Ian Welsh

The horizon is not so far as we can see, but as far as we can imagine

Tag: Neoliberalism

You Can’t Run Industrial Policy OR A War Economy Under Neoliberalism

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On May 13, 2024

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Washington spent 7.5 billion dollars on charging stations. The result?

Seven stations.

China has subsidized charging station as well. I can’t find reliable figures, though one source says around 10 billion dollars. How many charging stations does China have? Over seven million, 2.2 million of which are public units. The US has 186,200.

Bottom line Chinese EVs sell for about eleven to twelve thousand dollars, though when sent to the West the companies charge multiples of that and take the profits, so if you want a cheap EV you’ll have to figure out how to buy in China and import it yourself, which most Western countries make very difficult.

What’s amusing is that the US is planning on a 100% tariff on Chinese EVs—but even so, they’d still be cheaper and sell at a profit for Chinese EV makers. (As a practical matter, it’s very hard to get Chinese EVs in America.)

A western journalist specializing in EVs went to China recently and drove their cars. The article is long and worth reading, but the summary is that they’re better cars on top of being far cheaper. And this is an American journalist who went in expecting otherwise.

So, let’s fish and cut bait: as the title said, you can’t run industrial policy or a war economy under neoliberalism. It’s impossible. Russia easily and massively increased its production of weapons and ammunition during the Ukrainian war. The West? Hardly at all.

Washington spends 7.5 billion for 7 charging stations. This isn’t just incompetence, this is corruption. Yes, China and Russia have corruption. Lots of it. It is nothing compared to American and European corruption, not even on the same scale. In China, especially, most corruption is “honest corruption” — you can take a slice, but you have to actually deliver. If X number of homes or charging stations are to be produced, you’ve got to produce them.

This is a feature of neoliberalism. Neoliberalism is about unearned profits. This is seen most clearly in the stock market and in real estate. During the post-war period the stock market traded sideways. The indices basically didn’t go up at all. Under neoliberalism they went up inexorably. What is odd about this is that during the post-war period GDP growth was higher, so stock prices haven’t been rising since 1980 because of better economic performance, but rather because it’s government policy run mostly thru the Federal Reserve.

But this isn’t just true of housing and stock prices, it’s true of almost everything. Profit margins have soared during the neoliberal era. Our companies don’t compete on price or quality, they try to create oligpolies or monopolies so that they can charge more without having to provide significantly more value. The way they took advantage of Covid to raise prices far faster than their costs were rising is instructive.

Simply put, neoliberalism is about unearned money: about capital gains; PE plays where you buy a company with debt, load it with the debt and then dump it; monopolies and oligopolies and getting government to juice asset prices or pay you far more than you deserve for shoddy goods (see mil-industrial complex.)

There are, of course, partial exceptions, but even in those tend to be partial. Apple produced some real new products, but they also seek to receive monopoly prices for them. Almost all of the internet, built as a commons, has been turned into walled gardens and the small producers marginalized even as their product was stolen. AI is little more than an IP theft machine against small producers—writers and artists.

But let’s move back to “can’t run industrial policy.” Neoliberalism was very explicitly against tariffs and for free capital flows. Money flowed to the highest returns, no matter from which country. Capital goods and expertise were exported. China until very recently was a low-cost producer, so the West engaged in labor arbitrage and sent the manufacturing floor there. Take Apple, for example. They designed the iPhones and iPads and so on, but they were almost entirely produced in China, because it was cheaper.

Problems is that the best way for engineers to learn is on the manufacturing floor. So as the West sent most of its manufacturing to China, the Chinese learned. After all, they were the ones actually making the goods.

And now Huawei’s phones are out-competing Apple and Samsung. They’ve created their own OS. Their chips aren’t quite as good yet, but they’re moving fast.

As I’ve said repeatedly, wherever the world’s manufacturing floor is, is where innovation will inevitably move. There is a delay. It was about forty years when America overtook the UK. In the China/US case it seems to have been about twenty years. Which is to say, it’s already happened.

