The recession has come as a cold shower to policy makers and their economic advisers, but only because they decided to ignore the facts. Whether they chose so out of expediency or sheer ignorance, I don’t know. About five years ago, I started writing about SA’s myopic approach to economic growth, predicting GDP would contract annually, leading to a recession in the middle of 2017.
Every single year, I diligently produced my projections of future growth, which parted significantly from the optimistic data published by the Reserve Bank and even from the less benevolent estimates of the World Bank. I was right, they were not.
No doubt our leaders are responsible for the current contraction, but the root causes go beyond SA.
A systemic shift is occurring globally, with the old model of large-scale industrialisation unable to produce growth almost anywhere. European economies are stagnant and so has been Japan for a few decades. China has more than halved its growth expectations, while Brazil and Russia have been in prolonged recessions for years, in line with my 2012 predictions most Brics countries would soon face serious crunches.
Even Africa, which was until recently heralded as the “rising” continent, is experiencing severe downturns. Take Nigeria, which was celebrated as the continent’s economic miracle. In 2013, I had already indicated the country’s development “success” would be short-lived based on extensive exploitation of natural systems and local communities.
As the IMF suggests, the world might have entered a “secular stagnation”. The US has been partly shielded from this trend because of its dominant currency position, a critical advantage in times of quantitative easing, and because of the expansive policies of the Obama administration. Although President Donald Trump presents himself as the “growth” president, he will probably achieve the opposite: his reckless policies will undermine the gains of the past, collapsing job creation in the more dynamic sectors of the economy in an effort to resuscitate moribund fossil fuel industries.
Factoring in the possibility of a new financial crisis — which some see already brewing in the US, but I dare bet it will be China that brings the global economy down this time — it becomes clear the world is in for a bumpy ride.
Over the past few years, I have learnt a thing or two about development, especially sustainable and equitable development. Above all, I have learnt the obsession with growth may have disastrous consequences for long-term prosperity.
Not only does this obsession make people blind to the environmental and social costs of conventional industrialisation, but it ultimately weakens the economy itself, undermining future growth. It’s a suicidal strategy, which SA perfectly embodies.
As I describe in my new book, Wellbeing Economy: Success in a World Without Growth, a low-growth future need not be grim and hopeless. Actually, it could prove to be the much-needed window of opportunity for “real” economic transformation, not just rhetoric. A focus on wellbeing means a different model of industrialisation, supporting companies that have a positive effect on society and nature.
It means strengthening small businesses and fostering local economies by training people in jobs that add real value to communities. It also means empowering citizens by better distributing resources and opportunities.
Read the full article in Business Day: https://www.businesslive.co.za/bd/opinion/2017-06-28-fixating-on-growth-could-subvert-prospects-of-long-term-prosperity/#