A tribute to a rare humanist economist
Patrick Bond, University of KwaZulu-Natal Centre for Civil Society
20 December 2007
I can offer some partial, highly biased, professional (sort of) and
heart-felt reflections on the work of Norman Reynolds, who died last
week in a site I'm sure he was happiest: up an African mountain hiking
with family members. Though we connected only on a dozen or so
occasions, most recently over dinner last year on a Durban visit, I knew
and admired him a full twenty years, dating to my first doctoral
research interview in Zimbabwe. Norman worked for a Harare agency with a
liberal-enlightened corporate agenda but in fact, because of his
influence, threw its energies into building up a savings/credit research
agenda and pilot project network in several rural areas. This was
typical, as Norman moved increasingly to relatively countercultural and
contrarian projects - using his background and skills and incredible
warmth - in order to move resources into the projects he was so
committed to.
As a result of his practical orientation, Norman wasn't the kind of
self-promoting published economist who flaunted hierarchy, he was far
too democratic a mensch. His writing style - unbelievably fluid and down
to earth (given that all mainstream economists get trained in clunky
writing) - allowed him to generate a steady flow of invariably
stimulating op-ed articles for diverse but influential newspapers,
including in recent years The Zimbabwean and Business Day.
For me, Norman epitomised the strength of the 'heterodox' economic
community. It's a crowd full of misfits and ex-elitists and creative
thinkers. I'm not really in this crowd, myself, but hang around on the
edges and fellow-travel as much as they'll have me. With Norman's
passing - after Guy Mhone who died nearly three years ago and Margaret
Legum who passed away a few weeks back - the community is shattered. But
it's a good time to remind each other why this community has generated
so much light and not a small amount of heat, and earns so much high
regard.
One key reason Norman had influence, audience and great admirers across
Southern Africa and the world, is that he contested conventional wisdom
so earnestly, including Thabo Mbeki's attempt to compress a
multifaceted, *singular* economic system into the idea of 'Two
Economies', which Mbeki claims are 'structurally disconnected'. Here was
one of Norman's replies:
'We have a "dual economy". Not, however, the double story house model
that government pushes, as in ASGISA, where the rich are partying in the
top floor and the poor are trapped below without the ladders (delivered
education, skills, houses etc.) to climb to the top floor and join the
party... The real "duality" is global and marginalised local economies.
The global is well served by GEAR and a plethora of institutions. The
latter, marginalised local economies, lacks any real attempt to create a
set of policies and programmes that promote "Localisation" to balance
out the opportunities and threats of "Globalisation".'
Norman spent enormous time and energies addressing shortcomings of the
alleged 'dual economy' with the same kinds of systems that make the
first economy so prosperous at the expense of poor people. These
included titling and mortgaging land, increasing the scope of the cash
economy (through more appropriate institutions), and promoting
microcredit. Norman did these better than anyone I know. Some of the
materials I've been looking at today - such as his recent call for a
bank oriented to the Zimbabwean exiled diaspora - reflect this sense
that a more robust, interventionist, institutional economics could solve
market imperfections.
But although, coming from the left, I still have my doubts about these
as strategies, four commonalities kept our conversations as comradely as
could be. Norman took as a first priority an approach to *local-level*,
national and regional economic linkages which we agreed were far
preferable to export-oriented growth and the mindless extraction of
natural resources. Just consider a few sentences from a recent Zimbabwe
paper written for The People's Agenda project, in a section on 'A Stable
Yet Dynamic Foreign Exchange Regime': "Keynes made the all-important
distinction: people, ideas and some goods and services must move freely
between countries – but not goods and services that can be produced
locally and certainly not money. He argued for controls over capital
flows so that each country could set interest rates according to
domestic economic policy needs." Hear hear! That's radical stuff these
days, far to the left of Cosatu's appeals to Jacob Zuma.
Second, no one I knew had as diverse and full a set of experiences
setting up local marketplaces as Norman. That meant, from time to time,
there were disasters which Norman was perfectly frank about. I quote a
paper of his in my PhD (Uneven Zimbabwe: A Study of Finance, Development
and Underdevelopment) providing evidence for a problem we Marxists call
'overaccumulation': “The danger for all participants, including banks
who finance small rural enterprises, is that local markets with small
demand can be quickly saturated by a commonality of available materials
and skills.”