Now it’s important to note that this is no longer just about the manufacturing floor. The West’s costs are genuinely higher than China’s even now that China is no longer a low-cost labor market.  This is a feature of neoliberalism: we deliberately produced high housing and rent costs. In America, high health care costs are a deliberate matter of government policy. High living and real-estate costs mean American firms couldn’t compete with Chinese even if they wanted to and still had the capability, not even with subsidies, of which there are far more than people believe.

For about six years, I’ve heard constant complaints from Chinese that it was no longer possible to buy a home. Their housing market, like ours, was being bought up by investors, pricing out young people.

What was the Chinese response? They crashed their housing market and the government has stepped in. (From the Economist. Since it’s behind a paywall, I’m using a tweet with a screenshot):

We can’t compete with this. It’s impossible. Not because it’s impossible in theory, but because we don’t believe in doing such things and to pursue such policies we would have to hurt rich people, a lot, and they own Congress and the Presidency and our politicians in other countries.

China has repeatedly shown that if a policy is good for the majority, but hurts the rich, they’ll do it anyway. We’ve repeatedly shown the opposite.

And you can’t run industrial policy or a war economy if you want fake profits based on not actually producing good new goods at cheap prices. It can’t be done. If an entire society is based around “give me money for the least possible effort”, you’re cooked

China’s government, while not without serious flaws, works, and ours doesn’t, and that’s because China has refused to let private interests take over the government.

China is a capitalist country, there is no question about it. But the sort of capitalism they practice is the type we practiced in the 50s and 60s. You can get rich, but you have to actually produce and incomes are expected to rise faster than the cost of goods. Ordinary people’s lives are expected to get better. So much so that one Chinese I know said that many of the problems of China were essentially those of a paperclip optimizer which was intended to reduce poverty.

The West is toast. We can’t compete. It’s that simple. To compete we will have to change significantly, and while putting up tariffs isn’t actually a bad idea, it’s not enough alone. Without changing our fundamental governing and economic policies and ideology so that to get rich and stay rich you have to actually make good cheap new products in a way that improves the majority’s lives, we will never be able to compete.

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The Decline and Fall of Post-war Liberalism and the Rise of Neoliberalism

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On February 10, 2022

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strikes-involving-more-than-1k-workersIn the Anglo-US world, post-war liberalism has been on the defensive since the 1970s. This is normally shown through various wage or wealth graphs, but I’m going to show two graphs of a different nature. The first, to the right, is the number of strikes involving more than 1K workers. Fascinating, eh?

The second, below and to your left, is the incarceration rate. It isn’t adjusted for population increases, but even if it was, the picture wouldn’t change significantly.

This is the change caused by the Reagan revolution in the US, which, as is the case with most revolutions, started before its flagship personality.

(Article re-published as it’s important and a lot of current readers won’t have seen it.)

Graph of incarceration in the US over time

From Wikipedia

 

I was born in 1968. I remember the 70s, albeit from a child’s perspective. They were very different from today. My overwhelming impression is that people were more relaxed and having a lot more fun. They were also far more open. The omnipresent security personnel, the constant ID checks, and so forth, did not exist. Those came in to force, in Canada, in the early 1990s. As a bike courier in Ottawa, I would regularly walk around government offices to deliver packages. A few, like the Department of National Defense and Foreign Affairs, would make us call up or make us deliver to the mail room, but in most cases I’d just go up to the recipient’s office. Virtually all corporate offices were open, gated only by a receptionist. Even the higher security places were freer. I used to walk through Defense headquarters virtually every day, as they connected two bridges with a heated pedestrian walkway. That walkway closed in the Gulf War and has never, so far as I know, re-opened.

I also walked freely through Parliament Hill, un-escorted, with no ID check to get in.

This may seem like a sideline, but it isn’t. The post-war liberal state was fundamentally different from the one we have today. It was open. The bureaucrats and the politicians and even the important private citizens were not nearly as cut off from ordinary people as they are today. As a bike courier, I interrupted senior meetings of Assistant Deputy Ministers with deliveries. I walked right in. (They were very gracious — in every case.)

