Power, Economic

Knowledge and Corruption

Week 6
The world has 2,153 people
who are billionaires.

They have more wealth

than 4.6 billion people on
the planet (Oxfam, 2019).
 Billionaires recovered
their COVID-19 losses in
just nine months, yet it
could take the world’s
poorest people more than
a decade to recover
(Oxfam, 2021).
 These statistics are just 2
examples of why we need to
learn specifi cally about power
as economists.
 Structure for this study unit
• First, we look at power (its conceptualisations and important concepts
linked to it).

• Then we ask why are economists so powerful and what are some of the
problems with economics.

• Finally, we link this to corruption and how we need to actively think about
anti-corruption strategies in both the public and PRIVATE sector to ensure
greater development for all.

• The state plays a vitally important role in development and we need to

address the question of corruption to break down this idea that the South
African state is somehow uniquely corrupt and therefore unable to be an
actor for development!
© Michelle Groenewald
 Context
• Yo u n e e d t o w o r k t h ro u g h t h e c o re c o n t e n t f o r t h e w e e k – t h e s e s l i d e s a re n o t s u ffi c i e n t t o p a s s . M a ke
y o u r o w n n o t e s b a se d o n t h e c o re c o n t e n t a n d p r a c t i c e t h e a p p l i c a t i o n o f t h e s e i d e a s !

• Po w e r i s o ft e n n o t a d d re sse d w i t h i n t h e s t u d y o f e c o n o m i c s ( b e s t c a s e y o u l e a rn a l i t t l e a b o u t m o n o p o l y
p o w e r ) , b u t i t i s v i ta l l y i m p o r t a n t a s i t i n fl u e n c e s a l m o s t e v e r y t h i n g t h a t h a p p e n s i n t h e e c o n o m y.

• T h i s l a c k o f e n g a g e m e n t w i t h p o w e r f ro m t h e s i d e o f e c o n o m i s t s i s d e e p l y p ro b l e m a t i c , b e c a u s e e v e n
t h e c l a i m s o f c o m p l e t e o b j e c t i v i t y re l a t i n g t o a m a r ke t m e c h a n i s m t h a t a p p o r t i o n s re s o u rc e s p e r f e c t l y ,
i s a c t u a l l y u n d e r- p i n n e d b y p o w e r.

• T h o se w h o h av e th e p o w e r t o p ro d u c e ,

• t h o se w h o h a v e th e p o w e r t o p u rc h a s e ,

• t h o se w h o h a v e p o w e r b e c a u s e o f o w n e r s h i p ( b o t h n a t u r a l re s o u rc e s a n d c a p i t a l ) ,

• t h o se w h o h a v e p o w e r b e c a u s e o f t h e i r g e n d e r , c l a s s , r a c e , c a s t e , c o u n t r y o f b i r t h ,

• t h o se w h o h a v e p o w e r b e c a u s e o f h i s t o r i c a l e v e n t s ,

• t o n a m e b u t a f e w.
 We need to engage with the political to be better
economists.
• E c o n o m i c s d o e s n ’ t h a p p e n i n a v a c u u m . Le t ’ s t a ke t h e m i n i m u m w a g e i n S o u t h Af r i c a a s a n ex a m p l e :

• We c a n h a v e t h e “ b e s t a n a l y s i s ” o n w h a t t h e o r y t e l l s u s a b o u t m i n i m u m w a g e s ( s u p p o s e d l y t h a t a n i n c re a s e
i n a n a t i o n a l m i n i m u m w a g e w i l l m e a n a n i n c re a s e i n u n e m p l o y m e n t ) .

• B u t w e m u s t c o n s i d e r t h e p o l i t i c a l re a l i t i e s o t h e r w i s e o u r e c o n o m i c a n a l y s i s m e a n s v e r y l i t t l e a n d i s u n l i ke l y
to be implemented.

• I n S A - t r a d e u n i o n s , c i v i l s o c i e t y , w o r ke r s a n d e v e n s o m e e c o n o m i s t s s h o w e d t h a t i t m a d e e c o n o m i c s e n s e t o
m o v e f ro m a s e c t o r a l w a g e t o a m i n i m u m w a g e . I t w a s t h e p o w e r o f t h e s e a c t o r s t h a t e n s u re d t h a t w e
i m p l e m e n t e d a n a t i o n a l m i n i m u m w a g e i n S o u t h Af r i c a .

• T h i s i n c re a s e i n w a g e s f ro m t h e s e c t o r a l w a g e s t o t h e n a t i o n a l m i n i m u m w a g e i s a c t u a l l y a s s o c i a t e d w i t h a n
i n c re a s e i n a g g re g a t e d e m a n d , a re d u c t i o n i n i n e q u a l i t y a n d a b o o s t t o e c o n o m i c g ro w t h .

• Re a d m o re h e re -
h t t p s : / / w w w. w i t s . a c . z a / n e w s / l a t e s t - n e w s / i n - t h e i r- o w n - w o r d s / 2 0 1 6 / 2 0 1 6 - 0 8 / a - n a t i o n a l - m i n i m u m - w a g e - w o u l d - c u
t - p o v e r t y- a n d - b o o s t - g ro w t h - i n - s o u t h - a f r i c a . h t m l

• T h e a t t e m p t t o re m o v e t h e p o l i t i c a l f ro m t h e e c o n o m i c , i s t o d e n y a n i n t e g r a l t r u t h a b o u t h o w t h e e c o n o m y
f u n c t i o n s . I n s t e a d o f t r y i n g t o a v o i d t h e p o l i t i c s o f i t a l l , f u t u re e c o n o m i s t s n e e d t o b e a b l e t o g r a p p l e w i t h
h o w p o w e r i n fl u e n c e s e c o n o m i c re a l i t i e s . a n d a s k w h a t c a n b e d o n e t o e n s u re m o re j u s t a n d e q u i t a b l e
a p p ro a c h t o t h e e c o n o m y.
 What is power?

• There a re m a ny c onc e ptua l i sa t i ons of powe r. Thi s i s f rom y our c ore c ont e nt for the we e k.

• Oz a nne hi ghl i ght s tha t:

• “Typically, power has been defi ned in behavioural terms – that is, the ability of one
person to control the behaviour of another – rather than in terms of the broader
economic and social system and institutions or the ownership and control of
resources”

• Look at the other defi nitions of power on the next slides. As your core content
points out, there is no generally accepted single defi nition of power.

• Learn actively - Compare and contrast the diff erent defi nitions of
power
More defi nitions on power

• I ntroduc i ng a N e w E c onom i c s: Pl ura l i st , Sust a i na bl e a nd Progres si v e by Re a rdon, M a di

a nd Ca t o ( 2 0 1 7 ) ex pl a i ns powe r i n t he fol l owi ng wa y:

• Powe r i s a m ul t i -f a c e te d word; ri c h i n m e a ni ng, y e t ha rd t o de fi ne . W hi l st m a ny

di ff e re nt de fi ni t i ons f or powe r ex i sts ;

• “ Powe r m e a ns c ontrol , by a pe rson or a n i nst i tuti on, ov e r t he m i nds, l i v e l i hoods a nd

bel i e fs of othe rs” – R i c ha rd Pe e t: G e ogra phy of Powe r, 2 0 0 7

• “ Powe r i s the ge ne ra l i se d pot e nti a l i ty for ge tti ng one ’ s own wa y or f or bri ngi ng a bout
c ha nge s ( a t l e a st som e of whi c h a re i nte nde d) i n othe r pe opl e’ s a c t i ons or c ondi t i ons. ”
(B enn, 1 9 7 6 :4 2 6 )
Sources of power (from your core content)

• Mann (1986), identifi ed four sources: the fi rst arising from the need people
have for meaning in their lives, which manifests itself as ideological power;
the second arising from the need for subsistence, from which economic power
emerges; the third arising from the need for law and order, which is
expressed as political power, and the last arising from the need for defence,
expressed as military power.

• Please take a look again at your core content for the greater nuance provided
in that chapter.

• Can you identify sources of power in a case study? Can you

apply these defi nitions of power and sources of power?
 Contextual application of power
• P o w e r i s c o n t e x t u a l ; i n v o l v i n g a s p e c i fi c t i m e , p l a c e a n d a c t o r s . I f w e a r e t o c h a n g e t h e t i m e a n d p l a c e , t h e n i t
i s l i ke l y t h a t t h e a r r a n g e m e n t o f p o w e r w i l l a l s o h a v e c h a n g e d

• W h e n c o m p l e t i n g a c a s e s t u d y o n t h i s l e t t h e c o n t e x t g u i d e a n d i n f o rm t h e re l a t i o n a l a s p e c t o f p o w e r.