Third, we agreed that the big megaprojects carried out in lieu of proper
development were ridiculous white elephants. Even one which has been
widely praised - the Kariba Dam in his native Zimbabwe - was subjected
to tremendous scrutiny by Norman and some colleagues in a scoping paper
he wrote for the World Commission on Dams. Brilliant work, which I still
give to students interested in environment, energy and economics.
Fourth, we overlapped on our use of human rights discourses, which
Norman took very far indeed. Particularly when he argued for rights to
employment - and influenced a recent ILO delegation quite considerably -
we knew that there was a strategic alliance between his reform project
and those of us on the far left.
In these ways, the Norman I knew at a distance continued to - and indeed
will always - inspire me. I think of his trajectory from privilege as a
white Zimbabwean into the hallowed halls of UCT, Oxbridge, Harvard, and
then jobs at the World Bank and Ford, before serving as Chief Economist
to Robert Mugabe during the early 1980s. And I can hardly believe how he
evolved into such a relaxed yet extremely productive Johannesburg
consultant, with an eye to what low-income people could do with a bit of
cash and a marketplace.
There are some people who get great credit (even a Nobel Peace Prize
last year) for being 'barefoot economists' but Norman didn't seem to
give much of a damn about professional glory. He had enormous reach and
persuasive influence, and that was enough to push his pet projects from
the bathtub or wherever he dreamed them up, to the funders, to the
newspapers, to the massses - but crucially also back again, the other
way around. So it's a great and principled methodological challenge he
leaves us, no matter our ideological predilictions. If tracking his
meandering footsteps will also bring us to luminous heights via
grassroots paths, it's a route we must all try to follow.
***
A people's economist Obituary
22 Dec 2007 23:59 Norman Reynolds, a beloved partner, father, friend and
mentor, died last Saturday, December 15, while hiking with his daughters
in the Drakensberg.
Reynolds was a development economist who dedicated his life to
envisioning and implementing economic rights-based programmes that
restore the local economies of communities through processes that
reclaim African traditions of mutual care and support and bring economic
growth. He worked with people in damaged communities, advocating that
development begins with reclaiming their identity and renewing their
culture. He asserted that a renewed sense of community was the
appropriate vehicle through which social grants and investments might be
directed towards public benefits, such as providing for child, health
and investment rights.
He demonstrated that citizens could become responsible parents, proud
community members and partners with government through rebuilding their
local production bases. The local pilots of these programmes bear
testimony to this vision. Reynolds’s innovative, sustainable community
investment programme -- being implemented at several sites across South
Africa and adopted by the department of provincial and local government
as its official approach to local economic development -- created road
maps whereby all Southern Africans, trapped because of systematic
disempowerment and exploitation, might take steps towards establishing
working local economies in which cash circulation is raised by up to
400%. In the private sector Reynolds pioneered democratic employee
ownership.
He was born in Harare on July 14 1941 and attended Peterhouse Secondary
School before enrolling at the University of Cape Town for a degree in
economics. He completed his PhD in 1968 with a Study of an African
Irrigation Resettlement Scheme in Eastern Zimbabwe. He was a visiting
fellow at Harvard, Cambridge and Cape Town universities and was an
Ashoka Fellow. He worked at the World Bank with colleagues, such as
Joseph Stiglitz and David Ellerman, and at the World Bank in India
between 1970 and 1975. He joined the Ford Foundation between 1975 and
1979 as its rural development specialist in India and south Asia.
In the early 1970s Reynolds helped Steve Biko and the Black Peoples’
Convention to establish economic programmes. He was chief economist in
the first post-liberation Zimbabwean cabinet between 1981 and 1986.
After directing the Southern Africa Foundation for Economic Research in
Harare between 1987 and 1990, Reynolds returned to South Africa and
continued his work with Earth Africa, the Market Society and the
People’s Agenda. Between 1992 and 1995 he chaired the National Drought
Forum and worked on the Spatial Development Plan for the City of Cape
Town and then on the Integrated Development Plan for Johannesburg.
In 2002 the United Nations requested that Reynolds develop a relief and
recovery plan for Zimbabwe. He contributed a weekly column, illustrated
by his friend Len Sak, to The Zimbabwean. In 2004 he founded The
People’s Agenda. He left footprints in the lives of many people. He
committed his enormous intellect, passion and time to the cause of
economic justice and human dignity. We will miss him sorely as we work
to take forward his ideas and thinking. Reynolds is survived by his
partner, Lucy Thornton, his brother, Lance Reynolds, and his four
daughters, Talitha, Portia, Sabaa and Abigail. His memorial service is
at 12pm on December 22 at The Cottages, 30 Gill Road, Observatory,
Johannesburg.
