Architects of Poverty – Book Review

Architects of Poverty by Moeletsi Mbeki (Picador Africa – Pan Macmillan 2009) R152 at Exclusive Books in the V&A Waterfront

…it was the Africans who caught the people in the interior and sold them to the owners of the ships that transported them to the Americas to be sold into slavery. So it was the Africans who needed the guns to protect themselves against the communities they raided for people to sell. (Preface; page x)

Moeletsi Mbeki’s new book is not a scholarly work. It is, instead, an angry tirade against “BEE and its subsidiaries – affirmative action and affirmative procurement”; and a warning that these policies are at the root of the de-industrialisation of the country.

The underlying metaphor for Mbeki is the slave trade with the high consuming black elite implicitly compared to the tribal chiefs who conspired with the slave traders to deliver the flower of Africa’s youth into the holds of the slave ship. Those who actually ran and directly benefited from the trade  – the slavers and plantation owners – become, in Mbeki’s analysis, the resource extraction industries, the dreaded “Minerals-Energy Complex”.

At the outset he makes it clear that his complaint is something more than a moral critique of the corruptions and conspicuous consumption of the new elite. The consequences for Mbeki of the system that has “BEE and its subsidiaries”; at its heart is the condemnation of the vast majority of South Africa’s people to poverty and marginalisation.

The two crucial players in Mbeki’s drama are, firstly,  the black upper middle class, which:

… dominates the country’s political life today but … plays next to no role in the ownership and control of the productive economy of South Africa; its key role is overseeing the redistribution of wealth towards consumption. It manages (or should that be mismanages?) a few state-owned enterprises inherited from the National Party era. (page 73)

The second set of crucial player are “the “oligarchs” – an unfortunately loose concept in Mbeki’s lexicon, referring to “big business” and foreign investors, specifically those involved in the extraction industry:

The South African economy is dominated by the extraction of minerals from the ground, processing them into metals through the use of electric power and chemicals and selling them to the rest of the world. Most of the assets of the economy are devoted to these activities, which also account for most of the country’s exports

The “oligarchs” are at the centre of the Minerals-Energy Complex web and represent the overwhelmingly dominant set of interests in determining key aspects of policy, according to Mbeki’s analysis.

Other groups and sets of interests: organised workers, peasants and farmers, manufacturing capital and the poor and unemployed are all losers in the division of spoils between the MEC and the black elite, who between them are the “architects of poverty”.

The precise mechanism through which the narrow self interests of the MEC and the black elite converge to the detriment of the country as a whole is through a system of what can best be described as bribes.

The primary object of the economic oligarchy during the Codesa II negotiations was to ensure the preservation of the MEC. The quid pro quo for representatives of the black upper middle class, the ANC politicians, who agreed to the preservation of the MEC was the creation of BEE.

Thus BEE is, at its heart, a bribe intended to pay off – and ensure the corruption of – the political elite, and to cause it to drop its demand for nationalisation of the mines. However there is a hidden quid pro quo as well that is at the heart of Mbeki’s fears. The MEC is, in Mbeki’s analysis, addicted to cheap labour. One of the ways to keep down the price of labour is to subsidise its reproduction by supplying it with cheap manufactured goods. According to Mbeki, beyond the preservation of the MEC “the emerging black political elite” also agreed to strip open South Africa to cheap Asian manufactured goods and thereby maintain the supply of cheap labour to the MEC.

The consequences of this bribe is the hollowing out of the South African manufacturing sector – and Mbeki’s explanation of why the ANC elite and the MEC excluded the domestic manufacturing sector from the Codesa II negotiations. Thus the BEE bribe is the direct cause of the de-industrialisation of South Africa.

The second level of the “bribe” is the payment of social grants to the poor. Increased public spending on welfare has increased, according to “the doubters” (the group to which Mbeki clearly belongs) not out of the goodness of ANC leaders hearts:

… it has been done to placate the poor so that they do not rebel and, most importantly, it has been done to buy the vote of the poor. (p84)

Mbeki argues that a country develops when it is able to harness the energies of its people and put them to productive use. (P85) But that the “resource curse” is allowing/causing South Africans to live off the fat of the land – and not as a result of their own work and ingenuity:

This is precisely the trap into which the ANC government has fallen. At least a quarter of the population receives social grants that would not be available if South Africa were not rich in minerals. Without mineral wealth to redistribute government would have to work harder and be more creative about finding solutions to unemployment and poverty. Resource wealth makes it possible for the government not to have to put an effort into redeveloping the economy to create more jobs.