• C o n s i d e r t h e d i ff e re n t t y p e s o f p o w e r t h a t e n s u r e d t h a t w e h a d w i t h t h e R D P ( Re c o n s t r u c t i o n a n d
Development Plan)

t h e n G E A R ( G r o w t h E m p l o y m e n t a n d Re d i s t r i b u t i o n )

and now the NDP (National Development Plan).

• R D P e n v i s i o n e d a v e r y a c t i v e r o l e f o r t h e s t a t e t o i n t e r v e n e i n t h e m a r ke t i n o rd e r t o e n s u re t h a t t h e g a i n s
f r o m e c o n o m i c g ro w t h c o u l d b e r e d i s t r i b u t e d t o t h o s e w h o n e e d e d i t m o s t .

• G E A R h a d a f a r m o r e m a r ke t - o r i e n t e d a p p r o a c h w h i c h p r i o r i t i s e d fi s c a l d i s c i p l i n e a n d p r i c e s t a b i l i t y.

• NDP has an explicit focus on alleviating poverty, inequality and unemployment, with a fair amount of
i n t e r v e n t i o n f ro m t h e s t a t e r e q u i r e d . T h e r e i s a l s o a f o c u s o n e n s u r i n g t h a t t h e r e i s a c a p a b l e d e v e l o p m e n t a l
s t a t e . T h e N D P s t i l l p l a c e s a l o t o f e m p h a s i s o n t h e p r i v a t e s e c t o r t o e n s u r e e c o n o m i c g ro w t h a n d i n
e n s u r i n g t h a t t h e s t a t e d o e s n o t h i n d e r t h e p r i v a t e s e c t o r f ro m b e i n g a b l e t o f u n c t i o n e ffi c i e n t l y.
Relational application
• P o we r i s al so r e l at i o n al ;

• power oc c urs be t we e n t wo or m ore pa rti e s ; whe re the powe r be t we en t he v a ri ous pa rti e s i s

unequa l . Thi s une qua l a dv a nta ge m e a ns tha t the pa rt y whi c h ha s a gre a t e r a dv a nt a ge i s l i ke l y to
forc e the othe r to a c t a ga i nst the i r wi l l . I n une qua l powe r exc ha nge s, the re i s a st i m ul a t or
(posi ti on of dom i na nc e ) the re i s a re a c tor ( wi l l ne e d t o c ha nge the i r be ha v i our) .

• W hen c om pl e ti ng a c a se study: ba se d on y our c ont ex t ua l ex pl a na t i on y ou shoul d know who a re the

pa rti es a t pl a y.

• Then a sk y ourse l f, who i s i n a dom i na nt posi ti on a nd why ? W ho i s s ti m ul a t or a nd who i s the

rea c tor? W ha t t y pe of c ha nges i n a c ti ons wi l l thi s c a use a nd why ?

• A ppl i c a ti on t o S A:

• The E F F ’ s powe r ( y ou a re of c ourse we l c om e to di sa gre e wi t h t he m ) i n s pa rki ng a na ti ona l

deba te re l a t i ng to l a nd re form , m a na ge d to prov i de m om e ntum for the A N C to c ons i de r t hi s
topi c wi t h gre a t e r urge nc y ?
 Links to schools of Thought – Marxism on Power

• D i ff e r e n t c o n c e p t i o n s o f p o w e r b a s e d o n d i ff e r e n t s c h o o l s o f t h o u g h t , t h i s c h a p t e r h i g h l i g h t s t w o o f t h e m ( M a r x i s t a n d
Institutional):

• I n t e l l e c t u a l s t a n d a r d o f f a i r n e s s t o ke e p i n m i n d

• P r a i s e d c a p i t a l i s m o n t w o a c c o u n t s ( w h i l s t s t i l l b e i n g V E RY c r i t i c a l o f c a p i t a l i s m a s a n e c o n o m i c s y s t e m ) :

• I n c r e a s e i n p r o d u c t i v e f o r c e s ( e ffi c i e n c y a n d i n n o v a t i o n a s w e d i s c u s s e d u n d e r c o n c e p t u a l i s i n g d e v e l o p m e n t )

• Fr e e d w o r ke r s f r o m f e u d a l i s m ( p r e v i o u s e c o n o m i c s y s t e m ) , a s w o r ke r s c o u l d n o w c h o o s e t o s e l l t h e i r l a b o u r
a n y w h e r e i n o r d e r t o e a r n a l i v i n g ( d o y o u a g r e e t h a t w o r ke r s a r e r e a l l y f r e e ? )

• Fo r M a r x i s t s , p o w e r i s a t t r i b u t e d t o t h o s e w h o a r e t h e o w n e r s o f l a n d a n d c a p i t a l . I t i s t h o s e w h o h a v e o w n e r s h i p o f
t h e s e a s s e t s , w h i c h m e a n s t h a t t h e r e i s a n i m b a l a n c e o f p o w e r a n d s o , e x p l o i t a t i o n o f w o r ke r s o c c u r s . Fo r t h a t r e a s o n ,
the power of trade unions is particularly important.

• Ac c o rd i n g t o M a rx , s o c i e t y i s d i v i d e d i n t o a n t a g o n i s t i c c l a s s e s , t h e b o u rg e o i s i e an d p ro l e t a r i at . In
t h i s re l a t i o n s h i p , t h e w o r ke r s d e p e n d o n t h e b o u rg e o i s i e , w h o i n t u rn ex t r a c t t h e s u r p l u s v a l u e
p ro d u c e d b y t h e w o r ke r s i n t h e f o rm o f p ro fi t .

• D a v i d H a r v e y d i s c u s s e s h o w t h e r i s e o f g l o b a l c o r p o r a t i o n s i s j u s t i fi c a t i o n f o r t h e t y p e o f p o w e r t h a t i s
c o n c e n t r a t e d i n t h e h a n d s o f a c l a s s w h o i s a b l e t o e x p l o i t w o r ke r s i n o r d e r t o h a v e h i g h e r r e v e n u e t h a n m a n y
countries in the world.

• h t t p s : / / t h e c o n v e r s a t i o n . c o m / w h o - i s - m o r e - p o w e r f u l - s t a t e s - o r- c o r p o r a t i o n s - 9 9 6 1 6
Links to schools of Thought – Institutional economics
on Power

• For I nsti t ut i ona l e c onom i st s, powe r ex i sts be c a use of t he rul e s a nd v a l ue s whi c h ex i st

both f orm a l l y a nd i nform a l l y. The y se e m a j or opportuni t i e s f or a c ha nge i n the struc ture
of powe r, i f we c a n a l te r our i nst i t uti ons. The y a ss um e tha t t hi s re a l i gnm e nt of powe r
through i nst i tuti ons i s m ore l i ke l y to ha ppe n a s i nst i tuti ons a re re l a t i v e l y fl ex i bl e a nd
a da pta bl e .

• How m i ght t he e c ol ogi c a l a nd f e m i ni st sc hool of thought ex pl a i n powe r?

• A re som e s c hool s of thought “ be tt e r ” a t e nga gi ng wi th the t opi c of powe r?

 Commodifi cation of Natural resources

• Those who ha v e powe r ov e r na t ura l re sourc e s a re a bl e to t urn i t i nto a c om m odi ty ( a c om m odi ty

i s somethi ng use ful tha t c a n be t urne d i nt o a c om m e rc i a l a dv a nta ge ) .

• We c a n a sk s om e v e ry se ri ous que sti ons a bout whe the r the c om m odi fi c a t i on of na t ure, whi l st
a l l owi ng ec onom i c growth, wi l l e nsure tha t t he e c onom y c a n c ont i nue t o func ti on i n a
susta i na bl e m a nne r?

• Thi s i s a pa rt i c ul a rl y di ffi c ul t que sti on for de v e l opi ng c ount ri e s, a s the c ha l l e nge of pov e rty ,
i nequa l i ty a nd une m pl oy m e nt a re a l re a dy c om pl ex a nd di ffi c ul t topi c s. Thi s i s m a de e v e n m ore
c ompl ex , whe n one ha s to que st i on whet he r pol i c y proposa l s re l a ti ng to t he se t opi c s wi l l be
ec ol ogi c a l l y sust a i na bl e .

