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

Economics, Power and Capitalism

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

I was asked the following 3 questions - they are in bold. I responded as I did below. You can comment to me what you think.

(a) How do we inspire less selfishness? Tough question. Meditate? Pray? Construct morality on social contract theory? Construct institutions that incentivise selflessness - i.e. use selfishness to defeat itself? What do you guys think would make a practical difference?

Ok, I don’t think that we can really inspire less selfishness, except in terms of regulation of corporates to ensure that they don’t exploit labour, or to ensure that they do not exploit natural resources. The key here is an efficient and effective regulatory body which can actually adequately monitor what corporates are doing and hold them responsible for their behaviour. Personally, I don’t think we’ll be able to change individual behaviour, I think that the only way to adequately reinforce behaviour that is somewhat altruistic is to have government become more efficient, publicly so in fact, so that people can see where their tax money is going. On this, it is entirely feasible for us to pay even higher taxes than we are in South Africa, assuming that we can begin to see better outcomes. Obviously graft and corruption are enemies of this outcome, but we can but hope that government becomes more efficient and that they find ways to eliminate graft thus ensuring that we see where the money that we as taxpayers pay goes somewhere – Social Grants, Public Hospitals, Infrastructure, whatever. (the new public works programs if they are re-vamped (which they are meant to be) should do some good here).

(b) How do we protect against selfishness? Tough question. Confer legal rights on people? Overthrow capitalism in a glorious communist revolution?

Personally, I believe that a version of regulated or ‘responsible’ capitalism is the only way that we can eventually see a positive future for SA. This is contingent on several factors. The first is that a revolution of any sort is costly and time-consuming and therefore is unlikely to be considered useful. Secondly, capitalism is the game that is played by almost all countries and one of the only ways that we can ensure some kind of improved aggregate lifestyle for South Africans (and Africans in general) is if we learn to play this game better than it is played by members of the first world. We need to increase the efficiency and effectiveness of institutions, we need policies to be implemented with measurable goals and with individuals and member of government accountable for what they do. This does not require a change in government, nor does it even require a strong opposition, it simply requires responsible governance by the party in power. Something of which I believe they are capable, especially in the context of the massive improvements that have resulted from their rule in the past five years (I don’t count the first 5 as they were basically emergency management subsequent to the nightmare that constituted Apartheid Economics). Moreover, socially democratic models are quite likely to work in the long run, Thabo Mbeki is a big fan of people like Gerhard Schroeder of Germany, or of socially democratic models such as Sweden.

Commensurate with this is a necessity for an increase in the skills of the average individual. This then requires an improved education system, and a system which in turn reflects the changes that need to occur in the economy. Hence campaigns for increased math and science education, for higher quality teachers, etc are all within the ambit of this eventual policy goal. This means though that the ANC as a party are going to have to reverse some of their decreased spending on education, even though SA has high education spending as a percentage of GDP internationally, a lot of the money goes unspent, moreover when it is interacted with the equitable share system the provincial and national goals need to be aligned in order to have proper educational outcomes. Interesting things to note are simply things such as the success of the primary school feeding program in Mpumulanga, which will hopefully result in higher marks and increased attention for later education and remedy the nightmare that has been that province’s education outcomes in recent history (in the 2002 School Register of Needs survey, Mpumulanga was often left out because the schools had such poor data, and inadequate data provision).

(c) And, very importantly, how can we reconcile any answers to (a) and (b) above with the idea of freedom? If you agree that human freedom is a value worth pursuing (which I certainly hope you do), how can we balance the need for limiting selfishness with the value of liberty to do what we want?

To a large extent I think that liberty is over-rated (Yes, that was meant to incense you Al). Although the previous statement was somewhat inflammatory, I do believe it to a large extent. I think that because of the indoctrination that we have received in terms of ‘personal liberties’ in western societies, people have an incorrect belief that they should be allowed to do whatever they want. I may be sounding all 1984 here, but there are many instances in which personal beliefs and personal liberties are not necessarily for the best of society as a whole or society on aggregate. Yes, I like the fact that I have freedom of movement, of expression, etc, but I don’t really believe that they are intrinsic rights that are necessary in order for everyone to live happy lives. I think that our ideas of freedom often constrain us to believe in a system that has to promote these ideals when they are not necessarily for the best, I would gladly sacrifice my freedom to move out of South Africa if I believed it would help solve South Africa’s poverty (granted this is a long shot, but an interesting point nonetheless, it is meant to be purely illustrative). The problem I think is that people make the argument that ‘life is only worth living if you have freedoms A through Z’, I think that if we all had Freedoms ‘A through X’ but not Y and Z, we could have a more successful society. Nevertheless, this does not mean that I believe that government should limit freedoms. The honest truth is that the limitation of individual freedoms has almost inevitably been correlated with countries which have subsequently failed, this would then mean that if South Africa started doing such it could be indicative of the proverbial end-days for our country. The above argument was meant purely as a philosophical understanding of what I believe is relevant – I think that if everyone could be fed, had a job, access to amenities, etc I would limit myself in many ways to see that occur. I would prefer not to have to do so though.

