Cyril Ramaphosa… now the President of the Republic of South Africa, has recently been talking in his sleep: “I do not understand what happened to me. I do not understand what happened to me. I do not understand what happened to me…“
Pretoria. Cyril Ramaphosa, formerly the President of the National Union of Mineworkers, and now the President of the Republic of South Africa, has recently been talking in his sleep: I do not understand what happened to me. I do not understand what happened to me. I do not understand what happened to me.
A mouse, having worked its way under his blankets and being in a position to take a bite of one of his toes, upon hearing his moans, like the Daily Maverick and the Globe and Mail, and apparently for similar reasons, decided not to attack.
As for me, I decided to treat the occasion as an opportunity to state the obvious, and to use the obvious as an opportunity to reframe current events in a long historical perspective. ‘Neither do the economists,’ I remarked (thinking I was stating the obvious). ‘They do not understand what happened to Cyril Ramaphosa either.’
‘Come off it!’ the mouse squeaked loudly, and, I might add, rudely. ‘You do not even know the names of all the economists! You certainly do not know that not a single one of them understands what happened to Cyril Ramaphosa or to South Africa! Surely as we speak here in the dark at the President’s bedside, in other places where we cannot hear them more than one economist is diagnosing South Africa’s ills! Who are you to dismiss all their diagnoses as misunderstandings without even knowing who is speaking or what they are saying?’
I felt that the mouse was not making an effort to see my point. Instead, he attributed to me an implausible epistemology, as if I were claiming to know everything that is going on in the minds of thousands of scholars I do not know, and most of whose works I have not read.
Choosing to ignore the mouse’s bad attitude, I simply replied, ‘Let’s listen a little more:’
I do not understand what happened to me. I do not understand what happened to me. I do not understand what happened to me. I did everything I was supposed to do to create jobs for the unemployed.1When corruption was scaring off investors, I fought corruption. When lack of access to credit was the problem, we provided credit. When investors are afraid that they could not take their profits out of South Africa and move them back home, we guaranteed freedom of capital movement. We hardly tax profits at all, paying government expenses with the VAT and by taxing the incomes of middle-class professionals and by going farther into debt! I do not know what happened. Unemployment went up instead of down. The unemployed were not grateful for all the blood, sweat and tears I put into creating jobs for them. Violence got worse! And violence scared away investors! Fires and murders! Demands that I ‘do something!’ Why do they blame me when I am working as hard as I can following the advice of the most highly qualified scientists? I do not understand it! I do not understand it!
His moans gradually subsided into silence, and then they started up again, repeating the same themes.
The mouse said I may only be a mouse, but unlike the people who are rioting in the streets, raping women, and setting fire to buildings burning people to death, I can think straight. I can understand that the President is working on solving the problem. I can make a rational argument.
The mouse offered the following as a rational argument:
- The only way to overcome poverty is for poor people to get money to buy food, housing, medical care and other necessities and conveniences.
- The only way (or at least the only desirable way, ruling out drug dealing, prostitution and so on) for a poor person to get money is to find a job.
- Jobs come into existence only when investors create jobs.
- All human beings, including investors, seek to maximize thesatisfaction of their preferences.
- In the case of investors, maximizing preferences meansmaximizing some combination of high earnings and low risks.
- South Africa does not have enough capital to create jobs fastenough to absorb existing unemployment and keep pace withits growing population.
- Therefore, to overcome poverty, South Africa must seekforeign capital.
- Following from premise 5 above, foreign investors will investonly on terms they accept, and these will be terms that maximize their confidence that they will achieve their investment objectives.
- Consequently, South Africa must remould itself to become an environment where potential investors will feel confident that they can achieve high rates of return at low risks.
Although my mother always said that honesty was the best policy, experience has taught me that what she always said is not always true. In this case, if I had told the truth I would have said that the mouse’s conclusion (9) only follows if all 8 of his premises are true. In fact, all his premises are false, except perhaps for 8. Even 8 is misleading in a word like ours overflowing with excess funds finding no profitable
outlet making anything useful. They dash around the world in high- speed speculative transfers in quantities that dwarf the real economy, usually concealing their true ownership, operating as trust funds parked in tax havens. Any project that pays, and is known to pay, will not fail for lack of funding. This is still as true today as it was when Walter Bagehot wrote it in 1873.2 In the imaginary world of Cyril Ramaphosa, the National Development Plan, the mainstream press, the economists, the DA, the ANC, the mouse, and too many others to count, there is a shortage of capital in South Africa. The solution to the problem of mass unemployment is to persuade investors to bring to South Africa the capital it needs. In the real world, every, or almost every, profitable niche in the South African economy is already being occupied by a firm that is already making money there. So, 8 is at best misleading. It leads one to believe that capital is scarce and investors few. What is really scarce are real markets with real customers who will pay for products not already being supplied by somebody who got there first. The score: 7 false premises and 1 misleading premise delude a President who does not understand why 9, which he fervently believed, was a fantasy that could only collide with reality. It led to anger; to setting fires, to killing police officers, and other acts typical of the humiliated poor. They are driven to violent insanity by the tissues of lies that enslave them.