• Wi l l those i n posi ti ons of powe r, m a ke de c i si ons tha t re sul t i n a c hi e v i ng e v e r hi ghe r profi ts, or
wi l l a c ti v e de c i si ons be m a de t ha t pri ori t i se t he e nv i ronm e nt?

• Wi l l thi s be de pe nde nt on pre ssure from t he ge ne ra l publ i c , spe c i fi c a l l y t he y outh?

© Michelle Groenewald
Power in terms of climate activists

• You can follow this link for more on climate activists in the Global South:

• https://www.globalcitizen.org/en/content/amazing-young-south-africans-fi ght-cli
mate-change/

• Climate protests in 2019 were planned in more than 1600 towns in over 125
countries and organizers say the number of strikers is expected to surpass the
1.6 million people who took part in the fi rst Global Climate Strike in March.

• Inspired by 16-year- old Swedish activist Greta Thunberg's weekly protests, the
global youth climate movement has swept the globe in recent months. (MORE ON
THIS IN THE WEEKS TO COME).
 Power in activism

South African climate change activist, Ayakha Melithafa

 Power in activism

Greta Thunberg full speech at UN Climate Change COP24 Conference

 Capitalism and property rights
• C a p i t a l i s m , a n e c o n o m i c s y s t e m ( n o t a s c h o o l o f t h o u g h t , b u t i t m a y d r a w f ro m m a n y s c h o o l s o f
t h o u g h t ) , t h a t a d h e re s t o t h e i m p o r t a n c e o f p r i v a t e p ro p e r t y r i g h t s t o o w n t h e f a c t o r s o f p ro d u c t i o n . T h i s
t h e n e n a b l e s a g e n t s t o e n s u re t h e p ro d u c t i o n o f g o o d s a n d s e r v i c e t h a t p e o p l e n e e d ( o r t h i n k t h e y
need).

• O n e o f t h e ke y d e fi n i n g c h a r a c t e r i s t i c s o f c a p p i t a l i s m i s p ro fi t m a x i m i z a t i o n .

• T h i s i s b u i l t o n t h e a s s u m p t i o n t h a t a p r i v a t e o w n e r w i l l b e b e t t e r a b l e t o m a n a g e re s o u rc e s t h a n a
c o m m u n i t y o f p e o p l e , t h e l o c a l g o v e rn m e n t o r t h e n a t i o n a l s t a t e . I s t h i s a l w a y s t r u e ?

• A l t h o u g h M a rx w a s v e r y c r i t i c a l o f c a p i t a l i s m , h e d i d a c k n o w l e d g e t h a t fi r s t l y , c a p i t a l i s m h a s t h e
p o t e n t i a l f o r m a s s i v e i n c re a s e s i n p ro d u c t i v i t y. S e c o n d l y , c a p i t a l i s m d i d p ro v i d e f re e d o m f ro m f e u d a l
l o rd s i n t e rm s o f p e o p l e b e i n g a b l e t o l e a v e t h e c o u n t r y s i d e a n d s e a rc h f o r e m p l o y m e n t i n n e w f a c t o r i e s .

• Le t ’ s c r i t i c a l l y e n g a g e w i t h t h i s .

• I s s t r i v i n g f o r i n c re a s e d p ro d u c t i v i t y a l w a y s b e n e fi c i a l ?

• I f w e a c k n o w l e d g e t h e ex p l o i t a t i o n o f w o r ke r s i n f a c t o r i e s , w a s t h i s f re e d o m f ro m a f e u d a l l o rd re a l l y
f re e d o m ?

© Michelle Groenewald
 Property rights
• A propert y ri ght ‘ i s a re l a ti onshi p be twe e n the ri ghts hol de r a nd the ri ghts re ga rde r unde r a s pe c i fi c
a uthori ty st ruc t ure l i ke t he s ta te gra nt i ng l e gi ti m a c y a nd se c uri ty to a s pe c i fi c re sourc e or be nefi t
strea m’ ( Va t n, 2 0 0 5 : 2 5 4 ) .

• I mporta nt poi nts t o not e a bout t he de fi ni ti on of prope rt y ri ght s:

• The s ta te ’ s powe r i n de fi ni ng a nd e nforc i ng propert y ri ght s ( e v e n pri v a t e prope rty ri ghts ) , i s

very i m port a nt . Ofte n a ss um e d t ha t pri v a t e prope rt y ri ght s m e a ns t he sta t e ha s no powe r ov e r
ownershi p, whe n i n e sse nc e to e nsure tha t the owne rshi p of pri v a t e prope rty i s e nforc e d, i s a
ma s si v e unde rta ki ng f or t he sta t e .

• I f pr o pe r t y r i ght s e n su r e t h at so me can o wn pr o pe r t y, t h i s i n h e r e n t l y me ans t h at t h e

powe r o f o wn i n g pr o pe r t y, al so me an s t h e po we r t o e x cl u de o t he r s fr o m o wn i ng i t .

• The ri ght t o own prope rty i s a soc i a l re l a ti on whi c h ha s be e n c onc e pt ua l i z e d, de fi ne d a nd

enf orc e d by the sta t e . The re fore , a s soc i a l re l a ti ons c ha nge , so t oo c a n t he t y pe s of prope rt y
ri ghts .

© Michelle Groenewald
Links to institutions and development
• Fo u r p o s s i b l e p r o p e r t y re g i m e s :

• P r i v a t e p ro p e r t y: A n i n d i v i d u a l o w n s t h e a s s e t a n d i s a b l e t o e x c l u d e o t h e r s f ro m o w n e r s h i p

• C o m m o n p ro p e r t y: A s e t o f i n d i v i d u a l s o w n t h e a s s e t , w h i c h i s ‘ p r i v a t e p ro p e r t y f o r a g ro u p o f c o -
owners’. The co - owners coll ectively establi sh rules of access/exclusion.

• State owned – The asset is owned by the state

• O p e n a c c e s s – T h e r e i s n o o w n e r s h i p a n d t h i s n o p ro p e r t y r e l a t i o n s h i p b e t w e e n o w n e r a n d r i g h t s
regarder; it i s ‘ what was there in the beginning’ .

• W h a t e x a m p l e s e x i s t o f t h e s e v a r i o u s p ro p e r t y t y p e s i n S o u t h Af r i c a ?

• T h e a b i l i t y t o p r o v i d e a c c e s s , e x c l u d e a c c e s s , d e c i d e o n f u t u r e i n c o m e f ro m t h e u s e o f p r o p e r t y a n d h a v i n g
p r o p e r t y t o o ff e r a s c o l l a t e r a l - p ro v i d e s t h o s e w i t h a c c e s s t o p r o p e r t y w i t h a l o t m o re p o w e r i n c o m p a r i s o n
to those who do not.

• Thinking explicitly about our work under institutions and economic

growth last week. What types of property regimes do we need in South
Africa that are not based on violence (applying Mushtaq Khan’s work) to
ensure that we can economic development in our specifi c context?
 Homework 9

• Wa t c h t h i s v i d e o a n d n o w l o o k a t i t t h ro u g h
h t t p s : / / w w w. y o u t u b e . c o m / w a t c h ? v = p a a e n 3 b
4 4 X Y & f e a t u re = y o u t u . b e

• A n s w e r t h e q u e s t i o n s b e l o w:

1. Explain how the power of the rich to

a v o i d p a y i n g a w e a l t h t a x , i s c o n t ex t u a l

2. Show how the power of the rich to avoid

p a y i n g a w e a l t h t a x i s re l a t i o n a l

3. C r i t i q u e w h e t h e r c a p i t a l i s m h a s e n s u re d
e c o n o m i c d e v e l o p m e n t f o r t h e w o r ke r s
in the poultry factories

© Michelle Groenewald
 Homework 10:
Power case study - SA

• h t t p s : / / w w w. i o l . c o . z a / n e w s / p o l i t i c s / d o u b t s - o v e r- g o v
• What is the contextual nature
e r n m e n t s - p l a n - t o - t a x - s u p e r- r i c h - 5 0 4 4 9 7 0 4 of power in implementing a
• Re a d t h i s a r t i c l e : wealth tax?
• It appears that the government is planning to tax
• What is the relational nature of
t h e s u p e r r i c h . T h e N a t i o n a l Tr e a s u r y c o n fi r m e d i n power in implementing a
Pa r l i a m e n t t h a t Fi n a n c e M i n i s t e r T i t o M b o w e n i w i l l
a n n o u n c e n e w t a x e s i n h i s Fe b r u a r y b u d g e t a n d t h i s wealth tax in SA?
would include the wealth tax.