The post-war liberal state involved multiple sectors, in conflict, but in agreement about that conflict. Strikes were allowed, they were expected, and unions were considered to have their part to play. It was understood that workers had a right to fight for their part of the pie. Capitalism, liberal capitalism, meant collective action because only groups of ordinary workers can win their share of productivity increases.

productivity and wages

productivity and wages

Which leads us to our second chart. The moment you lock up everyone who causes trouble (usually for non-violent, non-compliance with drug laws), the moment you crack down on strikes, ordinary people don’t get their share of productivity increases. It’s really just that simple.

This is all of a piece. The closing off of politicians and bureaucrats from public contact, the soaring CEO and executive salaries which allow them to live without seeing anyone who isn’t part of their class or a servitor, the locking up of people who don’t obey laws that make no sense (and drug laws are almost always stupid laws), the crushing of unions, which are a way to give unfettered feedback to politicians and our corporate masters, are all about allowing them to take the lion’s share of the meat of economic gains and leave the scraps for everyone else.

But why did the liberal state fail? Why did this come about? Let’s highlight three reasons: (1) the rise of the disconnected technocrat; (2) the failure to handle the oil crisis, and; (3) the aging of the liberal generations.

The rise of the disconnected technocrat has been discussed often, generally with respect to the Vietnam war. The “best and the brightest” had all the numbers, managed the war, and lost it. They did so because they mistook the numbers for reality and lost control. The numbers they had were managed up, by the people on the ground. They were fake. The kill counts coming out of Vietnam, for example, were completely fake and inflated. Having never worked on the ground, having not “worked their way up from the mail room,” having not served in the military themselves, disconnected technocrats didn’t realize how badly they were being played. They could not call bullshit. This is a version of the same problem which saw the Soviet Politburo lose control over production in the USSR.

The second, specific failure was the inability to manage the oil shocks and the rise of OPEC. As a child in the 1970s, I saw the price of chocolate bars go from 25c to a dollar in a few years. The same thing happened to comic books. The same thing happened to everything. The post-war liberal state was built on cheap oil and the loss of it cascaded through the economy. This is related to the Vietnam war. As with the Iraq war in the 2000s, there was an opportunity cost to war. Attention was on an essentially meaningless war in SE Asia while the important events were occurring in the Middle East. The cost, the financial cost of the war, should have been spent instead on transitioning the economy to a more efficient one — to a “super-analog” world. All the techs were not in place, but enough were there, so that, with temporizing and research starting in the late 1960s, the transition could have been made.

Instead, the attempt was left too late, at which point the liberal state had lost most of its legitimacy. Carter tried, but was a bad politician and not trusted sufficiently. Nor did he truly believe in, or understand, liberalism, which is why Kennedy ran against him in 1980.

But Kennedy didn’t win and neither did Carter. Reagan did. And what Reagan bet was that new oil resources would come online soon enough to bail him out.  He was right. They did and the moment faded. Paul Volcker, as Fed Chairman, appointed by Carter, crushed inflation by crushing wages, but once inflation was crushed and he wanted to give workers their share of the new economy, he was purged and “the Maestro,” Alan Greenspan, was put in charge. Under Greenspan, the Fed treated so-called wage push inflation as the most important form of inflation.

Greenspan’s tenure as Fed chairman can be summed up as follows: Crush wage gains that are faster than inflation and make sure the stock market keeps rising no matter what (the Greenspan Put). Any time the market would falter, Greenspan would be there with cheap money. Any time workers looked like they might get their share of productivity gains, Greenspan would crush the economy. This wasn’t just so the rich could get richer, it was to keep commodity inflation under control, as workers would then spend their wages on activities and items which increased oil consumption.