-- Marjorie Jobson is a board member of The People’s Agenda, which
Reynolds chaired
***
Forget JZ, focus on the people
13/12/2007 08:58 - (SA)
Norman Reynolds, News24 User
As Ralph Waldo Emerson observed: "There are always two parties, the
party of the past and the party of the future; the establishment and the
movement."
The ANC establishment has achieved much, but it is now bogged down
around too many failing elements of governance and development to lead
effectively. The "left" opposition is advancing old ideologies that,
while they reflect the need to tackle poverty more directly, have too
little a sense of programme for the country to back them and threaten
international confidence.
If the conference dealt with the following two issues, the ANC would
heighten its role and status and bring renewed confidence to all. The
problem of personalities would fade against a new vision of a brave
country that knows its history, and therefore its goals, and can define
a paradigm shift away from state "delivery" and its attendant patronage
and petty corruption to the long made promise of "partnership" with
citizens.
1. The ANC's political legacy must be saved. Democracy is not well. The
next election will show that a large number of the young will not have
registered, many who have registered will not vote, and the ANC, as of
now, will win a large share of votes cast but only a minority of all
those who might have registered and voted. Last election the figure was
near 40%. This time it could fall to 30%.
Citizens must be given the right to elect the President. And electoral
reform, as recommended by the Commission that reported some time ago, a
mix of constituency and representative systems, must be a firm ANC
promise to all.
2. We have a "dual economy". Not, however, the double story house model
that government pushes, as in ASGISA, where the rich are partying in the
top floor and the poor are trapped below without the ladders (delivered
education, skills, houses etc.) to climb to the top floor and join the
party.
The global top floor of the house cannot create the jobs needed. The
economy is falling behind on jobs (just 2.6% at present) and too few
unemployed have the ability to work in global South Africa.
The real "duality" is global and marginalised local economies. The
global is well served by GEAR and a plethora of institutions. The
latter, marginalised local economies, lacks any real attempt to create a
set of policies and programmes that promote "Localisation" to balance
out the opportunities and threats of "Globalisation".
In poor South Africa, unemployment ranges from 50% to 70%. More serious,
very few of these millions of families, around only 11%, can report any
significant economic activity. Lives are still being wasted on a
frightening scale. This fact, non-working local economies, holds the
majority of citizens as economic prisoners of poor areas.
Government spends some R300bn in poor South African areas on teachers,
nurses, police, social grants, and a little on infrastructure and
agriculture. Given the unreformed "labour camp" that these areas remain,
this money is shifted to global South Africa as there is no local
production. For every Rand, only some 30 cents of local economic
activity is created.
A new deal
There is a new programme, the fourth "framework" of government's new
Local Economic Development Policy (2007) that can quickly enable every
R1 that arrives in poor areas to create R3 to R5 of effective local
demand that, in turn, rewards a massive upturn in local economic
activity. Called "The Sustainable Community Investment Programme" or
SCIP, it seeks to partner competent citizens organised within Community
Trusts at street, neighbourhood or village.
Each Trust receives Child, Health and Investment Rights (monthly or
annual Budgets) that are spent, unlike social grants which are private
consumption grants and so leave local areas immediately, only on
community purposes, like feeding all the children, and thus producing
that food locally upon developed local production bases.
This circulation of cash and labour raises the local income multiplier
to 3.0 or higher, rewarding the ability of state spending to generate
working local economies ten times (from R0.30 to at least R3.0).
Moreover, it restores parent ability to look after their children and
renews community as a focus of activity and responsibility.
The Constitution is clear - the state may not interfere with parent
responsibility unless there is a clear breakdown - yet the new policy of
"no fee schools" declares that parents are dispensable. SCIP, instead,
gets behind parents, enabling them to be responsible. It does so by
generating a high local multiplier that grows the economy to the point
where communities, caring for all their children equally, can partner
the state by paying real school fees.
SCIP re-directs large but highly inefficient state spending through
communities as competent partners. In doing so, it builds local
economies and citizens. With far bigger local economies and thus a
larger national economy, some 70% of state spending will be returned by
way of taxation.
SCIP is the rebirth of the thrown away promise of the RDP; of citizens
as prime actors in their own country. Of citizens restored to cultural
integrity and to ownership.
If the ANC conference confirmed these two paradigm shifts - towards a
dynamic political and economic democracy - it would be its greatest
moment yet.
