• Subject Name : Economics

Corruption, Inequitable Economic Growth and Nepotism in The Neoliberal Political Economy

South Africa got liberation from British colonial rule in 1910 mainly due to vested interests of white ethnic groups in the country. The white English speaking people during rule of the National party of South Africa, influenced the macro and micro economic policies in their favor and exploited the economic and natural resources for very long time. This led to rampant corruption in almost every sector of South Africa (Dubow, 2017).

The corruption and nepotism took vigorous form even during anti-apartheid regime. The party African National Congress (ANC) that led to exit of apartheid rule in 1994 promised the people that new economic policies of the government will be focused towards economic reconstruction and removal of racial discrimination. However, the new macro-economic policies of the government also proved discriminatory against poor and deprived sections of society. Adopting neoliberal approach, the government initially recovered huge corporate taxes from large companies and allocated huge grants for social welfare schemes. However, the state grants on public welfare programs were significantly reduced gradually. This generated a huge social and economic inequality, corruption and nepotism in South Africa (Sebake, 2017).

Research scholars and social scientists consider nepotism and favoritism a part of corruption. According to Tytko et al. (2020), the corruption incidents occur due to conflict of interests such as favoritism, nepotism and cronyism. The conflict of interests in the political economy arises mainly be due to vested interests of some affluent groups. The concerned executives in the government and private entities work in favor of influential people against the interests of majority section of the society. Akuffo & Kivipõld (2017) illustrates that corruption, nepotism and cronyism arises due to leaders both in government and private organisations. These leaders believe that hiring family members, close friends or relatives at various positions will improve the organizational performance.

The literature on inequitable economic growth suggests that it is mainly due to uneven income distribution among different sections of the society. The classical politico-economic approach suggests that inequitable economic growth is the outcome of the coercive tactics of authoritarian political groups to suppress the weaker sections (Aiyar & Ebeke, 2020). The modern theories on economic inequality describes that increasing income gaps between the middle class workers and rich people as a result of global trade war is the major reason for huge economic underdevelopment and income disparity of people. (Inglehart, 2018).

History of Politico-Economic Development and Corruption in South Africa

South Africa was declared a self-governing state within the British Commonwealth in the year 1910. However, British rulers continued their dominance on the sub Saharan country even in post-colonial era with minority whites controlling political power and debarring native black population from decision making process. This increased unrest and anti-apartheid agitation by blacks community in South Africa. The constitution of South Africa was amended several times for removing the interference of British crowns. However, whites and colored community continued their dominance in economic policies that further intensified the anti-apartheid movement in the country. The pioneer of anti-apartheid movement was African National Congress (ANC) party led by Nelson Mandela. The long liberation struggle of blacks against racist ruler ended with Mandela swearing in as first president of the non-apartheid government of South Africa on 10 May, 1994 (ConstitutionNet).

At the time when Mandela government got power, the people in the country were highly disintegrated with inequitable income distribution, racial discrimination and corruption in various sectors. The post-apartheid regime promised equal opportunity to all people in the country. However, the macro-economic policies of the new government were more tilted towards corporates and capitalists and that further widened the income and wealth gap between the rich and poor people in South Africa. The macroeconomic initiatives that were undertaken by the non-apartheid government significantly improved the healthcare, education, housing and community services. However, the benefits of all government programs are not delivered properly to the poorest section and benefitted only the richer communities. The neoliberal government tried to connect South Africa with global economy that generated staggering impacts on domestic labor markets and employment scenario in the country. The growth in economic crimes such as corruption, nepotism and favoritism in the Sub-Sahara Africa was mainly because of market oriented policies of the government that mostly benefit the global corporate houses (Gumede, 2017).