The third reason for the failure of liberalism was the aging of the liberal generation. Last year, I read Chief Justice Robert Jackson’s brief biography of FDR (which you should read). At the end of the book are brief biographies of main New Deal figures other than Roosevelt. Reading them, I was struck by how many were dying in the 1970s. The great lions who created modern liberalism, who created the New Deal, who understood the moving parts were dead or old. They had not created successors who understood their system, who understood how the economy and the politics of the economy worked, or even who understood how to do rationing properly during a changeover to the new economy.

The hard-core of the liberal coalition, the people who were adults in the Great Depression, who felt in their bones that you had to be fair to the poor, because without the grace of God there go you, were old and dying.  The suburban part of the GI generation was willing to betray liberalism to keep suburbia; it was their version of the good life, for which everything else must be sacrificed. And sacrificed it was, and has been, because suburbia, as it is currently constituted, cannot survive high oil prices without draining the rest of society dry.

Reagan offered a way out, a way that didn’t involve obvious sacrifice. He attacked a liberal establishment which had not handled high oil prices, which had lost the Vietnam war, and which had alienated its core southern supporters by giving Blacks rights.

And he delivered, after a fashion. The economy did improve, many people did well, and inflation was brought under control (granted, it would have been if Carter had his second term, but people don’t think like that). The people who already had good jobs were generally okay, especially if they were older. If you were in your 40s or 50s when Reagan took charge in 1980, it was a good bet that you’d be dead before the bill really came due. You would win the death bet.

Liberalism failed because it couldn’t handle the war and crisis of the late 60s and 70s. The people who could have helped were dead or too old. They had not properly trained successors; those successors were paying attention to the wrong problem and had become disconnected from the reality on the ground. And the New Deal coalition was fracturing, more interested in hating blacks or keeping the “good” suburban lifestyle than in making sure that a rising tide lifted all boats (a prescriptive, not descriptive, statement).

There are those who say liberalism is dying now. That’s true, sort of, in Europe, ex-Britain. The social-democratic European state is being dismantled. The EU is turning, frankly, tyrannical, and the Euro is being used as a tool to extract value from peripheral nations by the core nations. But in the Anglo-American world, liberalism was already dead, with the few great spars like Glass-Steagall, defined benefit pensions, SS, Medicare, welfare, and so on, under constant assault.

Europe was cushioned from what happened to the US by high density and a different political culture. The oil shocks hit them hard, but as they were without significant suburbia, without sprawl, it hit them tolerably. They were able to maintain the social-democratic state. They are now losing it, not because they must, but because their elites want it. Every part of the social-democratic state is something which could be privatized to make money for your lords and masters, or it can be gotten rid of if no money can be made from it and the money once spent on it can be redirected towards elite priorities.

Liberalism died and is dying because liberals aren’t really liberal, and when they are, they can’t do anything about it.

None of this means that modern conservatism (which is far different from the conservatism of my childhood) is a success if one cares about mass well-being. It isn’t. But it is a success in the sense that it has done what its lords and masters wanted —- it has transferred wealth, income, and power to them. It is self-sustaining, in the sense that it transfers power to those who want it to continue. It builds and strengthens its own coalition.

Any political coalition, any ideology behind a political coalition, must do this: It must build and strengthen support. It must have people who know that, if it continues, they will do well, and that if it doesn’t, they won’t. Liberalism failed to make that case to Southerners, who doubled down on cheap factory jobs and racism, as well as to suburbanite GI Generation types, who wanted to keep the value of their homes and knew they couldn’t if oil prices and inflation weren’t controlled. Their perceived interests no longer aligned with liberalism and so they left the coalition.

We can have a new form of liberalism (or whatever we wish to call it) when we understand why the old form failed and can articulate the conditions for our new form’s success. Maybe more on that another time.

Published April 11, 2015, published back in the ’00s too, but I don’t remember when. Republishing doesn’t send out to lists, so I’m doing it as new piece. The original and comments can also be viewed.

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Delusion Regarding the Fall of Neoliberalism and Globalization

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On September 25, 2020

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So, the article below was published December 8th, 2015.