• But political parties are divided over plans by the • Given your explanation of
gove rnme nt to introduc e the tax. The ne w taxe s
would help to stabilise debt and raise up to
power, evaluate whether you
R40billion in the next few years. think a wealth tax in South
• D A s p o ke s p e r s o n o n fi n a n c e G e o r d i n H i l l - L e w i s s a i d Africa would be able to
they did not support the wealth tax and it would
l e a d t o p e o p l e a ff e c t e d s h i f t i n g t h e i r m o n e y
succeed?
elsewhere.

• He said the government could not simply introduce

t h e w e a l t h t a x w i t h o u t t a l k i n g t o o t h e r ke y
Now let’s link power to economic knowledge

• “I don’t care who writes a nation’s laws — or crafts its advanced treatises — if I can write its economics textbooks,”
Pa u l S a m u e l s o n ( E c o n o m i c s N o b e l p r i z e w i n n e r i n 1 9 7 0 ) .

• E c o n o m i s t s ( w h e t h e r i t b e t h r o u g h c o n s u l t i n g , r e s e a r c h o r a c t i v e p o l i c y m a ke r s ) , h a v e t h e a b i l i t y t o s h a p e o u r
economy in a way that other social scientists don’t.

• I n t e r n a t i o n a l l y , e c o n o m i s t s t h a t w o r k f o r t h e Wo r l d B a n k a n d t h e I M F h a v e a l o t o f p o w e r t o d i c t a t e t h e i d e a s t h a t a r e
available for economic policies.

• Rich a rd Pe e t ex p la in s in h is b o o k G e o g ra p h y o f Po we r, h o w in t h e e a rly 1 9 9 0 s, wh e n t h e ANC o u t lin e d a p ro p o sa l t o

t h e Wo r l d B a n k , “ t h e e c o n o m i s t s o p e n e d t h e i r l a p t o p s , m a d e a f o r e c a s t o f i t s n e g a t i v e e ff e c t o n t h e e c o n o m y , a n d
b lew u s away’. ( Peet, 2007) .

• Pe o p le t h a t h a v e st u d ie d e c o n o m ic s a t t o p u n iv e rsit ie s a re n o w p o we rfu l p e o p le . T h e ir e d u c a t io n sh a p e s t h e m t o
understand the economy in a certain way, and if that is a narrow, unrealistic understanding, we will have ripple
e ff e c t s i n o u r o w n e c o n o m i e s . 6 m e m b e r s t h a t a r e s i t t i n g o n t h e U n i t e d S t a t e s S e n a t e , a c h i e f j u s t i c e t h a t i s o n t h e
s u p r e m e c o u r t a l l h a d e c o n o m i c s a t H a r v a r d i n t h e i r fi r s t y e a r. M a r k Z u c ke r b e r g o f Fa c e b o o k j o ke d a b o u t s l e e p i n g
t h r o u g h E c o n 1 0 1 . 1 8 % o f a l l H a r v a r d ’ s g r a d u a t e s w i l l g o i n t o fi n a n c e , w h e r e t h e y a r e l i ke l y t o c r e a t e fi n a n c i a l
i n s t r u m e n t s t h a t d u e t o g l o b a l i z a t i o n , m i g h t e ff e c t m u c h o f o u r o w n e c o n o m y ( M a t t h e w s , 2 0 1 9 ) .

• This sort of power (which other social scientists such as sociologists, anthropologists, psychologists) don’t have
(wrongly so, but the nature of power within Economics as a social science) , means that we need to ensure that future
economists are given a broader understanding of economics so that we can better deal with the complexities of our
e c o n o m y.
 If you feel uncomfortable as we discuss this next
section – that is not a problem!
• Up until now you may have been taught that there is a right and wrong way in Economics

• There may not have been a lot of room for debate

• This type of simplicity is sometimes necessary to get you to think through some basic concepts, but this is part of a
b r o a d e r m o v e m e n t i n t e r n a t i o n a l l y t o t e a c h e c o n o m i c s i n a m o r e r e l e v a n t , u s e f u l , c r i t i c a l , a p p l i e d a n d c o n t e x t s p e c i fi c w a y

• T h e o v e r- r e l i a n c e o f g r a p h s a n d e q u a t i o n s c a n m a k e i t s e e m l i k e t h e r e i s o n l y o n e w a y t o u n d e r s t a n d t o e c o n o m i c s

• But actually there is a whole world of knowledge out there, with many more questions than answers

• T h is m a y m a ke y o u fe e l u n co m fo rt a b le a t t im es a n d ev en u n ce rt a in

• That is a good thing!

• This is what should push us to try to ask questions of ourselves, of our economies, of our society

• As your lecturer I am not the only fountain of knowledge, feel free to disagree with me! I also want to learn form you!

• There aren’t simple and easy answers in economics, but in this module you can develop a curiosity and an openness to ask
even more questions, and to learn in ways you didn’t previously think were possible.

• We w a n t t o t e a c h y o u a b o u t d i ff e r e n t w a y s o f t h i n k i n g s o t h a t w h e n y o u l e a v e t h i s m o d u l e y o u f e e l b e t t e r e q u i p p e d t o g o
out and ask even more questions, to understand better how you should be encouraged by debates and complexity, to feel
empowered to have an informed opinion as you seek to understand better and admit when we just don’t know!

© Michelle Groenewald
Let’s look at 3 problems in economics
• Thi s m a t te rs be c a us e the se probl e m s sha pe our e c onom i c a na l y si s, our pol i c y m a ki ng
a nd ul ti m a te l y our e c onom y

1. Probl e m of i nsul a ri t y

2. Probl e m of OV E R-R EL I A N CE on qua nti ta ti v e e c onom i c m ode l l i ng

3. Probl e m wi th l a c k of di v e rsi ty
 The problems with economics - insularity
• A rgua bl y the re a son no one sa w the
fi na nc i a l c ri se s c om i ng, i s be c a us e of
wha t we c oul d c a l l the i nsul a ri ty of
ec onomi c s. Ec onom i sts a re not open t o
knowl edge from othe r t he othe r fi el ds
( di sc i pl i nes) , so i de a s a re not c ont es te d
a nd deba ted.

• Ec onom i sts use i de a s ( c i te ) from othe r

di sc i pl i nes l e ss tha n e v e n M a t hs a nd
Physi c s ( x-a x i s) , whi c h shows how c l ose d
off we a re to ne w i de a s.

• Ec onom i c s i s c i te d the l e a st by othe r

di sc i pl i nes ( y a x i s) .

© Michelle Groenewald
 Problems with economics - Insularity

• C o l a n d e r ( 2 0 0 5 ) f o u n d t h a t 7 7 p e r c e n t o f e c o n o m i c s g r a d u a t e s t u d e n t s i n e l i t e p r o g r a m s a g re e w i t h t h e
s t a t e m e n t t h a t “ e c o n o m i c s i s t h e m o s t s c i e n t i fi c o f t h e s o c i a l s c i e n c e s . ”

• A d a m S m i t h w ro t e t h e We a l t h o f N a t i o n s , b u t a l s o T h e T h e o r y o f M o r a l S e n t i m e n t s . W h e n re a d i n g h i s o r i g i n a l
w o r k , i t w a s a c t u a l l y v e r y p h i l o s o p h i c a l a n d h a d m u c h ro o m f o r d e b a t e .

• W i t h t h e r i s e o f d a t a , a n d t h e p u s h f o r e c o n o m i c s t o b e c o m e m o re l i ke t h e n a t u r a l s c i e n c e s f ro m t h e 1 8 7 0 s
onwards, economics started to change.

• N o w e c o n o m i c s i s s e e n a s T H E s o c i a l s c i e n c e t h a t c a n o ff e r d e fi n i t i v e a n s w e r s , b e c a u s e o f i t ’ s r e l i a n c e o n
quantitative numbers, and graphs, and models.

• T h e fi n a n c i a l c r i s e s , s a w p e o p l e l o s i n g s o m e f a i t h i n e c o n o m i s t s , b u t t h e a n s w e r f o r m a n y p o w e r f u l e c o n o m i s t s
h a s j u s t b e e n t h a t w e n e e d t o m o d e l b e t t e r , h a v e e v e n m o re m a t h e m a t i c s , n o t t h a t w e n e e d t o re t h i n k o u r
a p p ro a c h a s e c o n o m i s t s .