There is a psychological injury entailed in the bribe of social grants:

Grants also add to and/or accentuate the humiliation that unemployed people feel about being dependent and unproductive and therefore unable to look after themselves and their families.

Moeletsi pushes his analytical luck – and helps to explain why he is under the hammer of  the Alliance at the moment – when he goes on to argue that the poor, in a futile effort to regain their self-respect:

… support demagogues who claim they, too, are marginalised and therefore want to replace the ruling elites with people-friendly governments. This, in a nutshell, is what happened at the ANC conference in December 2007, when delegates voted out their president and most of his cabinet.

It seems justified to challenge Mbeki and ask what alternative he would pose to Black Economic Empowerment. Given the racially skewed system of ownership and control inherited by the ANC government, was redistribution not an inevitable priority? Even if purely for the purposes of containing political risk? Some of Mbeki answers to similar questions from journalists and at conferences imply that redistribution is, in his opinion, in and of itself, a bad thing.

In fact, it strikes a fatal blow against the emergence of black entrepreneurship by creating a small class of unproductive but wealthy black crony capitalists made up of ANC politicians, some retired and others not, who have become strong allies of the economic oligarchy this is, ironically, the caretaker of South Africa’s deindustrialisation (61)

Architects of Poverty takes many digressions into broader African politics – especially exploring the failure of Zimbabwe and of various strategies for regional  integration, as well as the evils of dependency on donor aid. But Mbeki keeps circling back to his consuming theme:

With the advent of parliamentary democracy in 1994, South Africa’s real bourgeoisie, (i.e. the “oligarchs” – ed) through the process of Black Economic Empowerment …. created a new class from among the African National Congress (ANC) politicians. But it is a pseudo-bourgeoisie whose purpose is to act primarily as an interlocutor in the inner circles of the new political elite on behalf of the real bourgeoisie. Like the pseudo-states in sub-Saharan Africa, these pseudo-bourgeoisie are not a class of entrepreneurs. At best they are crony capitalists who are patronised by the economic oligarchy, just as Africa’s pseudo-states are patronised by Western powers through foreign aid. (p157)

Mbeki’s book is great as a moral critique of the excesses of the new South African elites; but suffers from a weak and haphazard use of theory. ‘The political elite’ is an easy concept, not entailing great abstraction and ‘the beneficiaries of BEE’ can be named by a glance through the Financial Mail’s Little Black Book; but Mbeki should take more care when collapsing these commonsense concepts with “the black middle class” or even “the state”, “the bourgeoisie”, “the peasantry” and the Mineral-Energy Complex.

In general Mbeki casually slips in and out of the language of a Marxist critique and analysis of the contending interests in South Africa, but he appears to mean a slightly different thing almost every time he uses a concept. How an economic class emerges and comes to articulate its interests (in Marxist theory) is a useful (but strictly circumscribed) contribution to economics and social theory. But the “bourgeoisie” is not, for example, just another name for the secret meeting of a couple of businessmen getting together to advance their narrow interests. Unfortunately Mbeki’s lackadaisical use of theory is going to strengthen the hand of the communists, trade unionists and ANC heavyweights who are already baying for his blood.

So do not read the book for its accuracy and theoretical precision. Read it as the honest and angry critique it appears to be. Read it because Mbeki has dared to speak what he sees as the uncomfortable truth to the new and the old powers in South Africa.

An interesting aside is that Moeletsi is the brother of Thabo, South African president ousted from leadership of the country last year (and from the party at Polokwane in 2007). It is clear from much of the book that Moeletsi has made his views clear to his brother and that he blames him for putting in place the cornerstones of the system. But Moeletsi is even more strongly critical of the new ANC leadership and he is clearly angry with them for their ousting of his older brother. There is an interesting story published in the Citizen based on Moeletsi Mbeki’s comments at a recent conference in Johannesburg:

He said that the ANC had been “very good” at establishing a political system and the Constitution, but had not done well in economics.“I never expected them to because they have never run a business.” He said that at least he and his brother, President Thabo Mbeki, had worked in the family’s spaza shop as children.“But when my brother gets kicked out as head of government, you won’t have anyone there who has actually managed even a spaza shop.

It is difficult to imagine Thabo and Moeletsi Mbeki running a spaza shop – and even more difficult to imagine that this equips anyone to run an economy. However Moeletsi Mbeki’s critique is, at it heart, an assertion of the simple virtues, usually ascribed to the petit bourgeoisie: thriftyness, hard work, frugality and respect for the property of others and for your own. In this assertion the book succeeds.