The pull quote is:

Neo-liberalism is nearing the end of its cycle. It will kill a lot of people dying, but its death is now ordained and can only be slowed by fanatical levels of police state repression in a few countries. And its death convulsions and the birth pangs of the new system will create a new age of war and revolution which will kill far more.

This is now as close to inevitable as human affairs, endlessly complicated and subject to unexpected shocks, can be.

Nothing has changed, the process has simply continued. Notice the repression going on in the US right now. Since I wrote it, the UK left the EU, there was massive resistance to Macron in France, and so on. We have massive fires all over the world: Australia, California, South Africa the Amazon and more. Wealth continues to concentrate at the top, etc, etc…

These convulsions take time. Slap the start of the actual fall as 2020, with the UK’s Brexit, and we’ve got 12 to 20 years to go. This one’s going to be bad, really, bad, simply because of climate change and our vast over-exploitation of limited resources. There’s going to be a lot of real hunger and lack of water, and so on.

The next age is undetermined, but one possibility is a centrifugal period. It is hard to imagine a future in which, India, for example, survives as a unified nation. For that matter, I’m not sure I’d put my money on China holding together over the middle run: 50/50 it’s fallen into warlordism by 2050 to 60.

The simple way to make your guesses is ask if a country can feed itself with domestic production AFTER the effects of climate change. If it can’t even feed itself now (or only barely); or if it is going to have serious water issues (water, obviously affects agriculture, so it’s not really two things), then the smart money is that it’s going to break up or lose effective control of various hinterlands.

And if you’ve got resources a more powerful nation on your border wants, well, that could go very badly for you. (My fellow Canadians, who seem clueless about how violent Americans are, should take note here.)

On the upside, this will be a very interesting period to be alive, if you can stay that way.

Natalie Nougayrède writes in the Guardian about The Front National’s victory in France:

Marine Le Pen has no solution for France’s problems, her economic programme is all about retreating from the outside world and Europe. Her social vision is of a mythical, homogeneous France that never existed. What she has to sell is an illusion. It’s only because so little else is on offer that people are buying.

This analysis is, there is no kinder way to put it, delusional.

And Nougayrède should know it, because she writes:

The impact of globalisation marked the end of what the French demographer Jean Fourastié coined Les Trente Glorieuses (The Glorious Thirty), the 1945-1975 period when France was modernising and increasing its international influence. There is much twisted nostalgia in the rise of the National Front.

Nougayrède blames this on the oil shocks, which the entire West failed to handle (note that Japan, far more vulnerable to the oil shock, DID handle it. Their later failure had other causes). She notes that France’s elites have not, since 1975, been able to turn things around, something I have noted as well.

But she is wrong about a retreat from globalization being delusional. The simple fact is that in France and almost every other country (including, by the way, most African countries), growth was better before globalization, and the proceeds of that growth were distributed to their populations much more evenly.

This is a fact, and you can only argue against it by invoking China (which used classic mercantalist policies, and was not meaningfully party to the 1945-1975 consensus economy.)

There will always be trade. There will always be global movement in goods, capital, and ideas, but more is not always better.  In fact, one can easily argue that more is rarely better.

As for “Europe,” the fact is that increased integration has not been to the benefit of most Western Europeans. That assertion is, again, extraordinarily hard to argue against and is especially true of the creation of the Euro.

Nougayrède wants France’s leaders to fix things, and not to fail, but she is very nearly as delusional as them. She admits that their failure has led to the rise of Front National, but cannot admit that their policies have failed, economically, along the lines that Marie Le Pen says they have.

Just because someone is a near-Fascist does not mean they are wrong about everything. I have no tolerance for LePen’s brand of Imperialism and cultural supremacy, but she, like Trump, is telling a lot of truths to a lot of people who feel like their country has been on the wrong track for a long time. (In the U.S., white, working class male salaries peaked in 1968. No matter how much you scream about white privilege, you are a fool if you expect white males to gravitate towards anyone who doesn’t at least pay lip service to reversing that.)