© Michelle Groenewald
 Problems in Economics - Over-reliance on quantitative
economic modelling

• “ A l l m o d e l s a r e w r o n g , b u t s o m e a r e u s e f u l ” – G e o r g e E . P. B o x , B r i t i s h s t a t i s t i c i a n .

• A m o d e l i s a s i m p l i fi c a t i o n o f r e a l i t y , i t a b s t r a c t s , a n d h a s t o l e a v e o u t s o m e d e t a i l s ( R e a r d o n , M a d i & C a t o , 2 0 1 8 ) . T h e s u p p l y a n d
d e m a n d g r a p h s t h a t y o u l e a r n t a b o u t i n p r e v i o u s e c o n o m i c s c o u r s e s , a r e i n e s s e n c e a m o d e l t o h e l p y o u u n d e r s t a n d t h e e c o n o m y b e t t e r.
In your econometrics module now, the regressions that you are learning about are also models that attempt to simplify an aspects of the
e c o n o m y s o t h a t w e c a n u n d e r s t a n d t h a t p a r t b e t t e r.

• If we acknowledge the complexity that that there is in our economies, then a model can be useful tool to better understanding the
e c o n o m y.

• I n o rd e r t o s i m p l i fy , w e n e e d t o m a ke m a n y a s s u m p t i o n s .

• A p a r t i c u l a r p r o b l e m l e a d i n g u p t o t h e fi n a n c i a l c r i s e s i s t h a t e c o n o m i s t s d i d n ’ t a s k i m p o r t a n t q u e s t i o n s a b o u t w h a t w e r e t h e i m p l i c a t i o n s
o f t h e a s s u m p t i o n s t h e y w e r e m a k i n g . A v e r y f a m o u s t y p e o f m o d e l c a l l e d a D S G E m o d e l t h a t w a s w i d e l y u s e d b e f o r e t h e fi n a n c i a l c r i s e s ,
d i d n o t m o d e l t h e fi n a n c i a l s e c t o r a t a l l ! H e n c e , n o o n e c o u l d s e e a fi n a n c i a l c r i s e s c o m i n g a s t h a t a s p e c t w a s n o t e v e n b e i n g c o n s i d e r e d .

• T h e y a l s o f o rg o t t h a t m o d e l s o n l y re p re s e n t re a l i t y a n d s t a r t e d t o m a ke b i g , b o l d c l a i m s a b o u t h o w t h e i r m o d e l s c o u l d p re d i c t h o w t h e
economy would function into the future.

• S o t h e p r o b l e m w i t h e c o n o m i c s i s n o t n e c e s s a r i l y m o d e l s , b u t t h e o v e r- r e l i a n c e o n t h e m a s t h e t o o l t o p r o v i d e T H E t r u t h w h i c h w e c a n
a n a l y s e t h e e c o n o m y.

© Michelle Groenewald
 Economic models

• T h i s s e c t i o n s d r a w s f r o m t h e w o r k p r e s e n t e d b y Re a r d o n , M a d i a n d C a t o ( 2 0 1 7 ) - I n t r o d u c i n g a N e w E c o n o m i c s : P l u r a l i s t ,
Sustainable and Progressive

• When we critique a model, it isn’t fair to say that this model is too simple. That is the nature of what a model is. What we can
d o i s c r i t i q u e w h e t h e r t h i s s i m p l i fi c a t i o n i s a c t u a l l y g e t t i n g t o t h e e s s e n c e o f w h a t w e a r e t r y i n g t o m o d e l . We c a n a s k c r i t i c a l
q u e s t i o n s a b o u t w h e t h e r t h e a s s u m p t i o n s w e m a k e i n t h e s e m o d e l s a r e r e fl e c t i v e o f t h e e c o n o m i c r e a l i t i e s t h a t p e o p l e f a c e .

• M o d e l s a re d ev e l o p e d b y a n i n d i v id u a l , o r a g ro u p o f i n d iv id u a l s . T h e y w i ll b e g u id e d b y c er t a i n b el ie f s / k n o w l ed g e a n d m a ke
d e c i s i o n s b a s e d o n t h o s e b e l i e f s / k n o w l e d g e . T h i s i s n o t a p r o b l e m . We c a n c r i t i q u e t h a t e c o n o m i c m o d e l l e r s s h o u l d b e u p f r o n t
a n d cl e a r a b o u t w h a t t h o s e b e li e f s w ere , a n d i n f o rm o t h e rs a b o u t t h e a lt e rn a t i v e b e li ef s t h a t ex i s t . T h i s w a y p o li cy m a ker s
h a v in g t o m a ke a d eci s io n , ca n l o o k a t v a ri o u s m o d e l s in s t e a d o f a s s u m in g t h a t t h ere i s o n l y o n e w a y t o a p p ro a c h a p ro b l em .
Economic models should also be updated as new knowledge comes to light, to ensure that we have better models.

• As the economy changes over time, it is important that models are also able to do so. If a model is static (does not show
ch a n g e s o v er t i m e ), t h en e co n o m i s t s s h o u l d n o t m a ke cl a i m s a b o u t w h a t h a s h a p p e n ed o v er t im e , o r w h a t w i l l h a p p e n in t o t h e
f u t u r e . We c a n c r i t i q u e e c o n o m i c m o d e l s w h e n t h e y m a k e c l a i m s t h a t t h i s m o d e l c a n e x p l a i n a l l s i t u a t i o n s , i n a l l c o u n t r i e s , i n
all time periods.

© Michelle Groenewald
 Problems with economics – lack of diversity
- As we saw when we discussed the
problem of the insularity of economics,
there are serious problems with various
different, (sometimes competing) ideas
not being debated and engaged with.
- The Nobel prize in economics has only
ever been awarded to two women, and
only to 3 people who were not white,
Arthur Lewis and Amartya Sen.
- Lacking the widest possible range of
perspectives, life experiences, and
expertise, the profession stands to miss
crucial information and make poor
decisions.
- Diversity is generally deemed to be good
for innovation (Page, 2008; Carney,
2017).
- Estimates in the USA suggest that less
than 8% of full-time faculty in university
economics departments come from
ethnic minorities. About 15% of
economic undergraduate and master’s
degrees awarded in 2016 went to
minorities, and just 10% of doctorates.
In South Africa?

• Look a t the se st a ti s ti c s from PwC

• “ Our c a l c ul a t i ons from thre e uni v e rsi ti e s i n South Afri c a , the Uni v e rsi t y Ca pe Town;
N el son M a nde l a Uni v e rsi ty a nd St e l l e nbos c h Uni v e rs i ty , show tha t t he pe rc e nta ge of
wom e n c om pl e ti ng a PhD i n e c onom i c s i s 2 1 % .

• The t re nd of fe m a l e unde rre pre se nt a ti on i n e c onom i c s ha s fa r- re a c hi ng c onse que nc e s

for ge nder ba l a nc e i n hi gh- ra nki ng posi ti ons a t uni v e rsi t i e s, ba nks a nd i n gov ernm e nt .
The a v e ra ge f e m a l e s ta ff re pre se nta ti on i n t he e c onom i c s de pa rt m e nt s of si x Sout h
Afri c a n uni v e rsi ti e s i s c urre nt l y a t 3 5 % , wi th l i t tl e m ore tha n a qua rt e r of fe m a l e
ec onom i sts i n se ni or posi ti ons. ”

• W hy m i ght t hi s be the c a se ?
 This does not have to be an OR approach
This gets to be an AND approach.

We can learn about economics from

OR
white, Western, men like Smith, Keynes,
Marx
AND
vers we can learn economics from people who
come from different parts of the world,
have different identities, nationalities,
us ethnicities, races, genders, sexualities,
ages, classes etc.

AND When drawing from this, we get to

engage with a richer, better, more useful
economics.
 Let’s look at some development indicators: Why does
this matter?

• K n o w i n g h o w p o w e r f u l e c o n o m i s t s a re , m e a n s t h a t t h e y s h a p e h o w t h e e c o n o m y f u n c t i o n s , w h a t p o l i c i e s
a re p ro p o s e d

• S o u t h Af r i c a f a c e s t h e m a s s i v e e c o n o m i c c h a l l e n g e s . We n e e d e c o n o m i s t s w h o a re a b l e t o c r i t i q u e t h e w a y
i n w h i c h t h e e c o n o m y i s c u rre n t l y n o t w o r k i n g t o e n s u re e c o n o m i c d e v e l o p m e n t f o r t h e m a j o r i t y o f S o u t h
Af r i c a ’ s p e o p l e . B u t w e a l s o n e e d n e w i d e a s . C re a t i v e a n d i n n o v a t i v e w a y s o f a p p ro a c h i n g t h e t r i p l e
c h a l l e n g e o f u n e m p l o y m e n t , p o v e r t y a n d i n e q u a l i t y.

