Why we still believe exports for jobs will lead to shared growth: A response to Fine’s “Harvard Group Shores up Shoddy Governance”

Introduction

In 2006 the South African Government convened an International Growth Advisory Panel (IGAP) to take a new look at the country’s growth record and, in light of such, offer comment on the national growth strategy, ASGISA. The team comprised twenty five members who worked alongside government counterparts in the Presidency, Treasury, Department of Trade and Industry (DTI) and others. About one-third of the team was South African and over two-thirds hailed from developing countries. They worked on topics framed by ASGISA and related to their various academic disciplines (including economics, political science and public administration). IGAP papers were never intended to be comprehensive, hard policy products but aspired rather to provide rigorous contributions from across disciplines and world-views to the ongoing dialogue on growth puzzles facing the nation.

Given this aspiration, we welcome the current request to engage in this journal and hope that this article spurs responses that do in fact help solve puzzles. To date, commentary has focused lightly on this goal and has given little attention to the substance of the IGAP work. At best, we have seen some discussion of our recommendations, as in Professor Fine’s work – but with limited evidence of engagement with our detailed analyses. Critique of our apparent failure to reflect on the influence of South Africa’s conglomerate structures on the economy seem to miss the ninety pages written on exactly this subject in discussing BEE, for example, or the paper dedicated to examining the impact of such structures on profit margins and growth. Claims that we ignored the potential role of public expenditures and employment in the growth equation, or that our calls for counter-cyclical fiscal policy reflect narrow neo-classical perspectives, simply disregard two or more papers on the topic that lay out a detailed, fact-based story leading to recommendations that government should not see spending as a primary vehicle for growth. We believe this recommendation holds up well given the economic changes seen recently.

Given our impression that many commentators have yet to engage with many of the IGAP ideas, this article’s intention is to provide the basic storyline that emerged from the work and show dynamically, within this story, how we came to some of our recommendations. This storyline does not reflect on all the papers and leaves out a lot of detail and even some recommendations, which we hope readers will delve into in specific papers underlying the panel’s work. It is important to note that the story we describe does not run counter to the direction of any paper, however, and as such represents a lucid and important narrative that emerged without any prearrangement from the independent work of the many scholars. We believe it is a story that should therefore be given some serious attention and hope that presenting it here will secure such.

South Africa’s growth narrative: past and present

Post-apartheid South Africa inherited an economy characterized by low growth, high inflation, high unemployment and high inequality. Since this time, the country has fostered the kind of political and economic stability one would expect to translate into improved results. Government first reduced and then kept inflation low, solidified its fiscal position, gradually begun building an infrastructure for the future, and promoted policies to empower those traditionally disempowered – particularly racial groups excluded from the economy under apartheid. If the world were fair, political restraint and economic rectitude of this magnitude would have produced a booming South African economy operating at or near full employment. It is anywhere but at this place, however. In the first post-Apartheid decade, unemployment almost doubled while before-transfer inequality increased significantly across all racial groups and between them.

A general storyline about growth

Figure 1 shows that, while the economy has certainly grown from the lows of the mid-90s, it has not reached a sustained, high-growth path. Growth at the time the panel was convened for the first time...