Public institutions: Fix them, because they’ll save SA’s ass

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Public institutions: Fix them, because they’ll save SA’s ass

To expose a country to global economic forces without tightly regulated protection is a sure way to kill it

Jonny Steinberg


Among the worst wounds our enemy can inflict on us is to cloud our thinking. And I fear Jacob Zuma has clouded the thinking of many who consider him SA’s greatest foe.
For what the “nine wasted years” have shown us, more and more people are beginning to say, is that from public institutions we can expect only trouble – the one hope for the future is that they clear out of the way and allow the market to do its work.
That seems to me an alarming proposition, for there is no sane world in which there is only a market. To expose a country to global economic forces without protection is a sure way to kill it. And the only way to protect a country is with decent public institutions. The choice is not between states and regulators on the one hand and markets on the other; it is for both to be as strong as they can be.
That is why fixing what Zuma has broken is so important – not to get public institutions out of the way, but to make them work properly again. I am not sure how many radical free-marketeers appreciate what would have happened to SA had it been thrown open to global commerce without restraint or protection.
The Asian financial crisis of 1997 passed us by. So did the Argentinian crisis of 2001. Why did nothing similar happen here? In part because SA was protected from global financial markets; much of the country’s sovereign debt was local and rand-denominated and thus sheltered from currency fluctuations. Elsewhere, governments fell. Societies were thrown into turmoil. Ours was not. What might have come to pass had SA gone bankrupt three, four or five years after the transition to democracy? It is a counterfactual barely worth pondering.
SA was saved during democracy’s early years by other forms of protection from the vicissitudes of global economic integration. When agriculture and light manufacturing were liberalised in the 1990s, and when the mining industry’s labour market continued to shrink, labour was shed at an alarming rate. In response to this growing unemployment, the SA state vastly expanded the reach and the value of cash transfers to the poor.
Thank goodness public institutions, in partnership with private ones, had the capacity to do this. These transfers rapidly became the largest source of income for the bottom third of all households. There is no question that in the absence of this basic feature of the social state, SA would have fallen apart at the seams.
Lest we forget, there is also the story of the Aids epidemic and its treatment. In the decade between 2007 and 2017 SA’s death rate more than halved. Antiretroviral medicine accounted for much of the decline. And market forces had little to do with the delivery of Aids treatment. The factors involved were enormous inter-country transfers of resources, powerful activism, the expertise of NGOs and, crucially, the public healthcare system through which almost all of this treatment was delivered.
Permit me one last example. In 2007 and 2008 the entire European and North American banking system was sucked into a mortgage default crisis that started in the US, a debacle that changed the world. SA’s financial sector watched from the sidelines, largely unscathed, primarily because it operated under an old-fashioned, tight regulatory regime. Once again, the limits of SA’s global integration protected it from catastrophe; and these limits were the result of decisions – public decisions, it should be stressed – that the country has made over the years.
If there is a lesson from the Zuma period, it is not that the state should get out of the way and let the market do its work. It is that public institutions – from a host of regulators to the treasury, Reserve Bank, SA Social Security Agency, hospitals and clinics – should be cared for and protected. For if they are not as strong as they can be, SA has fewer choices at its disposal about how it engages with global capitalism. And to run out of choices is to run out of luck.
• Jonny Steinberg teaches African Studies at Oxford University and is a visiting professor at Yale.

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