• O u r s t a t i s t i c s o n t h e t r i p l e c h a l l e n g e o f p o v e r t y , i n e q u a l i t y a n d u n e m p l o y m e n t a re d e e p l y p ro b l e m a t i c .
W h i l s t t h e re a re m a n y w a y s i n w h i c h w e n e e d t o a l l w o r k t o g e t h e r , t o m a ke s u re o u r e c o n o m y w o r k s
b e t t e r , o n e re a l l y i m p o r t a n t a re a i s t o m a ke s u re t h a t w e e d u c a t e o u r e c o n o m i s t s b e t t e r a n d b r i n g m o re
d i v e r s i t y t o t h e fi e l d o f e c o n o m i c s t o d r a w f ro m d i ff e re n t ex p e r i e n c e s a n d ex p e r t i s e f o r a r i c h e r , b ro a d e r ,
m o re re a l i s t i c e c o n o m i c s .

© Michelle Groenewald
Poverty and inequality

• 30,4 million South Africans live under the UBPL of R992 per person per
month in 2015, latest data we have available (StatsS A, 2017)

• Despite general decline in 2006 and 2011, increase in poverty levels in

2015.

• COVID will likely have made this much worse.

• 0,63 Gini coeffi cient (World Bank, 2015) – highest in the world

• Palma ratio of nearly 8; top 10% earns 8 times more than the bottom
40% (UNDP, 2017)

• Top 10% of South Africans own 90-95% of all wealth (Orthofer, 2016)
https://
www.bloomberg.com
/news/articles/2021-
06-01/south-african-
unemployment-
rises-to-new-high-in-
first-quarter
 Production of Knowledge

• K n o w l e d g e , j u s t l i ke g o o d s , i s a l s o p ro d u c e d .

• T h e Pro d u c t i o n o f K n o w l e d g e i s n o t a n e u t r a l p ro c e s s , r a t h e r i t i s i n h e re n t l y l i n ke d t o p o w e r.

• A re c e n t s t u d y f o u n d t h a t a ro u n d 4 3 p e r c e n t o f t h e a r t i c l e s p u b l i s h e d i n t h e t o p f o u r e c o n o m i c s j o u rn a l s
w e re a u t h o re d b y s c h o l a r s c o n n e c t e d t o o n e o f t h e e d i t o r s a t t h e t i m e o f p u b l i c a t i o n ( C o l u s s i , 2 0 1 7 ) .

• T h e re i s g e n t l e m a n ’ s a g re e m e n t t h a t t h e h e a d o f t h e I M F a n d t h e Wo r l d B a n k w i l l b e A m e r i c a n a n d E u ro p e a n

• I t i s p o s s i b l e t h a t y o u w i l l g o t h ro u g h y o u r w h o l e d e g re e s h a v i n g n e v e r h e a rd o f t h e w o r k o f a s i n g l e Af r i c a n
economist, or a single female economist.

• W h o a re t h e o n e s w r i t i n g t h e j o u rn a l a r t i c l e s a n d p o l i c y p a p e r s a n d e c o n o m i c s t ex t b o o k s ?

• K n o w l e d g e t h a t i s c o d i fi e d i n w r i t t e n f o rm i s a l s o s e e n a s m o re v a l u a b l e , m o re r i g o ro u s a n d m o re u s e f u l
t h a n k n o w l e d g e t h a t i s re l a y e d v e r b a l l y.

• S a b e l o N d l o v u G a t s h e n i ( 2 0 1 9 ) ex p l a i n s t h a t w e m u s t a c t u a l l y e m b r a c e k n o w l e d g e s , t o b re a k d o w n t h i s i d e a
t h a t t h e re i s o n l y o n e f o rm o f k n o w l e d g e . ( H e n c e , w e h a v e d e c i d e d n o t t o u s e a t ex t b o o k f o r t h i s m o d u l e . )

© Michelle Groenewald
Deep dive on an African economist and a female
economist

• Sa m i r A m i n

• El i nor Ost rom

• Let’ s e nga ge wi t h the v e ry i m port a nt c ontri but i ons the se two e c onom i sts m a de !

• There a re so m a ny m ore !

• Ta ke a l ook a t y our a ddi ti ona l re sourc e s for m ore!

• Tha ndi ka M ka nda wi re , Sa di e A l ex a nde r, Ly n Oss om e – t o na m e but a fe w!

 The work of Samir Amin

• Ta ke a l o o k a t t h e Re d Pe p p e r a r t i c l e u n d e r a d d i t i o n a l re s o u rc e s f o r m o re o n t h i s :

• Or the eBook link that can be found in your content for the week

• Global power

• C o re a n d p e r i p h e r y

• De-linking

• C a p i t a l i s m ; C re a t i v e M a rx i s t

• H e re i s a n o t h e r v i d e o re l a t i n g t o S a m i r A m i n ’ s w o r k

• h t t p s : / / w w w. y o u t u b e . c o m / w a t c h ? v = C u Y R- _ t f W F w

• What about his work can we critique?

• H o w c a n h i s w o r k b e a p p l i e d t o t h e c o n t ex t o f S o u t h Af r i c a ’ s e c o n o m y ?
© Michelle Groenewald
 The work of Elinor Ostrom

• Wa tc h thi s v i de o to be tt e r unde rst a nd som e of the i m porta nt i nsi ghts from one of onl y 2 wom e n
to ha ve won the N obe l i n E c onom i c s.

• See the vi de o e m be dde d on the nex t pa ge , but y ou c a n a l so fol l ow t he l i nk be l ow:

• https://m a rgi na l re v ol ut i on. c om / m a rgi na l re v ol uti on/ 2 0 1 9 / 0 2 / wom e n- i n- e c onom i c s -e l i nor-

ostrom. htm l

© Michelle Groenewald
Elinor Ostrom
 Refl ection questions

• “ Lea rni ng to unl e a rn i n orde r t o re l e a rn…” ( Tl osta nov a a nd M i gnol o, 2 0 1 2 ) . W ha t doe s t ha t

mea n for y our own j ourne y of l e a rni ng?

• How c a n we c ha nge t he produc t i on of knowl edge to e nsure tha t m ore i de a s a re de ba te d

a mongst the e c onom i sts of t he f uture ?

• W ha t i s i t a bout the st udy of e c onom i c s tha t i l l us tra te s tha t pe opl e of c ol or or wom e n, a re not
a s l i kel y t o st udy i t or tha t t he y a re not e nc oura ged t o suc c e ed a t the hi ghe st l e v e l i n t hi s
di sc i pl i ne ?

• How do we e nsure t ha t knowl e dge whi c h m i ght not c om e from t he We st i s se e n a s v a l ua bl e a nd

i m porta nt a nd i nfl ue nt i a l i n s ha pi ng our pol i c i e s?

© Michelle Groenewald
Now let’s draw the links to corruption!
• We h a v e s e e n t h a t p o w e r c a n b e u n d e r s t o o d i n m a n y d i ff e re n t w a y s .

• That understanding power is vital for better economic analysis.

• We h a v e a l s o s e e n t h a t e c o n o m i s t s a re v e r y p o w e r f u l s o c i a l s c i e n t i s t s .

• T h i s m a ke s i t v e r y i m p o r t a n t f o r u s t o a d d re s s s o m e o f t h e p ro b l e m s i n e c o n o m i c s

• T h e s t a t e c a n b e a v e r y p o w e r f u l a c t o r t o e n s u re d e v e l o p m e n t

• O ft e n i t i s e c o n o m i s t s t h a t a d v i s e t h e s t a t e .

• C o rr u p t i o n i s o ft e n g i v e n a s t h e re a s o n w h y t h e s t a t e c a n ’ t b e i n v o l v e d i n d e v e l o p m e n t i n a
m e a n i n g f u l w a y.

• E c o n o m i s t s s h o u l d b e t t e r b e a b l e t o e n g a g e w i t h w a y s t o b u i l d a n t i - c o rr u p t i o n i n t o t h e p o l i c y
p ro p o s a l s ! Fo r b o t h t h e s t a t e A N D T H E P R I VAT E S E C T O R !

