entitled An incomplete transition: Overcoming the legacy of exclusion to the National Assembly’s Finance Standing Committee.

What followed was a discussion which reminded this retired university professor of excruciating seminars, for which students should have had the conceptual background, but didn’t, and should have read the prescribed material, but hadn’t. And some of the dodges used by parliamentarians to get through the allotted time were familiar, including:

  1. I didn’t read this because I knew in advance it was wrong. [Floyd Shivambu] We know that the World Bank is an instrument of United States foreign policy. We know that it legitimated apartheid. We know that its structural adjustment programmes and projects nearly always fail. Why should we listen to the World Bank?
  2. What can I do to convince people I’m on top of this [Riffles through paper]. Ah yes, here’s something on human capital [Alf Lees]. I’d like to know what the presenter thinks about SETAs. They seem to run through a lot of money and not produce very much.
  3. What we need is something really comprehensive. [SeerajMahomed]. Yes, there’s some history in the report, but a major part is missing, and there is a need for in-depth analysis of path dependency and multigenerational impact of misallocation of resources.
  4. The ideological quick one-two. [Various] But what is this about private sector participation? They are constantly coming to Parliament to argue for the retention of the status quo. They refuse to come to the party. They are sitting on huge cash resources, which they speculate with, or send abroad.
  5. The play for time [YunusCarrim]. We said in 2016 we should engage with the World Bank and we’ve invited you to-day and our finals are fast approaching and we are very busy and come back to the next parliament and we shall have a really robust discussion.
  6. The World Bank should account to us for suborning our officials [YunusCarrim]. The World Bank has a great influence on people in the public service, which we should monitor and exercise oversight.
  7. Are you telling us what to do? [Various] We’re sovereign! We decide what we shall do! The government has considered all the issues and has taken positions on them!
  8. Say what? [YunusCarrim]. The diagnosis is good, but it is not matched by the quality of the proposals, which largely overlap with ANC positions. 
  9. We must find an alternative to the Washington consensus [YunusCarrim]. Update: Washington has found an alternative to the Washington consensus.

Of course, none of these observations establishes the truth of the World Bank’s arguments. Rather, they indicate the unwillingness of the Committee to come to terms with them.

What are we to make of all of this?

First, it is apparent that Donald Trump is not the only one in the world to make it up as he goes along. Vast, airy, false generalisations are the stock in trade of our parliamentarians as well. 

Secondly, Keynes observed at the end of his General Theory

Practical men who believe themselves to be quite exempt from any intellectual influence, are usually the slaves of some defunct economist. Madmen in authority, who hear voices in the air, are distilling their frenzy from some academic scribbler of a few years back.

The reference to ‘scribblers’ belongs to a more literate time and civilization than our own. Half-remembered snatches of conversations are more like it.

Thirdly, there seems to be a lack of clarity about the limits of government relationships with markets. Governments can do a great deal. They can regulate markets. They can assign and re-assign rights within them. They can tax the proceeds of transactions within them. They can take initiatives which affect them. They can repress them. In all these cases, they can attempt to estimate, with more or less precision, what the outcomes of action will be, and their associated costs and benefits. But what they cannot usually do is negotiate with them to determine agreed outcomes, to order. Take the example of international portfolio capital flows. Outcomes in this market depends on the decisions of a myriad of agents, some in this country, some abroad, who cannot be brought to a negotiating table[1].

Fourthly: In the United Kingdom of the late 1940s and early 1950s, two responses by Cabinet Ministers to civil service recommendations they didn’t like could be distinguished. They were Aneurin Bevan’s “I won’t bloody have it”, and Antony Eden’s “Let us try to find another way”. The World Bank presenter out-Edened Eden, thanked the parliamentarians for their rich range of comments, and then delivered a tutorial on aspects of what the report actually said.

Fifthly, it appears that parliament has insufficient economic expertise among its members to help South Africa get through difficult times. One remedy is to hand. At least, the parties with substantial representation should make sure that there are people with such expertise high enough on the party lists to get elected to parliament in 2019. Nothing enhances credibility like having people who know what they are talking about. Street smarts we have already.

The brutal fact is that the nationalist tendency to turn inwards in order to create rent for its beneficiaries has led us in to a dead end. It has happened before: the same tendency within Afrikaner nationalism, augmented by international isolation, resulted in a chronic balance of payments problem, ultimately rendering apartheid vulnerable to financial sanctions. Now the problem shows up in exchange rate volatility and a vulnerability to adverse capital flows. The punishment fits the crime: political in the case of apartheid, economic now.

The Trump trade war and the drying up of dollar liquidity are both bad news for us. We urgently need better and more broad based economic leadership than we are getting. Now is not the time for incompetence or timidity.

Charles Simkins
Head of Research

[1] Politicians tend to personify. Compare Bill Clinton’s question: “You mean to tell me that the success of the economic program and my re-election hinges on the Federal Reserve and a bunch of fucking bond traders?"