STEVEN FRIEDMAN: Why the insider debate on the economy is pie in the sky

It will clearly take more than a recession to get the mainstream to talk about how to make the economy work for South Africans.

For a moment last week, there seemed a chance that news of a recession would trigger serious discussion on how to begin fixing an economy that has underperformed for decades for those inside it and has hardly performed at all for the rest.

Instead, there was a familiar recitation of oft-repeated remedies. Some said the government must be friendlier to formal businesses, others that it needs to take them on.

The government said nothing was really wrong with the economy that could not be fixed by a stimulus package.

The people whose energies are ignored are those who do not earn an income from the formal market and so must find a way to make their living outside it.

All these responses assume that the only economic actors who matter are the insiders, who do business in glass and concrete buildings. And so they ignore the economy’s core problem — not using the abilities of many of its people, and the changes that will be needed to fix that.

The people whose energies are ignored are those who do not earn an income from the formal market and so must find a way to make their living outside it.

The debate treats them as a problem, not a solution. If they are noticed at all, the left and right compete to suggest how to turn them into "respectable" wage and salary earners like the rest of us insiders.

These "solutions" must sound good because they dominate the debate. But they are fantasies; whatever policies are pursued, and even if growth improves, many people will be forced to make their living outside the formal market for decades.

The fantasies also ignore the reality that the excluded are, in the main, not useless but energetic and productive — they must be if they want to survive.

By trying to make them go away, instead of helping them to contribute, the mainstream makes sure they do not play the role they could in growing the economy and opening it to many more people.

Why does the left, right and centre not see this? Because the one issue on which they agree is that the goal of post-1994 SA is to create an apartheid economy open to everyone.

When democracy arrived, the economy was divided sharply between insiders and outsiders. Instead of negotiating ways of opening it to the outsiders, the old economic elite and the new political leadership assumed that what was needed was to make sure that everyone was included in an economy built to serve only insiders.

Since this is impossible, it ensured that, while more people are now insiders, most outsiders remain outside and the abilities and energies of many people are ignored.

Every now and then, politicians talk of boosting the "township economy", in which the outsiders function. But they are soon drowned out by those who find the outsiders embarrassing.

Another reason why the mainstream is not eager to unleash the energies of the outsiders is that this would force left and right to think differently. Those who believe regulation always helps the poor don’t want to acknowledge that the outsiders are often hamstrung by the rules, many of them demanded by formal businesses who don’t like competition.

Those who insist that the government’s job is to do what formal business wants it to do will resist measures that would give outsider businesses a guaranteed role in the economy.

They also will not like spending to ensure they enjoy the safety and infrastructure they need to thrive.

All this explains why not even a recession gets the mainstream talking about how to include the outsiders.

Until that changes, growth will remain limited and many will still see the economy as the cause of poverty, not plenty.

• Friedman is research professor with the humanities faculty of the University of Johannesburg.