This is one of a series of columns that were produced for Moneyweb Investor in which Stuart Theobald explores the intersection of philosophy of science and finance. This followed an earlier series for Business Day Investors Monthly on the same theme. This column was first published in July 2016.
South Africa has a culture of seeking consensus when developing social policy. According to this culture, legitimacy is achieved when apparently conflicted parties come together and agree. This strategy is dubious philosophically, but moreover compromises evidence-based policy formation. It is not at all clear whose agreement should matter, and their agreement doesn’t mean the policy is the correct one anyway.
The clearest manifestation of this culture is the National Economic Development and Labour Council (Nedlac), which describes itself as a “consensus-seeking body acting to reach agreement through negotiation and discussion”. In theory, all policy setting legislation must go through a process at Nedlac, although some, controversially, skip this step to avoid delays.
The view of history as being the result of forces in opposition to each other, itself has a long history. It is often attributed to the Eighteenth Century German philosopher Hegel, though it has roots going back to Socrates and Aristotle. Hegel thought true, or at least better, propositions came from clashing views, called the thesis and antithesis, leading to the synthesis. That idea profoundly influenced Karl Marx and his dialectical materialism, which is the idea that economies are organised according to an evolving process of competing interests, principally those of capital and labour.
The South African dialectical process is essentially Marxist. We tend to think of society as broken up into “business” and “labour” and sometimes “civil society”. We assume that they have coherent interests, and policy should find a way to serve all of them. So embedded has this way of looking at the world become, that we think these interest groups are coherent agents.
There are several problems with this approach to policy formation. Firstly, the opposing forces that we create for the dialectic are fictions, made up entities. Hegel’s first dialectic was actually between the family and the state. Our Marxist division of business and labour might be appropriate when the issue in question is one that affects all businesses in one way, and all workers in another way, but there are very few, if any, such issues on which to divide interests. In fact, most issues affect everyone differently, and the coherent groups that might be affected in the same way might be completely different in each case. We often ignore important groups like consumers or, tragically, the unemployed, because they don’t fit our model of the dialectic.
Business is not a coherent agent. Companies are an organisational form that people can use in order to achieve a range of objectives. Generally, companies are useful because they have a legal person separate to that of their founders. Any one person has many different interests and reducing them to a single perspective because they happen to own a part of a company is silly. The companies that people create are anyway often in conflict with each other, in competition to try and out-innovate and take market share. There is no coherent “person” that is business as a whole, and there are no people who are just business people. The same is also true of wage-earners.
Often, in order to satisfy the dialectical mode, various organisations are invented that are then claimed to represent “business”. Nedlac’s business faction consists of Business Unity South Africa, an entity that is dominated by large, established businesses. Their interests are certainly not identical with those of all people who happen to be involved in the organisational form.
But the biggest problem is that a dialectic at best serves already existing entities. Critical to economic development is stimulating the creation of new entities such as entrepreneurs. This is a real problem. The radical failure of the dialectical approach was on display with the last iteration of the Mineral and Petroleum Resources Development Act amendment bill. After much negotiation, it protected the investments of existing mining companies, which grudgingly acquiesced to the legislation via the Chamber of Mines, but created a hostile environment for the nascent gas sector. Gas companies, because they don’t yet exist, had no sway in the dialectic, and the result was something that would ensure they won’t come into existence. That bill has thankfully been sent back for revision. But that’s far from the only negative impact of our dialectical culture – some legislation drafters have taken to staking out extreme positions, thinking that is an appropriate start for a process of antithesis leading to sensible synthesis.
This points to a fundamental problem with the dialectical approach: it is not evidence-based. It seeks consensus and makes the fallacious assumption that if we all agree then it must be best policy. Of course, we often don’t know what’s in our own interest. Sometimes, a policy like removing trade barriers appears to be contrary to our interest because it lets in low cost competing goods, but in the long run stimulates efficiencies that make the whole economy better off. No currently existing entities seem able to take climate change seriously, because it is future generations that will be worst affected. Economies are like ecosystems in that there are various agents and types of entities that are in constant tension leading to an equilibrium. Policy can affect different entities differently and shift equilibria, and render the ecosystem healthy or unhealthy. Understanding and anticipating the impact of policy is a difficult scientific matter. Pitting groups of agents in that ecosystem against each other to seek some sort of consensus is no way to answer the question.
Mature democracies don’t have consensus seeking fora. The institutions of democracy, such as a parliament with ultimate policy authority, are considered enough. They have research units that have teams of social scientists investigating different policy options. They can run trials, study the experiences of other economies, and develop models and complex computer simulations. We went this way with the process behind the National Development Plan. This was perhaps the greatest demonstration we’ve had in our history that we can employ strategies other than the dialectic approach. Instead of trying to agree, a team of expert commissioners was assembled to consider all of the available evidence and then chart an optimal policy strategy. Crucially, as the commissioners themselves argued, that plan should evolve as we learn from the process of implementation, and we must invest in research as we go.
Negotiation is important, particularly when it is about deciding the fundamental objectives of social policy, such as reducing poverty and inequality. It is also important to communicate the reasoning behind policy interventions with the public, so that people remain informed and able to exercise their democratic wishes. But with respect to particular policies, it seldom helps to set imagined factions of society against each other and wait for them to find some consensus