By Rabelani Dagada
Although I am a devout advocate of free market principles, one who agitates for less government input and less regulation, I believe that entrepreneurs and the private sector can thrive where the government is strong in terms of providing a conducive environment for individuals and enterprises to thrive.
In his highly acclaimed book entitled ‘Why does India Grow at Night?: The Difficulty of Executing Economic Reform,’ Gurcharan Das makes a compelling “liberal case for strong state”. Das also argues that the Indian economy would have grown tremendously if the state were strong. If the government fails to provide security and necessary social and infrastructure services, individuals will not be able to make adequate financial savings, entrepreneurial innovation will be hampered, and business will not invest sufficiently. If South Africa wants to grow economically, the state should increase its expenditure on fixed investment from 19% to closer to 30% of the gross domestic product.
Fixed investment is constituted by the construction and expansion of infrastructure such as roads, railway lines, dams, and seaports. On the other hand, the South African economy needs some ‘oomph’ and government infrastructure projects can signal a wake-up call to the private sector to ‘get-up-and-invest’. Some of these fixed investments should comprise national pride infrastructure projects which are delivered through public private partnerships.
In order to focus and align the interests of the state with that of the wider economy and the country’s public, national pride projects are of tremendous importance. The United States in the 60s and 70s enjoyed the National Aeronautics and Space Administration (Nasa) space programme, the result of which not only assisted in the country achieving the global hegemony it now enjoys, but also drove extraordinary innovations in various technologies. This included innovations which extended from satellite communications to the development of the smoke detector, microwave, and microwaveable foods. This inspired an entire generation of citizens to embrace the modern American identity.
Whether of origin from families who had settled in the country many generations previously, or from those who had recently arrived ‘off the boat’ from a devastated Europe after the Second World War, modern American chauvinism, founded on projects of national and geo-strategic relevance, achieved a continental commitment. Amongst a population of greatly varying ethnic and linguistic origins, they committed themselves to the dictum, ‘Ask what you can do for your country’. This happened whilst engendering a culture of productive ambition and both individual and societal self-betterment that drove children to dream of becoming ‘American’ astronauts, or the world’s best sportsman or woman in a particular field.
American success has also greatly assisted the United States in developing a global image of the ‘land of opportunity’, to such an extent that it exhibits a larger pool of foreign talent than any other economy. How many South Africans have been educated in our institutions at our cost and have migrated to the United States and driven its economic growth? How much of our modern South African economy was founded on the efforts and skill sets of Europeans who had left a decimated post-war Europe in the 40s and 50s in search of a new life? The value loss or gain attributable to these considerations is likely impossible to accurately determine.
In the Chinese context, the prevailing developmental mentalities that have given rise to the Three Gorges Dam, a high-speed rail network, the anti-ship missile programme, or a remarkably capable Olympic team, all of which have so astounded the world, are founded upon and have re-inspired the ancient Confucianism identity of the Middle Kingdom.
In a modern South African context, the Gautrain at a metropolitan level, as well as the FIFA 2010 World Cup and Square Kilometre Array (SKA) South Africa at a national level, are examples of the type of strategic infrastructure or capability projects that resuscitated identity and ambition in society. They demanded intimate public- and private-sector engagement, whilst having provided commercial opportunities for both established and emerging firms.
For the South African economy to grow rapidly, we need to embark on national pride infrastructure projects to increase our fixed investment spending to match other emerging markets’ standards and the National Development Plan’s target of 30%. That in turn requires a far more enabling investment policy environment.
Professor Dagada is a Policy Fellow at the IRR, a think-tank that promotes political and economic freedom.
Read the article on Moneyweb here.