***
The People's Agenda
(excerpt of an article on Zimbabwe)
A Stable Yet Dynamic Foreign Exchange Regime Keynes made the
all-important distinction: people, ideas and some goods and services
must move freely between countries – but not goods and services that can
be produced locally and certainly not money. He argued for controls over
capital flows so that each country could set interest rates according to
domestic economic policy needs. The massive structural shift to vast
speculative capital flows does not affect the rich countries as much as
it does many poorer countries. The reason is that the developed
countries, which set the rules, conduct very little trade compared with
the size of their GDPs. For instance, the imports and exports of the USA
and the EU comprise a mere 15% and 14% of their GDPs. In the UK, trade
makes up around 30% of GDP. As a small economy, 65% of Zimbabwe’s GDP is
formed by exports and imports. Zimbabwe receives prices from the global
economy. The flash of vast speculative monies rushing hither and thither
easily distorts the pricing of normal trade. The International Monetary
Fund estimates, December 2004, the build-up of unpaid foreign arrears is
now US$2,6bn. This amounts to a debt of R1, 300 per citizen or R7, 800
per family of six. Moreover, Zimbabwe runs a yawning annual US$500m gap
between foreign currency inflows and outflows. Post the 2005 March
election, there is great political and thus economic uncertainty. Hence,
it is unclear if and when Zimbabwe will rebuild working relations with
the IMF and the World Bank to help with restoring a working currency and
trade and investment systems. The international community has long been
ready to announce a “package” of support if that government can earn
enough legitimacy. The detail, however, remains important. The level of
state debt, international and national, makes this task difficult. Yet
Zimbabwe has and can again pay its way in the world. The way foreign
exchange is raised and distributed becomes crucial. With so many
competing needs, an open system will not work. There are humanitarian
(food and health) and general (fuel and electricity) needs that must be
met. At the same time,
3 the gross displays of consumer wealth an open exchange system allows
are not to be tolerated. Non-essential imports should be curbed in
favour of local production. What is needed is a rapid recovery of those
activities that earn foreign exchange and the creation of a large mass
market for basic goods and services, that is for locally produced items
that have low foreign exchange requirements in their production and thus
consumption. People and the public interest, sustainable economic
recovery, must be seen to come first. Zimbabwe’s foreign exchange system
is chaotic. It is a punishment to all citizens and businesses and
rewards speculators and subsidises government loans at the expense of
savers. Most people work to make the corrupt few rich while becoming
impoverished in the process. The orthodox foreign exchange market will
not serve Zimbabwe’s recovery. It needs a system that recognises market
forces, but does not naively believe that “free markets” are indeed free
and thus are not a perfect solution. A return to an orthodox foreign
exchange regime would ignore the mismatch of the highly open nature of
the Zimbabwe economy, unfair international trade practices and the
dominance of speculative money flows. It would also treat consumer goods
as equal to essential imports. It would thus starve foreign
exchange-earning sectors of access to abundant and cheap foreign
exchange and hold back on essential services. Four foreign exchange
categories fulfil different purposes in the economy. They should be
treated separately and the economy defended from difficult international
conditions, at least until it has recovered. These categories are:
1. Those sectors that earn foreign exchange. Exporters, tourism, and
services must be allowed to maximise their foreign exchange earnings by
optimising production and sales. They must be allowed to buy and then to
repay all the foreign exchange they can use. The best method is for each
sector to adopt “indicative planning”; that is a plan to optimise all
relations within each sector. In Zimbabwe agriculture would be one such
sector. Under normal conditions it earns around US$4 for every US$1 it
uses. Tobacco, horticulture and beef, etc have higher earnings ratios
and must be helped to recover. Tobacco is 12:1. Mining, tourism,
manufacturing and services are other net earners. For Agriculture,
farmers, input and equipment suppliers, transport, banks, processors and
trade agents, labour and the state agencies that form the agriculture
sector would undertake a series of optimising circular or iterative
discussions. “I, John, could double production and employment if....”
And the response: “I could do what John requires if...” This exposes the
bottlenecks and helps devote key resources to removing them. If they are
net earners of foreign exchange, they loan what they need, even from
foreign banks. Foreign exchange is not allowed to be a constraint.
Government or donors can guarantee such loans at very little risk. In
this way, the financial capacities of the donors and of the state are
multiplied manifold.
4 If funds have to be borrowed abroad, the interest rate would be likely
to be lower than local rates, providing a cost savings, and there is
little or no foreign exchange risk involved in this “market” as it earns
the same currencies that were borrowed.