• T h i s g i v e s u s t h e p o w e r t o fi g h t c o rr u p t i o n a n d t h e p o w e r t o h a v e m o re o p p o r t u n i t i e s f o r
development!
Important links to make:

• A l a rge pa rt of wha t we wi l l be di sc ussi ng thi s se m e ste r, i s t he i m port a nt rol e tha t t he

sta te c a n pl a y i n e nc oura gi ng de v e l opm e nt .

• We wi l l l ook a t thi s i n m ore de t a i l t hroughout the se m e s te r, but hi stori c a l l y m a ny

c ountri e s ha v e e nsure d v e ry hi gh l ev e l s of de v e l opm e nt by ha v i ng a sta t e who st rongl y
i nterv e ne s i n the m a rke t , i n orde r t o e nsure de v e l opm e nt .

• Often stude nts te l l m e t ha t we a s Sout h Af ri c a ns wi l l not be a bl e to do thi s, a s our sta t e

i s too c orrupt. The poi nt of t hi s c l a ss i s t o show y ou t ha t c orrupti on i s not uni que to
gove rnm e nt or to South Afri c a for tha t m a t te r. Ra t he r, tha t c orrupti on ex i sts i n the
pri va te s e c tor t oo. A be tt e r a pproa c h woul d be to a sk

• H OW D O W E BU I L D A N TI - C ORRU P TI ON STRATEG I ES I N TO EV ERY P OL I C Y TH AT I S

C REATED ?
Some critical questions to ask:
1. I s c o r r u p t i o n u n i q u e t o S o u t h Af r i c a ?

2. I s i t p a r t i c u l a r l y p ro b l e m a t i c w i t h i n o u r c u r re n t g o v e r n m e n t ?

3. H o w d o w e m e a s u re s o m e t h i n g w h i c h i s i n h e re n t l y s e c re t i v e ?

1. W h a t a re t h e i n t e rc o n n e c t i o n s b e t w e e n t h i s a n d t h e m e a s u re s o f d e v e l o p m e n t ?

2. h t t p s : / / a f r i c a c h e c k . o r g / f a c t - c h e c k s / re p o r t s / j u r y- s t i l l - o u t - h o w - m u c h - s o u t h - a f r i c a - l o s e s - c o r r u p t i o n - e v e r y- d a y

4. W h a t s o r t o f n e w s a re w e c o n s u m i n g ?

1. What sort of news gets headlines, over and over again?

2. Ta ke a l o o k a t t h e a d d i t i o n a l re s o u rc e s t o s e e w h a t t h e R 5 0 0 - b i l l i o n C OV I D re l i e f p a c k a g e h a s b e e n s p e n t
o n ! H a v e a n i n f o rm e d o p i n i o n !

5. B e f o re w e m a ke s t a t e m e n t s a b o u t c o r r u p t i o n h a v e w e i n f o r m e d o u r s e l v e s a s f a r a s p o s s i b l e o n t h e s i t u a t i o n ?

6. A re w e a w a re o f c o rr u p t i o n t h a t o c c u r s i n t h e p r i v a t e s e c t o r , n o n - g o v e r n m e n t a l s e c t o r , i n d i v i d u a l l e v e l ?

1. H o w d o e s t h i s re l a t e t o o u r d i s c u s s i o n a b o u t p o w e r b e i n g c o n t ex t u a l a n d re l a t i o n a l ?
© Michelle Groenewald
 Measurement: a critique of the
corruption perception index by Bill
de Maria (2008)
• “ Que st i on 9 . 0 9 of the Exe c uti v e Opi ni on Surv e y a sks “ I n y our c ountry , how c om m on
a re un-doc um e nte d ex tra pa y m e nts or bri be s from one pri v a t e fi rm to a nothe r to
se c ure busi ne ss” ? The i nt e rv i e we e ha s se v e n opt i ons from “ c om m on” to “ne v e r
oc c urs” . Re sponde nts do not ha v e t o di re c tl y wi tne ss “ c orrupti on” . A nswe rs ba se d
on pe rsona l i m pre ssi ons a nd he a rsa y a re usua l l y ha rv e ste d. The Exe c uti v e Opi ni on
Surv e y m e nt i one d a bov e doe s not c he c k whet he r re spons e s c om e from di re c t
ex pe ri e nc e , ge ne ra l i m pre ssi ons or he a rs a y from c ol l e a gue s i n the fi e l d. CPI ’ s othe r
da t a sourc e s a l so do not go i nt o the se m a tte rs . Thi s ha s m a j or i m pl i c a ti ons on the
va l i di t y , re l i a bi l i t y a nd t he pre c i si on of the fi na l re sul t s t ha t a re ta ke n a t f a c e v a l ue
by CPI c onsum e rs. ”
Private sector corruption – look at all these
examples!

© Michelle Groenewald
And so it continues… corruption also happens in the
private sector!

• Del ta Prope rty Fund

• https: / /www. da i l y m a v e ri c k. c o. z a /a rt i c l e / 2 0 2 0 - 1 2 - 1 0 - a nothe r-sa - c orpora te -s c a nda l -fra ud-

a nd-a c c ount i ng-fa i l ures -a t -de l ta - prope rt y-fund/

• EOH

• https: / /www. ne ws2 4 . c om / fi n2 4 / c om pa ni e s/ i c t /e oh- sl a ps-ex - c e o - a she r- bohbot - othe r- di re c

tors- wi th-heft y-da m a ge s- c l a i m -l i nke d- to -t e nde r- fra ud-2 0 2 1 0 6 2 9

• https: / /www. i ol . c o. z a / busi ne s s-re port/ c om pa ni e s/ c orrupt i on-a l m ost- ki l l e d-e oh- 3 c 6 e 4 9 c 4 -
b6 9 3 - 4 3 3 2 -9 4 de -6 c a c d2 a c bc 0 8

• Hul e tt

• https: / /www. da i l y m a v e ri c k. c o. z a /a rt i c l e / 2 0 2 1 - 0 7 - 0 1 - not- so - swe e t- tonga a©

t-Michelle
hul e tt- aGroenewald
ga i n-
del a y s-de bt -t a l ks-sha re - pri c e - fa l l s /
Links to development policy?
• T h i s m a t t e r s b e c a u s e b o t h t h e p u b l i c , p r i v a t e a n d n o n - g o v e rn m e n t a l s e c t o r , a s w e l l a s e a c h o n e o f u s – a re
c o n n e c t e d t o h o w p o l i c i e s g e t m a d e . O r a t l e a s t a re i n fl u e n c e d b y d e v e l o p m e n t p o l i c i e s .

• The National Development Plan:

• “ S o u t h Af r i c a re q u i re s b o t h a c a p a b l e a n d d e v e l o p m e n t a l s t a t e , a b l e t o a c t t o re d re s s h i s t o r i c a l i n e q u i t i e s
and a vibrant and thriving private sector able to investment, employ people and penetrate global
m a r ke t s . ” ( p g 1 0 9 o f t h e N D P )

• “ T h e g o v e rn m e n t , i n p a r t n e r s h i p w i t h t h e p r i v a t e s e c t o r , m u s t i d e n t i fy a re a s t o n u r t u re a n d s u p p o r t ;
d e v e l o p s e n s i b l e i n s t r u m e n t s t o s u p p o r t t h o s e a re a s ; a n d i m p l e m e n t t h e m c o m p e t e n t l y. ” ( p g 1 1 5 o f t h e
NDP)

• W h e n w e s e e t h e i m p o r t a n t ro l e t h a t t h e s t a t e h a s p l a y e d i n d e v e l o p m e n t h i s t o r i c a l l y ( n o t j u s t l e ft t o t h e
m a r ke t t o d e c i d e ) , c o rr u p t i o n s h o u l d n o t b e a n a rg u m e n t f o r w h y w e d o n ’ t h a v e a n a c t i v e ro l e f o r t h e s t a t e .

• S o u t h Ko re a i s a n e xc e l l e n t e x a m p l e f o r y o u t o re a d u p m o re a b o u t .