All of the above being said, it is very difficult to come up with ‘practical’ solutions that don’t limit the freedoms of business or of individuals. Corporations have a large amount of protection, as does labour. I believe that both of them could do with less protection. The right wing will scream at the violation of corporations and the left wing will scream at the violation of labourers – each of them contributes to the problem and they both need to make concessions in order to improve eventual outcomes for the country. Labour laws could be made more liberal and reduce the costs for hiring and firing individuals, equally corporate taxes could be higher, or at least the coporate sector could be duty-bound to do more for the country, for example the service could be requested to do work for government pro bono, or maybe they could be awarded government contracts contingent on their following certain practices (this or at least a version thereof is in place in certain instances).

I believe that people are very scared to give up what they have. Many of the white people in South Africa are still unprepared to pay the ethical price for Apartheid. My personal belief is that if you are a white individual in South Africa over the age of 5 you have immorally and unethically benefited from Apartheid in one way or another: either you received better schooling, or your parents had a better job, or you made money which was tantamount to being made at the blood cost of others. The White population of this country does not wish to take responsibility for this, we worry about our property rights (the property of which was often gained at dramatic cost to others of different races), or our ‘personal freedoms’ to which we are so philosophically attached. I believe that this often contributes to many white people acting against government when they could be acting in accordance with what government is trying to achieve. I reiterate that I am not trying to split this into an ‘us’ and ‘them’ scenario, but simply that white people overvalue what they have and undervalue what they owe. People too easily forget.

Is there no possible solution in striving for 'ethical capitalism'? Is there no point in fighting to 'make trade fair'? ('Ethical' and 'Fair' adopting primarily the assumption that unbounded selfishness is shit, as evidenced, for example, by the moral claims underlying Patrick's email: e.g. wasting natural resources is bad; selling tobacco to children is bad; firing atomic bombs at civilians is bad; rights for workers is good; voting to release Mandela was good; etc).

As I stated above, I believe that ethical capitalism or responsible capitalism is the system which is most likely to succeed. However, it will entail a large amount of sacrifice on an individual level, in terms of income, tax, personal benefits, the education of one’s children, and possibly several other levels. The stark reality is that many of us had extraordinary educations at private institutions, for us to have a morally and ethically responsible government may require of us a situation in which we send our children to schools that could be dramatically inferior to those that we attended. There will be a certain loss of the very high quality of services that we experienced because many of those services had been reinforced almost at the direct cost of services to the historically disadvantaged in our country.

In terms of making trade fair, this is a worthy goal in and of itself. The problem is normally that European and US representatives don’t want to come to the party. As was seen this week when the deadlines for the EU (specifically France) were to be met for the Doha trade round, the EU pushed them off. If the pattern continues unabated then the Doha round may end up as a complete failure as more protectionists gain power in the US and the EU respectively. It will not be happy. Making trade fair is a worthy goal, but with the number of times that the developing world has been burnt by promises by the developed world, the developing world need to see some indication of authenticity by the developed world before it will warrant any action by them to reduce their trade barriers, their tariffs, NTBs, etc.

In addition, the process of ‘making trade fair’ requires an equalization of political power which is external to such things as who has veto power on the UN, or who can buy off whom in the WTO. This kind of equalization of power requires even more of both sides of the developing/developed world because it requires them to take cognizance of their own political weaknesses and to deal with them without becoming melodramatic.

A comment on the selfishness issue: I don’t believe that this flows from Monotheistic religions, it most likely flows from a enlargement of personal preservation and personal genetic preservation. Hence, I want to make more money to ensure that my genetic offspring are more likely to produce offspring. The more money and power I have, the more likely this is to occur and the more offspring me and mine are more likely to have. It just so happens that the largest hegemon at the current moment in time is predominantly constructed of people who profess to be Christian. I believe that in many situations people will revert to genetic imperatives, even though they may believe or have faith in others. I agree that it seems strange for monotheistic religions which often promote unselfishness and love to be present in the face of so much selfishness. I think it is just genetic nature. Obviously there are possibilities for us to override genetics, but I think in many cases people simply revert.

Ok, so that wasn’t entirely coherent, but it’s a start. I think I get across some of what I am thinking about. Tell me what you are thinking, contemplating, etc.


P.S. If you haven’t listened to it yet, there is an interesting interview with the guy who wrote the article on The Economist Website.

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