2. Essential public goods The net earnings of foreign exchange by the
first market are deposited into the second market. This secures the
importation of essential “public and economic” imports such as fuels,
transport equipment and medicines. As there is no premium to be paid for
the foreign exchange, it keeps landed costs low. This helps establish a
low cost structure to the economy that also promotes its competitiveness.
3. Imports for local production Any balance left over from the import of
essential public goods goes into the third market that provides foreign
exchange for the imports needed for local production. In bad times, the
price of foreign exchange in this market will be higher than in the
first two markets. This will instil some discipline in terms of what is
produced. However, the price will be higher in the next market, market 4
for consumer goods imports. This will act to favour locally produced items.
4. Consumer imports The foreign exchange for imported consumer goods,
holidays abroad, etc. is provided in the fourth market. This is
allocated by way of a monthly auction of the available balance of
foreign exchange after the first three markets have been satisfied. Here
the price of foreign exchange will be the highest providing a degree of
protection for local production from competition from imported consumer
imports. The four markets have different foreign currency prices
according to the economic value of their activities. The model values
exports ahead of essential imports, aiming to “get the ball rolling” by
earning foreign currency; then it provides the means to buy essential
imports as cheaply as possible in order to keep the domestic cost
structure and inflation down; it also provides for import needs for the
local production of consumer goods and services; finally, it treats
imported consumer goods as the lowest priority and thus with the highest
foreign exchange prices, providing a degree of protection for local
producers. When the country generates more foreign exchange than is
needed for its immediate needs, including building up reserves, the
model can be simplified. One or more markets can be collapsed, even into
one market. The different markets can be reintroduced as foreign
exchange runs into short supply, beginning with placing consumer goods
imports at the back of the queue where available foreign exchange is
auctioned and prices are higher.
5 The country can thus defend itself not by tariffs or by interest
rates, but by altering the market conditions and thus the prices under
which foreign exchange is purchased for different purposes in different
markets to suit both global and internal conditions.
***
21 July 2005
Rebuild Zimbabwe from the bottom up
Norman Reynolds
WHEN a neighbouring government comes begging — having broken all the
rules of international membership and turned against its people — for
the means to keep its economy going and to feed its people, what does
one do?
The first point is to distinguish between that government and the plight
of its people, almost all of whom are innocent victims of its
demagoguery. This means that help must be given, and fast. It also means
that the terms of the loans become the only lever available to help
restore democracy and wealth.
Another consideration is that other countries to which Zimbabwean
President Robert Mugabe is appealing for funds will demand farmland,
minerals and future exports in payment; measures that help Mugabe to
pawn the country cheaply to stay in power.
We must forget about any first requirement for a government of “national
unity” in Zimbabwe. That is not on — not because the opposition Movement
for Democratic Change so distrusts the ruling Zanu (PF), as SA should
after the many broken promises to President Thabo Mbeki. But because
that presumes such a venture will lead to ordered elections. Zanu (PF)
has not won the past four elections and will not win any other. It
therefore does not want a national unity government.
Rather than seek conditions that the Mugabe government must promise to
keep, SA can set up a reformist programme that builds citizen competence
and ownership through economic rights programming. This would rebuild
the economy by creating local demand for locally produced goods. Later,
infrastructure projects will come into their own but, at first, in an
economy with little or no demand for goods and services, they cannot be
used or paid for.
The equivalent in Zimbabwe dollars of the delivered electricity, fuel,
food and so on that Zimbabwe needs, and that SA can provide and finance,
should be deposited into a trust in Zimbabwe. This should be run by
acceptable trustees from the region and Zimbabwe to form a partnership
body between government, citizens, civil society, the African Union and
the international community.
The trust should then invite all Zimbabweans to organise locally, to
reconstruct communities, and to register so that they can receive two
“rights” — child and investment.
All children would receive child rights grants monthly, administered by
all adults under the ubuntu injunction, “all children are my children”.
These monies would buy local produce to feed all children under 18
within a differentiated market that rewards local production. Part of
the payments to community members would be “taxed” to pay for all school
fees. This rewards local organisation and production and circulates
money locally three times or so for public purposes before it becomes
privately earned, when it departs to central places.
The investment rights provide funds to adults in each community. These
are first used to invest, together with a large locally contributed
labour input, to build the community’s productive base.