• Rather how do we devise policies which accept that we need to build anti-corruption measures
into the policy! © Michelle Groenewald
 “The KwaZulu-Natal based sugar company
Tongaat Hulett was fined R7.5-million last year
by the JSE for misrepresenting its financial
statements between 2011 and 2018, a scandal
second only to the Steinhoff debacle in scale,
and one that has cost more than 5,000 jobs and
millions of rands for investors.” (Toyana, 2021)
https://www.dailymaverick.co.za/article/2021-07-01-not-so-sweet-tongaat-hulett-again-delays-
debt-talks-share-price-falls/
“In 2018, under pressure from the media and the public,
Eskom hauled McKinsey to court to recover R1.6-billion
it had paid to the management consultancy and its
partner Trillian Capital Management for consultancy
work that the public utility admitted produced no
value.” (Mantshantsha, 2019)

https://www.dailymaverick.co.za/article/2019-10-23-eskom-we-paid-deloitte-r60-million-for-
three-weeks-of-work-in-two-corrupt-contracts/
 • “Losses amounting to more than R100-billion, exceeding, in 48
hours, the amounts the Guptas are accused of looting over a
decade… The biggest victims are government employees – the
1.2-million who contribute towards the Government Employees
Pension Fund keeping 400,000 pensions afl oat – who had no say
in the Steinhoff investment, and who are now poorer by R12-
billion. Should Steinhoff go bankrupt, which is not ruled out,
130,000 jobs across the world are threatened.” (Lungisa, 2017)

https://www.dailymaverick.co.za/opinionista/2017-12-13-the-steinhoff-debacle-the-biggest-
fraud-in-sa-history/
 Is government corruption worse than private sector
corruption for development?
• Le t ’ s b e v e r y c l e a r: w e n e e d t o ke e p o u r g o v e rn m e n t s a c c o u n t a b l e . T h e re m u s t b e re p e rc u s s i o n s f o r
c o rr u p t i o n .

• But:

• I w o u l d a rg u e ( b u t y o u a re f re e t o d i s a g re e b y p re s e n t i n g a n i n f o rm e d o p i n i o n ) t h a t w e c a n n o t b e
m o re a c c e p t i n g o f p r i v a t e s e c t o r c o rr u p t i o n , b e c a u s e t h e y a re n o t o u r g o v e rn m e n t .

• M a n y i n s t a n c e s p r i v a t e a n d p u b l i c s e c t o r c o rr u p t i o n a re i n t e r t w i n e d w i t h o n e a n o t h e r.

• A n d p r i v a t e s e c t o r c o rr u p t i o n h a s a n i m p a c t o n e m p l o y m e n t o p p o r t u n i t i e s , o n t a x p a y e r s , o n s e r v i c e
p ro v i s i o n , o n p e n s i o n s …

• G re a t q u e s t i o n : c a n w e j u s t n o t s u p p o r t a c o rr u p t p r i v a t e e n t i t y ?

• I f t h e y h a v e a m o n o p o l y ? I f w e a re d e p e n d e n t o n t h e i r g o o d / s e r v i c e ? W h a t a re t h e c o s t s t o t a x p a y e r s ?

• W h a t i s t h e ro l e o f t h e c o r p o r a t i o n i n Af r i c a

• S h o u l d t h e ro l e o f t h e c o r p o r a t i o n s i m p l y b e t o m a ke p ro fi t ?
© Michelle Groenewald
• At w h a t c o s t ?
Corruption as an institution?

• I n f o rm a l r ul e s o f t he g a m e – i n e s s e nc e

• Ta ke a l o o k a t t he c o re co n t e nt a g a i n a n d m a ke n o t e s !

• We a re a wa re t ha t co rr up t i o n exi s t s , w ha t a re f e a s i b l e a n t i - c o rr u p t i o n s t r a t e g i e s ?

• Re a d m o re h e re :

• h t t p s : / / a ce . s o a s . a c. uk /

• M u s h t a q K h a n o n co rr u p t i o n

• To p d o w n o r ve r t i c a l a p p ro a c he s o n l y a re p ro b l e m a t i c ( fi ne s , t r a ns p a re n c y , a c c o u nt a b i l i t y ,
co m m i s s i o ns e t c. )

• N e e d h o r i z o nt a l a p p ro a ch e s a s w e l l

• M u s t a s k : h o w ca n we co n s t r uct b e ha vi o ur c ha n g i n g i nc e nt i v e s f o r t h e s e r ul e b re a k i n g a c t o r s ,
s u c h t h a t i t i s i n t h e i r i nt e re s t t o d e l i v e r b e t t e r o u t c o m e s , w i t h l e s s c o rr up t i o n? © Michelle Groenewald
An example of how to build anti-corruption policy
• You wi l l se e a n ex a m pl e of how to bui l d i n a nti - c orrupti on pol i c y wi t h a n ex a m pl e f rom
B a ngl a de s h

• How c oul d we a ppl y thi s t o S A ?

Bangladesh garment industry application

• ht t ps ://a c e . s oa s .a c. uk/publica t ion/be t t e r-jobs -s tra tegy-to -end-fra ud-in-s kills -tra ining-in-ba ngl
a de s h-brie fi ng/

• Priv a t e t ra ining prov ide rs ( PTPs ) we re give n one-third of their pa yment onc e previous
t ra ine e s found e mploy me nt . This s e e mingly we ll-intentioned progra mme res ulted in
s ignifi ca nt fra ud by PTP provide rs who be ga n overs ta ting employment to rece ive the
inc e nt ive .

• An a s s e s s me nt of t he progra m s howe d t ha t it wa s being undermined by compa nies ’

willingne s s t o int egra t e t he t ra ine e s int o t he ir production line. Broa dly s pea king, compa nies
in t he ga rme nt s s e ct or could be div ide d int o t wo groups : thos e with higher orga nis a tiona l
ca pa bilitie s ( produc t ion line a rra nge me nt s t ha t e ns ure les s s toppa ge s due to mis s ing ra w
© Michelle Groenewald
ma t e ria ls , le s s product re je c t ions , s pa re pa rt s a re a va ila ble for s peedy fi xing of ma chinery
e t c . ) a nd t hos e wit h lowe r orga nis a t iona l c a pa bilities
 Bangladesh garment industry application
• I n c om pa ni e s wi t h hi gh orga ni sa t i ona l c a pa bi l i t i e s, t ra i ne e s we re a bl e t o sl ot i nt o
we l l - func ti oni ng produc ti on l i ne s . Thi s l e d to i nc re a se s i n produc ti v i ty whi c h
boost ed t he de m a nd f or tra i ne d worke rs .

• I n c om pa ri son, c om pa ni e s wi th l owe r c a pa bi l i t i e s, oft e n di dn’ t se e i nc re a se d

produc ti v i ty from ne wl y tra i ne d worke rs be c a use the tra i ne e s we re una bl e t o
func t i on e ff e c ti ve l y whe n i nt egra te d i nto a di sorde rl y produc ti on l i ne .

• The re fore , a si gni fi c a nt num be r of t he se l ow orga ni sa ti ona l c a pa bi l i ti e s fi rm s di d

not se e t he v a l ue i n e m pl oy i ng gra dua t e s from PTPs a nd woul d ra the r j ust a c c e pt
a ny one who a rri v e d a t the fa c t ory ga t e .

• Thi s l owe re d the de m a nd for worke rs tra i ne d by PTPs, whi c h i nc re a se d PTPs

i nc e nt i v e t o c l a i m fa l s e e m pl oy m e nt sta t us t o re c e i v e t he i nc e nt i v e .

© Michelle Groenewald
 Bangladesh garment industry application
• A t op down a pproa c h woul d ha v e be e n to de v e l op a n ov e rsi ght a ge nc y. H owe v e r,
thi s woul d l i ke l y not ha v e worke d be c a use i t woul d l i ke l y ha v e l e d t o the bri be ry of
the e nforc e m e nt offi c e rs, the re fore not de l i v e ri ng t he i nte nde d outc om e s.

• W ha t wa s ne e de d wa s a proc e ss to re m ov e t he i nc e nti v e to ov e rst a te fi gure s by

ens uri ng t ha t tra i ne e s di d a c tua l l y ge t e m pl oy e d.

• W ha t t hi s showe d i s t ha t a pol i c y i m pl i c a ti on for c urbi ng c orrupt i on i n t hi s i nsta nc e ,

wa s t he f a r m ore unc onv e nti ona l a pproa c h, of ra t he r prov i di ng support to fi rm s t o
i m prov e the i r orga ni sa t i ona l c a pa bi l i ti e s. Wi th thi s i nc re a se i n orga ni sa t i ona l
c a pa bi l i t i e s, fi rm s woul d be a bl e t o a ugm e nt t he i r t ra i ne e s wi th m ore e ffi c i e nt
produc ti on l i ne s to s e e l a rge i nc re a se s i n e ffi c i e nc y a nd profi ts , whi l st m a ki ng i t i n
the PTPs own i nte re st to no l onge r ov e rs ta te e m pl oy m e nt.

© Michelle Groenewald
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a diff erence as a
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