Growth Diagnostics for South Africa

The South African National Treasury has just put on its web site all the papers that were completed during a two-year project that I was involved in (along with a long list of other economists and social scientists).  The papers run the whole gamut from straightforward research exercises to detailed policy recommendations.  If you want a summary of the main results and recommendations, read this piece by Ricardo Hausmann.

In the press statement accompanying the release of these papers, the Treasury notes:

The research papers do not necessarily reflect government’s views, nor has government adopted or rejected any of the recommendations made by the Panel. Government also notes that there is no universal recipe or set of policies for a successful growth strategy. Whilst government has been debating, and will continue to debate the issues raised in the research, the process of responding to the papers and recommendations will benefit from a broader public debate. At their last meeting with members of Cabinet on 19 July 2007, the President requested that the papers should be made public to encourage a broader debate on shared growth. It is with this objective in mind that the papers are now being released for further dissemination by the public in general and the economic community in particular.

To facilitate the broader debate, Government is planning a major workshop on the report, between the international panel, government officials, local academics and economists, policy researchers and various stakeholders. This workshop is planned for 17 or 18 June 2008 (subject to confirmation). It is hoped that this workshop will also encourage local economists and academics to prepare response papers in order to stimulate the broader public debate. In this respect, economic departments at SA universities and research institutions will be encouraged to convene workshops later in the year on various aspects raised in the research papers, where such local papers can be presented.

This effort to distill the outsiders' views through the experience and knowledge of locals is extremely important and it is exactly what should happen whenever a government asks foreigners for advice.  I am happy that the South Africans are following this approach. 

Of course, I will be also very happy if they ultimately find our recommendations of some use! 

Comments

[Anh Tran]

Nice presentation. By the way, you look better in video than in picture.

Anyways, I just want to raise one point regarding rich and poor. The problem with economists is that they make too many assumptions. Here, assuming where people prefer to live based on consumption level misses a lot of things in reality. Let me give one important factor that also determines where people prefer to live: ego or social status.

From the data that you give, although the rich people in poor countries earn 3 times less than the poor people in rich countries, they have enormous social status within their countries. In many cultures, especially Asian, how other people view your economic life is much more important than how well your economic life actually is. To put this into context, I would rather live in a poor country and be viewed as rich; this would satisfy my ego. So, maybe your students did not really get the answer wrong.

Anyways, the above is not related to the key points of your presentation. I just want to raise it to show how economists often recommend policy options that does not reflect the whole reality because their assumptions are often unrealistic. Happiness is a relative thing. Defining happiness based on economic performance dramatically simplify the complex reality of human society.

[Anthony Yunnie]

The full set of reports were released yesterday. I am quite interested to see what you all had to say. Unfortunately, I think that any recommendations to free up the labour market will be heavily argued against by Cosatu, the ANC youth league and various other left elements.

[JJ@JJ.com]

Thanks professor, nice information. I have a nagging doubt nevertheless, after many many printed articles, conferences , books, etc on the development issue. Was all that worthy, insightful, valuable? Has any set of concrete theoretical recommendations worked in practice. Because for one of the most important examples of rapid growth ( China) all I see is post hoc rationalizations of why China is growing so fast, when as you and other have argued many times, China many times did the opposite of what the conventional wisdom in the development field recommended.

[Anthony Yunnie]

It is crushing, as a South African, to see comments like this in the news:

"Cosatu general secretary Zwelinzima Vavi said the report had not been discussed. "We do not take instructions from the Harvard group.""

There is an exodus of skilled labour from the country, and government and its alliance partners continue to take steps backwards, and not forwards. Why waste money on these studies if you are not going to listen to the advise? Its ludicrous.

If you are interested in the article that I quoted, go to:

http://www.busrep.co.za/index.php?fSectionId=561&fArticleId=4397624