Together, these rights funds rapidly restore citizen participation and
ownership, and community security and responsibility by building working
local economies. Upon these, the national economy can be restored
quickly. Having a high local income multiplier, they will generate
considerable taxes — perhaps 70% of the outlay. SA can recoup its loans
by sharing the risk; it can agree to receive 25% of the extra tax above
an agreed norm, which it could return to the trust.
SA also needs such a local economic development model that builds
competent citizens and communities able to be partners to government.
?Reynolds is a development economist and chairman of
www.thepeoplesagenda.co.za
***
October 30, 2001
Investing in SA's citizens
Norman Reynolds argues for Work Rights, which will get South Africans
working instead of involved in crime. (Part 2).
Yesterday's article argued for a re-direction of some R40billion of the
R50bn citizens and firms spend wastefully on private security every
year. Some R25bn should go to provide economic security to citizens as
the basis for building a "moral economy', a central piece of a
much-needed localisation policy that accepts that there are two
economies, global and marginalised.
Work Rights are the best mechanism. The balance, R15bn, can be saved,
lowering the costs to society of this massive failure of public policy.
The tragedy of South Africa, over 300 years and continuing, is the
massive loss of "competence" by ordinary people and the accompanying
loss of dignity. Competence is here used in the old English meaning,
"the ability to look after yourself, your family and to contribute to
the well being of your community". It is a good working interpretation
of ubuntu.
The Constitution promises socio-economic rights, essentially consumption
rights funded from the limited national budget.
More fundamental economic participation and investment rights require
programme development if real dignity is to be the foundation of social
workings.
Without bringing the mass of people into a working economy, the national
economy will never create the jobs and tax revenues needed for the
modern economy to incorporate all citizens.
Poverty and crime will be unending. As will a weak rand. Who would trust
a country where the "heavies" patently do not apply their minds?
There are good, dynamic economic policies and programmes that can be
adapted to provide practical correctives to the technical and human
failures of contemporary policy.
Such policies build up the dignity and financial autonomy of citizens
and engage and mobilise them in highly visible, responsible, local
investment-driven and quickly demonstrable ways.
They promise to bring the second economy into line with the needs of a
mass market for basic goods and services as the large base for the
national economy -- which is now potentially more highly performing --
rather than on imported production and capital.
Basic income
SOUTH Africa is looking at providing all adults with a "basic income".
This is a monthly payment by the state to all adults, working or not
working, rich or poor. It has many advantages.
However, most recipients will use it for consumption and so the cost
becomes a problem. If the grant is in the form of an investment grant
(Work Rights) distributed to all adults every six months, consumption
would follow upon the wage earnings and income spending from a first
round of investment spending.
This adds not just an investment loop. It provides the means for joint
action within communities to address their economic woes.
As explained below, it opens up a dynamic financing option for the state.
Work Rights
WORK Rights offer a set number of days of community public work activity
to all citizens at a wage rate set by government authority (local or
national) or by some other funding source. They are issued bi-annually
to all registered adult citizens.
A Work Rights programme also requires the provision of a matching
allocation of funds for materials required for public works programmes.
Since not all citizens wish to or are able to work, Work Rights can be
bought and sold in local markets. Families, groups, villages and local
governments can assemble the Work Rights and use them in chosen and
approved projects.
If these result in positive benefit streams, public or private, the
beneficiaries will have to accept the liability of a matching loan, thus
drawing in the far larger resources of national and international banking.
The marginalised areas of most of Africa, its townships and rural areas,
are highly dependent upon the formal economy. Consequently, cash
circulation before it departs to the modern economy is very low,
typically about 1,3. Money hardly stays to work!
With Work Rights, it should be possible to raise the multiplier to
between 3 and 4. One of the methods to achieve this is to pay wages and
most of project services and materials in a local currency (eg. the
Soweto $).
Much of the expenditure will then go to support locally produced goods
and services.
Apart from the R25bn available from spending on security, Work Rights
can be financed by the state entering into a social compact with its
citizens.
Local, citizen-driven and government and bank-partnered "community
public works" would enjoy a high local multiplier. Wage rates would be
low and people would employ each other within communities.
The state can spend increasing proportions of the large "social
consumption" budgets (health, education, welfare) as investment through
its citizens by way of Work Rights. This could add up to R40bn a year,
bringing the total available to R65bn a year.
Citizens in turn, motivated by extra activity and wages, local
investment and greater local cash circulation generated by Work Rights,
would enter into a partnership with the state to assume an increasing
share of the costs of schooling and of health and locally transformed
welfare systems.
