Economics, Literature and Scepticism

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I am a PhD student in Economics. I am originally from South Africa and plan to return there after my PhD. I completed my M. Comm in Economics and my MA In Creative Writing (Poetry) at the University of Cape Town, where I worked as a lecturer before starting my PhD.

Sunday, May 14, 2006

Beneath are a few things that I wrote in an internet debate about The Economist.

Posted by Simon Halliday | Sunday, May 14, 2006 | Category: |

So a few perspectives that may be of interest in the mountains of economics reading that I have done.

Firstly, Englebert (2000) isolated a ‘legitimacy’ index that contained variables of democratization, graft, corruption, etc in order to ascertain whether that was an adequate explanation of something called ‘The African Dummy’ by Barro (1994) (The Africa Dummy is a variable occasionally thrown in to cross-country regressions because of just being an African Country, it is generally significant and has a large magnitude of impact, i.e. it’s bad to be in Africa). Similarly, Ndulu and O’Connell (1999) have done similar work on governance structure, institutions, etc in order to ascertain whether they are at the centre of Africa’s poor performance economically rather than just politically, although there paper has some problems in it, it makes an interesting contribution by an implementation of something called ‘The Lipset Hypothesis’ which basically says that those countries with better initial pre-democracy institutions will do better than the others. This is better for SA, but sucks for much of the rest of Africa.

Ok enough of that, but something which may prove interesting is that Bhorat and Oosthuizen (forthcoming) show that the SA government gives more support for the poor and unemployed than is supposedly given by COSATU. This is a really interesting result mainly because COSATU continually defends itself by saying that it protects the poor and the unemployed by protecting the individual in those households who is employed. Government’s protection of these is categorized by their offering of the Child Support Grant and the Old Age Pension, which disproportionately support the two lowest income groups in South Africa (i.e. those with incomes of 0-400 and 401-800 rand per month). Incidentally, if we combine these two groups into a group of 0-800 rand per month, this single group holds over 75% of South Africa’s unemployed. This is an intuitive result as it is most often the poor and uneducated who do not have the resources to obtain an education or find the money to even obtain a job (finding work incurs costs), moreover with recent studies into ‘network theory’ of job searches these people can’t get jobs because they don’t have friends who have jobs. Self-reinforcing cycles of siffness.

Nevertheless, on Matthew’s points on Robert Guest and subsequent Economist views on Africa, and South Africa specifically. Guest is not at all positive about South Africa in The Shackled Continent, moreover, if the current editorial team maintain his ideological standpoint then I cannot believe that they will represent South African policies in what would be considered a positive light. Notwithstanding that, the survey is more positive than the previous one as Matthew says (had to read it previously) although we should not let that lull us into believing or agreeing with everything that is presented by The Economist or by the Financial Times. I would also contest Matthew’s statement that The Economist is at all centrist, yes they did not support Berlusconi’s outright capitalism, but in terms of Italian politics he was considered right wing, and being slightly left of the right wing does not suddenly make a publication centrist. However, if we agree that the so-called centre is moving more ‘right’ then Matthew’s considerations may have more credence (I know that this was researched in a recent study, I can’t remember the names of the authors). Nevertheless, I do agree that such a publications focus on issues such as graft and corruption do not necessarily coincide with a specific political agenda. What also reinforces what the articles were saying is Mbeki’s recent commentary to reinforce the arguments of both papers on the role of cronyism in South Africa. It is a massive problem. In my mind though, we need to consider this in the context of the positive which Stuart brought up. Additionally, if we look at how the government is doing in beginning to cause accelerated growth (although that is admittedly debatable – that the govt policy is causing it that is), that there are numerous increases in poor peoples’ access to amenities, that there are supposedly decreases in both poverty and inequality (SA going down in the world rankings of ‘most unequal countries’) then we must see that there are good results from the current government. The obvious question that covers most peoples lips is whether there is a sufficiently strong trickle down effect for the benefits of economic growth to be felt by the unemployed, those that Bhorat and Oosthuizen (forthcoming) and Bhorat and Leibbrandt (2001) investigate as being the most vulnerable. I hesitate to posit an answer to that question.

One area though that I think could have done with more observation is that of primary and secondary education, the availability of teachers and whether the new OBE based education system will supply tertiary institutions with sufficiently skilled individuals for the rigours of that training. We all know that SA faces a skills deficit, the question is then whether the primary/secondary responses to the tertiary needs are properly met.

So that was my initial 2 cents. If it makes any interesting points let me know.


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