As an economic project, the EU is a failure for many of its members, including France. There are exceptions (Germany, Poland, etc.) but the losers cannot be expected to just sit there and take the beating forever. The “beating” has been exacerbated by Europe’s deliberate imposition of austerity. It is not just that Europe’s elites have failed to create a good economy, it is that they have deliberately made the economy worse for the majority of residents in many of its countries.

Until we can honestly evaluate the failures of neo-liberalism, and gut globalist cant which claims more trade and capital flows are always a good thing (and, even if they aren’t, are “inevitable”) we cannot fix the economy.

France, like about half of the EU, should leave the Euro. It should re-impose tariffs on a wide variety of goods and produce them in their own countries. Yes, they would cost more, but wages would be higher. It should also move radically to non-oil-based energy (as is true of, well, almost everyone).

These basic policies are not difficult. Corbyn is not wrong to say “make the necessary adjustments so it will work today, and go back to post-war policies.”  It failed,  yes, but it was the last economy which spread money evenly through the economy.  Make sure it’s not sexist and racist, update it for new energy technology, and try it. It may not be the best solution (I’d like some fairly radical changes), but it’s certainly not crazy, given that it did give France those 30 great years.

The failure to deal with the oil price shock doomed the post-war world, yes. But it is 40 years later and we have technology and knowledge they did not have.

Until the developed world’s sanctioned intellectuals (as opposed to pariahs like myself and my ilk) and their masters come to grip with these facts, the population will continue to turn elsewhere. They may turn to sane and reasonable people like Corbyn, or they may turn to people like LePen and Trump, but people will not put up with “it’s going to get worse for the forseeable future” forever.

We can have reasonable policies, which will make the world better for everyone (even if that means there will be a lot less billionaires–the Corbyn solution), or we can have the rise of fascists and their left-wing equivalents.

The room in the mushy middle for those who aren’t willing to do something radical to fix the economy and other problems is narrowing. It will continue to narrow.

Our current elites will not adjust, so the question is: Who will we get? Corbyn and FDR? Mussolini, LePen, Trump?

Neo-liberalism is nearing the end of its cycle. It will kill a lot of people dying, but its death is now ordained and can only be slowed by fanatical levels of police state repression in a few countries. And its death convulsions and the birth pangs of the new system will create a new age of war and revolution which will kill far more.

This is now as close to inevitable as human affairs, endlessly complicated and subject to unexpected shocks, can be.

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Ideology Precedes Policy Which Determines Outcomes

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On March 23, 2017

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Ok, so…

The results are rather worse than that, actually, and anyone who reads this blog regularly is aware that, for example, working class white male wages peaked in 1968, in real terms. It’s not as if every other demographic has gotten off, either. Slowly the scourge has worked its way thru the demographic and socioeconomic classes, till practically everyone but the top 5% or so is being hit to some extent or another, even if they haven’t lost lifespan—yet.

Marcy Wheeler asks:

Which got me wondering: to the extent this is driven by a failure in ideology — by the failure of the American dream — which comes first, the failed ideology or the rising mortality rates?

…

. But as we try to figure it out, we ought to be focusing at least as much on how to roll out life and meaning that can sustain Americans again as we are on blaming Putin for our recent failures to do that.

Ideology tells tells you how the world works, what to do, how to do it and why you’re doing it. For example, NeoLiberal ideology has an axiom that “jobs are created by those who have money.”  On the face of it, this seems obvious: nobody without the ability to pay you has ever given you a job, I’d bet.

The corollary of this is “the more money that rich people have, the more jobs there will be”. So, under Neoliberal ideology, you funnel money to the rich and corporations and they create jobs.

Doesn’t actually work, mind you, but that’s what the ideology says.

The ideology also says “money is earned by people because they fill the needs indicated by the market, which represent what people and society want.”

Which means “if you have a lot of money, you deserve to have it because you got it filling other people’s needs”.  It also then follows that people with a lot of money are the sort of people who are good at providing what other people want, so therefore they should have more money so they can provide even more.

Poor people, by this ideology, do not deserve to have much money, because if they were doing something that other people wanted a lot of they’d have a lot of money.