A dramatic reform of state expenditure becomes possible. The state can
move from the limitations of budgetary expenditure to a prime concern
with investment. In partnership with citizens, it finances social
consumption through citizens as investment vehicles.
This adds the extra loop of investment and builds the local and the
national multiplier. By restoring competence to all citizens, South
Africa will become a truly developmental society in which human dignity
is assured.
Working local economies
THIS helps to realise another economic right, that of working local
economies. South Africa's Rural Development Framework, 1997, states that
all citizens have the right to live in working local economies.
By 2010, the whole country must be covered by periodic markets as the
main instrument to achieve that goal.
A large injection of investment funds, some to build rings of periodic
markets, and a far higher regional economic multiplier would create many
local opportunities for rewarding economic activity, generating the
potential for a large mass market for locally produced basic goods and
services.
Such a strategy is absent in most poor countries. Yet it places little
demand on foreign exchange in terms of investment or consumption and has
strong economic benefits -- including generating tax revenues and
providing a larger local economic base for a higher performing national
economy.
The half-yearly buying and selling of Work Rights among all citizens
will transfer most Work Rights to poorer communities and to those who
seek additional income or wish to become active in local affairs.
One benefit is that the youth are likely to mobilise to play a major
role, thereby becoming community builders within a communal financing
and governance system.
Training Rights
MOREOVER, those who buy in extra Work Rights above, say 60 days a year,
would gain a number of Training Rights, perhaps worth R2000. These are
banked and used by individuals to buy training from approved suppliers.
This adds a vital balance, demand-led to the almost totally
supply-driven training field for the poor. Citizens gain the means to
self-manage their career development -- to become financially competent.
What might an initial re-direction of security funds and some state
expenditure achieve?
R30bn would be split into wages and into materials, transport,
engineering and other services. R15bn wages at R35 a day (not
unreasonable when people pay each other within community and they
control and so receive the total wage bill) gives 428 million workdays a
year.
If the equivalent of an annual local income was 120 days' work a year,
some 3,5 million people would enjoy "full-time" local economic activity,
all in investment in now working local economies.
R30bn spent locally in this fashion would add some R90bn to local
economies, mop up the "foot-soldiers" of crime, and add a total of
R180bn to the national economy.
That, and a rapid drop in crime, is what the "heavies" missed.
Would the "heavies" please think again ± "failing to think about a
decision" is a breach of the law ... remember Sarfu and Nelson Mandela?
Today, citizens also enjoy the protection of the Promotion of
Administrative Justice Act and the basic requirement of the
Constitution, the right to live in dignity.
As seriously, why cannot such sound policies and good politics come to
the fore anyway? It is time this elite apartheid tent was folded away!
*Norman Reynolds is a development economist. He has served in India and
South Asia with the World Bank and Ford Foundation as their Rural
Development Specialist, was first Chief Economist in Zimbabwe after
Independence, has been a Fellow at Harvard, Cambridge and Cape Town
universities, and now directs Earth Africa and pursues economic rights
as the best basis upon which to reform global, local and community
economics.
***
14 August 2007 Hope for Zimbabwe walking among us Norman Reynolds
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WITH several million Zimbabweans in SA, and a million more on the way in
the face of an imploded economy and failed polity in their home country,
SA must act decisively. The background to any decision making is clear.
Zanu (PF) “stole” the three most recent elections and will not win
another unless all refugees are prohibited from voting. President Robert
Mugabe does not want, nor can he afford, a democratic election, the loss
of which would render him vulnerable to criminal charges. The lesson,
now so evident, is: stop pinning hopes on Mugabe’s participation in the
creation of a new constitution. Deal rather with Zimbabweans.
The Zimbabwean dollar is no longer a working currency. Until there is a
working currency, there can be no working economy. Something has to
replace it immediately. Internally, people are demanding payment in
rands. The Zimbabwean dollar buys nothing, as there is little production
inside Zimbabwe. Without production, even barter is difficult.
The millions of adult Zimbabweans now in SA and those already on their
way must be treated as fellow southern African citizens. They need the
means to help their families in Zimbabwe survive.
Today, they cannot send money as there is nothing to buy and any
official conversion of dollars or rands to Zimbabwean dollars is a
straight loss — a gift of hard currency to Mugabe for worthless money.
Food, bought here by refugees and sent privately to families in
Zimbabwe, costs an extra 120%-150% for transport. Hence, refugees are
now buying less than half the food they were able to deliver just two
months ago.