Disregarding my mother’s advice, I did not tell the mouse any of this, judging that brutal honesty would lower his self-esteem and poison our relationship. Instead of criticizing his opinion, I stated my own: `
The economists have it backwards, I said. They think the problem is insufficient investment and the solution is more investment. As John Maynard Keynes wrote, …’there has been a chronic tendency throughout human history for the propensity to save to be stronger than the inducement to invest. The weakness of the inducement to invest has been at all times the key to the economic problem.’3 But this is not strictly true. As Julius Nyerere often said, before Africa was conquered there was no unemployment. African societies were not economies in the European sense. People did not think or act in economic terms. The ‘economic problem’ analysed by economists was not part of their social repertoire; there were no words for it in their languages.
So, asked the mouse, if the economists have it backwards when they think the problem is how to strengthen a chronically too-weak inducement to invest, what would it mean to get it frontwards? What is the real problem?
The real problem is how to meet human needs in harmony with nature. But somehow humanity has tied itself up in knots in such a way that if somebody sells shares instead of buying them on Wall Street, that means unemployment in the Cape Flats. If the Chinese cut copper imports, that means mines have to be mechanized to remain profitable. How did humanity stew itself into such a pickle that most people have no control over their own lives, and are condemned to insecurity by forces far beyond their control? That is the problem. That South Africa feels compelled to seek foreign investments to stay afloat and avoid a further credit downgrade and further devaluation of its currency and even more unemployment, is a symptom of a much larger
problem. We should be asking, how can we become more self-reliant? How can we create dignified livelihoods for all?
What I can’t agree with, said the mouse, is talking of ‘the economists’ as if all economists think alike. I can see why you might say that some economists have mistaken views and give unhelpful advice, but surely the solution, as in any science, is to do more research and give better advice with the support of more evidence.4
As Thomas Kuhn might put the matter, I said, this is no time for normal science. This is an historic crisis. Taking a broader historical view, economics grew up as a way of thinking that made sense of –and actually, as a matter of history, contributed to creating—modern society, often called capitalist society but more appropriately called economic society.
Modern society, economic society, is not working. It is not meeting human needs. It is not in harmony with nature.
So, said the mouse, you are saying, echoing Keynes, that somebody who thinks generating more growth by finding more investors is the problem to be solved is thinking like an economist. Economists by definition do not understand. Their science presupposes a social structure that is not working; dysfunctional ways of thinking and acting are built into its foundations.5 Not by mistake, but because its foundations always were identical to the social structure of modern economic (first European, then global) society. It is not any economist’s fault that the subject they chose to study was a study of a way of life that is dysfunctional. Nevertheless, that is the way it is.
Thank you, I said. I was glad that I had avoided quarrelling with the mouse and that he had come around to seeing my point of view. I had to admit that my way of using the phrase ‘the economists’ has the awkward consequence that mavericks like the ones who write the Real World Economics Review, are not part of the set of entities to which the term ‘the economists’ refers. It is counter-intuitive to call them ‘dissenters, not economists’ when they have doctorates in economics and are employed as professors of economics. But my way of using the term has the advantage that it makes it clear that to rebuild the world, to build a world that works, we do not need ‘other economists’ as much as we need people trained in other fields who are able to look at problems now classified as ‘economic’ like ‘unemployment’ from other perspectives using different conceptual and mathematical tools.
- Details of mainstream economic advice on how to attract investors and create jobs are provided in papers by Dani Rodrik, Ricardo Hausmann, and Andres Velasco cited in the National Development Plan. See Dani Rodrik with those co-authors One Economics: Many Recipes. Princeton: Princeton University Press 2007; and other works by the same three.
- 2) Walter Bagehot, Lombard Street: A Description of the Money Market. London: Henry S. King publishers, 1873. ‘We have entirely lost the idea that any undertaking likely to pay, and seen to be likely, can perish for want of money’. From the second page of Chapter One.
3) John Maynard Keynes, General Theory. London: Macmillan, 1936. Pp 347-348.l5
4) Robert Heilbroner, The Making of Economic Society. Englewood Cliffs NJ: Prentice-Hall, 1969.5 Andre Orlean L’Empire de la Valeur : refonder l ‘économie Paris : Seuill, 2011.