Etc, etc…

Ideology tells people what policies to pursue. Those policies then create results.  With different ideologies, you get very different results.  FDR’s New Deal and the Keynesian consensus after WWII had as its thesis “the more money ordinary people have, the more they will buy, creating demand for products, which will create more jobs.” It also had “money in the hands of rich people doesn’t create demand and does create political problems which damage markets, therefore we should keep them from having too much money.”

The result of those propositions was the best economy in American (and European history), with growth rates higher in the middle and lower classes than in the upper and the rich classes (rich is not upper class, it is beyond.)

Ideology Determines Policy.

Policy Determines Outcomes.

(One might ask “what determines ideology”. Part of the answer will be in the upcoming “Creation of Inequality booklet” I’m about three-quarters finished.)

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Mandela’s NeoLiberal Compromise

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On December 10, 2013

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South Africa may no longer have apartheid, but the majority of the population still lives in poverty, the heights of the economy are controlled largely by whites, and rich blacks are concentrated in the upper ranks of the ANC and their families.  The rape rate is possibly the highest in the world, with a quarter of men admitting to having committed a rape and a quarter of women to having been raped, while murder is rampant.

The ANC had originally intended to purse socialist policies, including taking away the wealth of the richest whites.  Nelson Mandela decided not to do that.  There are varying accounts of why, from outright bribery to being convinced, but let’s go with convinced.  The story is that once Mandela was released from prison, as he traveled the world, it was explained to him that if white flight occurred, his country would mimic Zimbabwe’s fate, and taking away the wealth of the richest whites and distributing it would cause that white flight.

So most of the redistributive part of the ANC’s program was jettisoned.  Blacks were to have political freedom, but whites would control the economy.  (Though you certainly don’t want to be a poor white in S. Africa.)  Tax rates in S. Africa are typical: low for individuals, lower for corporations.

Bear in mind that when Mandela made this decision the prices of commodities, S. Africa’s main exports, were substantially depressed.

Mandela was in a bind, take that advice as ‘warnings’ and you probably read it better: “if you do this, we will disapprove. We cannot allow such redistribution to work, so it won’t.”

Mandela chose to take what was on the table, political freedom absent redistributive justice.

Was it the right decision?

Yes.  Not because it isn’t theoretically possible to do redistribution and make it work, but because at the time it was harder, and because the ANC wasn’t up to the job.  Given how they have botched far simpler policy areas, like HIV, given their rampant corruption, the idea that redistribution could be managed by them in a fair way, while maintaining economic growth and avoiding being crushed by the outside reaction is not credible.  These are not competent people, they are noticeably incompetent.

S. Africa has significant advantages in its mineral wealth (though that can also be a curse).  Resources that the rest of the world must have give you leverage to do what you want, and tell everyone else to take a hike (see Saudi Arabia).  But pulling that off requires finesse and it is harder to do if you have a redistributionist ideology, because international elites are happy to tolerate regressive regimes but do not want fair regimes to succeed, lest they show other countries that inequality and unfair trade deals are not inevitable.

Venezuela, though good has been done, is botching their experiment; so is Argentina.  S. Africa could never have pulled it off.

Much of this is probably also down to Mandela’s age: he was in his late seventies when he was President.  He did not have ten good years left to finesse through this sort of change, he did not have competent heirs or time to create them; instead he had the ANC, whose leaders were corrupt at best.

When the attempt is made at real redistributive justice, as it must be, it will be easiest done if a number of countries do it at about the same time, supporting each other, and acting as a bloc. If key resource nations like Canada, Russia, much of South America and S. Africa were to get together, it would be very difficult to bully them, because they control key resources which cannot be substituted away from except at great cost, and in some cases, at all.

Trade is key in the sense that countries must be able to buy certain key things they can’t make.  If producers work together, in solidarity, they can gain policy independence internally.  But this can only be done as a group, or great costs will be inflicted by the oligarchical forces of the developed world who do not want to, ever, see 90% tax rates create good economies ever again.

 

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