Zimbabwe is now virtually a hapless province of SA . The myth of
Zimbabwe as a national entity ended in 2004, when Mugabe stole that
year’s general election. Since then, he has engineered the largest
genocide for decades worldwide.
We are witnessing the latest stage — after beating up Matabeleland,
getting rid of farm workers by ruining commercial agriculture, and
sending, as Pol Pot did, the urban opposition to the countryside by
destroying houses and businesses, Mugabe is now chasing the remaining
members of the formal economy across the borders. The genocide remains
unnamed. So the international community, headed in this instance by
South African President Thabo Mbeki, has not had to act to stop it.
At the 60th anniversary of Auschwitz in 2005, Kofi Annan, then United
Nations (UN) secretarygeneral, called for an end to genocide. “It is,
above all,” he said, “a day to remember not only the victims of past
horrors, whom the world abandoned, but also the potential victims of
present and future ones. A day to look them in the eye, and say: ‘You,
at least, we must not fail.’”
Annan said not a word about Zimbabwe’s genocide. Nothing has been said
by any authority. Not by SA, the Southern African Development Community,
the African Union (AU), the European Union or the UN.
Annan quoted the old chestnut: “Truly it has been said: ‘All that is
needed for evil to triumph is that good men do nothing’.” However this
defines Annan’s response and SA’s own failed “quiet diplomacy”. This
neglect, which has been led by the South African government, has allowed
Mugabe to continue his rampage against all Zimbabweans.
The danger is that, with Mugabe weak and old, the field is ripe for new
demagogues to take over.
The Mugabe government does not have the ideas or the integrity to
persuade the international community to rescue the country while it
governs. Recently, at last, a senior African National Congress (ANC)
member, Cyril Ramaphosa, stated that SA should intervene in Zimbabwe.
However, he did not say how. ANC MP Kader Asmal has just called for UN
Security Council action.
There are steps SA and the international community can take to remedy
the situation. The UN and SA should declare a genocide in Zimbabwe, and
a failed and tyrannical state. As long called for, SA should open the
borders to people and goods and give all Zimbabwe refugees, here already
or coming, three-year working visas.
This will allow for the legal hiring of Zimbabweans, whose skills are
badly needed in our failing education, health and agricultural sectors.
They could also bolster the vast public and private middle management
and engineering sectors, where there are real shortages.
Within refugee camps massive training can take place by fellow
Zimbabweans, who have the skills, so that Zimbabweans going back over
the next three years have enhanced their abilities to rebuild Zimbabwe.
SA must allow the rand to become the working currency in Zimbabwe. The
5- million Zimbabweans in exile worldwide earn R10bn a month and seek to
send home R3bn a month.
If there were suitable banking regulations to keep the hard currency out
of Mugabe’s hands (where it is now paying for five-star hotel
accommodation and shopping in Malaysia), this money would play the major
part in the humanitarian and reconstruction work urgently needed.
With rand-backed demand inside Zimbabwe, South African goods could flow
and local production would be revived.
The international community could co-fund (with foreign currency
payments) support to Zimbabweans in SA, Botswana, etc, to ease any undue
pressure on the rand.
Finally, the UN and AU, with South African leadership, should provide a
mandate to treat Zimbabwe as a province of SA until its people choose to
hold a referendum on its “national” future. India has a similar
provision. “Presidential rule” allows the central government to take
over the administration of any Indian state (with between 30-million and
130-million residents) when it fails. “Super-administrators” replace
politicians and head the bureaucracy.
The real Zimbabwean economy has moved “offshore” — to SA, Botswana, the
UK and the US. It is here that family members try to find work or run
businesses or do crime so that they can send money — no longer a real
option — or food home.
These Zimbabweans must have about 3-million bank accounts in these
countries in dozens of banks, none of which has a programme to work with
them. It is time to form The Zimbabwe Bank — a bank run to support
Zimbabwean refugees.
It would become a powerful player, able to negotiate with the Mugabe
regime as the major provider of foreign currency — about R3bn a month —
to Zimbabwe. It would reinforce the open use of the rand and a free flow
of monies to Zimbabwe citizens. It, as a member-controlled bank, would
also become a central piece in the rebuilding of Zimbabwe.
A model now exists whereby such a bank could be created quickly using an
existing bank — Standard and Absa-Barclays fit the bill as they are
already prominent in Zimbabwe — to accommodate the new bank as a client,
so that it has immediate access to technology and banking skills.
The network of Zimbabwean refugees can carry the message and mobilise at
little cost.
Dr Reynolds is a development economist.
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