World Bank’s Findings on Poverty and Income Inequality in Sub-Sahara Africa

The World Bank (WB) considers inclusive growth to be widespread across all sectors of an economy involving a large work force of a country. Equal opportunity, equitable income distribution and social security are three pillars of a successful growth strategy of a country (Ngepah, 2017). The WB’s report on 2015 Millennium Development Goal (MDG) reveals that poverty has been gradually diminishing in all continents except Africa. The four key criteria of MDG were:

  • Reduce extreme poverty and malnutrition
  • Ensure equitable education opportunities to every section of the society
  • Eradicate gender biasedness and promote females
  • Minimize infant and child mortality

It further elaborates that extreme poverty has been diminishing in all regions of the world. However, nearly 45 percent of Sub-Sahara African (SSA) countries fail to fulfill the MDG criteria on poverty mitigation. Despite a series of economic development programs since 1990s, the macro-economic parameters such as inclusive economic growth, full employment and high per capita income stills remains a distant reality in SSA region. Africa stands still lowest in per capita GDP rates of the world. Foreign capital assistance is needed by third world countries especially for various social welfare and poverty eradication programs. However, the WB’s experts explain that excessive external fund borrowing increases debt burden on the developing countries that hinders the pace of economic growth. The major reason for underdevelopment of African continent is the high interests of the borrowed capital (Asongu & Nwachukwu, 2016).

Economic underdevelopment, poverty and corruption have been major issues of South Africa since independence. Social and racial discriminations against the black population by minority whites fumed the long anti-apartheid movement and installation of new democratic government in this SSA country. However, the plight of the poor blacks did not change appreciably even under the liberal government. Adoption of neoliberal macro-economic policies by the state further widened the income gaps among the different ethnic groups in the country. The WB’s report on MDG too indicated vicious poverty level in SSA region.

References for South Africa Case Evaluation

Akuffodb, I. N., & Kivipõld, K. (2017). Leadership behaviour in the context of nepotism, cronyism, and favouritism: a review of the literature. Leadership for Improvement Perceptions, Influences and Gender Differences, NOVA Publishers, New York, NY, 255-282. https://www.researchgate.net/profile/Kurmet_Kivipld/publication/320830285_Leadership_Behaviour_in_the_Context_of_Nepotism_Cronyism_and_Favouritism_A_Review_of_the_Literature/links/5a70375b458515015e624583/Leadership-Behaviour-in-the-Context-of-Nepotism-Cronyism-and-Favouritism-A-Review-of-the-Literature.pdf

Asongu, S., & Nwachukwu, J. (2016). Rational asymmetric development, piketty and poverty in Africa. The European journal of comparative economics, 13(2), 221-246. https://www.econstor.eu/bitstream/10419/149964/1/agdi-wp16-040.pdf

Aiyar, S., & Ebeke, C. (2020). Inequality of opportunity, inequality of income and economic growth. World Development, 136, 105115. https://www.cotec.es/fundacionfelipegonzalez/oportunidades/wp-content/uploads/2020/07/Inequality-of-Opportunity-Inequality-of-Income_growth_imf.pdf

Constitutionnet. Supporting Constitution Builders Globally. Constitutional history of

South Africa. http://constitutionnet.org/country/south-africa

Dubow, S. (2017). The Commonwealth and South Africa: From Smuts to Mandela. The Journal of Imperial and Commonwealth History, 45(2), 284-314. https://doi.org/10.1080/03086534.2017.1294790

Gumede, V. (2017). Political economy of post-apartheid South Africa. CODESRIA. https://codesria.org/spip.php?article2624

Inglehart, R. F. (2018). Modernization, existential security, and cultural change. Handbook of advances in culture and psychology, 7. https://lsa.umich.edu/content/dam/polisci-assets/Docs/Inglehart%20Articles/Modernization%20%26%20Cultural%20Change.pdf

Ngepah, N. (2017). A review of theories and evidence of inclusive growth: an economic perspective for Africa. Current Opinion in Environmental Sustainability, 24, 52-57. https://doi.org/10.1016/j.cosust.2017.01.008

Sebake, B. K. (2017). Neoliberalism in the South African post-apartheid regime: Economic policy positions and globalisation impact. International Conference on Public Administration and Development Alternatives (IPADA). http://ulspace.ul.ac.za/bitstream/handle/10386/1860/sebake_neoliberalism_2017.pdf?sequence=1

Tytko, A., Smokovych, M., Dorokhina, Y., Chernezhenko, O., & Stremenovskyi, S. (2020). Nepotism, favoritism and cronyism as a source of conflict of interest: corruption or not?. Amazonia Investiga, 9(29), 163-169. https://amazoniainvestiga.info/index.php/amazonia/article/view/1382

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