Good and bad capitalism (from 2016)

CRUDE anticapitalist rhetoric has long been central to African National Congress (ANC) politics. The idea that the “capitalist state” facilitates capital accumulation and co-ordinates exploitation thrives in the movement, in offshoots such as the Economic Freedom Fighters, in the trade unions and among nongovernmental organisations.

National Union of Metalworkers of SA general secretary Irvin Jim exemplifies this mind-set. He argues that political corruption is “fundamentally no different” to “stock exchange capitalism”. He is less worried by “Gupta capture”, he says, than by the “capture of the Treasury … by Trevor Manuel, Pravin Gordhan and Nhlanhla Nene, whose budgets have done everything possible to ensure that … white monopoly capitalism remains in power”.

Such attitudes have turned many post-apartheid socialists into useful idiots. When crooks and traditionalists decided to elect the conservative Jacob Zuma as president, leftists thronged to support him because he was not a “neoliberal”. Want to loot a parastatal? Campaign for economic development “driven by strategic state-owned enterprises”, and a gaggle of swooning socialist economists will line up to support you.

Should the National Treasury insist on value for money and the central bank try to keep inflation under control? Of course not: this is all part of the “neo-liberal agenda”. A transparent National Development Plan to mobilise resources for sustainable growth is neoliberal. How about the ratings agencies? Servants of global capital. Now the opportunists who want to steal money from public-sector pension funds say this will promote development — and credulous leftists are ready to get on board.

Change, however, is in the air. In briefings since his budget speech, Finance Minister Pravin Gordhan has distinguished between “good capitalism” and “bad capitalism”.

Since the collapse of communism two decades ago, a spotlight has been cast on the divergent country growth performance, and the varied distributional characteristics, of the only game left in town: capitalism.

Economists Carl Schramm, Robert Litan, and William Baumol distinguished four types of capitalism in their book, Good Capitalism, Bad Capitalism. “State-guided capitalism”, dominant across much of Asia and Latin America, involves “picking winners” (although it is often easier to pick losers instead).

“Oligarchic capitalism” downplays economic growth in favour of the enrichment of a tiny minority of the population — inequality and corruption invariably follow. “Big-firm capitalism” deploys economies of scale and network effects to generate efficient mass production — but big firms will engage in rent-seeking if they are not exposed to constant competition. Finally, “entrepreneurial capitalism” generates breakthroughs in new technologies and product areas.

According to the authors, a mix of big-firm and entrepreneurial capitalism best promotes sustainable growth. SA’s combination of state-guided and oligarchic capitalism, on this account at least, promotes corruption and ruin. Such analysis implies a mind-shift that is difficult for the SA left: we should not be “for” capitalism or “against” it. Instead we need to understand its dynamics and harness its creative energy, while mitigating its negative consequences.

Governments are not powerless in the face of a global capitalist monolith: they can discourage rent seeking, keep competition relentless for big businesses and use legal and institutional arrangements to promote entrepreneurial capitalism. The 2008 financial crisis has swept away liberal complacency and demonstrated the value of once-derided leftist critiques of financialisation and inequality. Business and labour alike are alert to the risks we all face in future decades, such as climate change and mass social unrest.

“Inclusive growth”, the economic merits of greater equality and the value of carefully set minimum wages used to be preoccupations of the left alone: now they are mainstream ideas. SA’s leftists need to abandon their fantasies about the end of capitalism. At least their finance minister, to his credit, wants to know how to make capitalism better.

• Butler teaches public policy at the University of Cape Town

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