Nicholas Woode-Smith thinks there is only one economics (“Columnist shows poor grasp of economics”, December 2). His understanding of the world would be so much richer if he were to recognise that, in the words of world-renowned professor of economics at Cambridge University Ha-Joon Chang, “economics is a political argument” (Economics: The User’s Guide).This is to say one’s usually class-based politics shapes one’s economics, along with its own rationalities. For Woode-Smith the solution to creating jobs is cutting red tape, which leads to increasingly higher wages.
If only his politics were not so one-dimensional. My politics begin with the inversion of his economics, such that increasing wages leads to job creation. His politics make him blind to the fact that the ANC has been a faithful disciple of his “liberal economics” — more accurately the hegemonic neoliberalism of (most of) the world since first practised by Britain’s Margaret Thatcher in 1979.
It is this neoliberalism that brought the ANC and DA together following the 2024 general election. It is this neoliberal glue that still holds the government of national unity together, much to the bewilderment of most commentators. The politics behind Woode-Smith’s “free economics” encourages each capitalist to reduce wages to the socially defined minimum for all levels of the wage hierarchy.
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This is good for each capitalist. It is essential for the maximisation of profit, which is the imperative of capitalism. But it presents a major contradiction for the collective capitalist.
Their individual wealth leaves a gap in the home economy between what is produced and the ability of the underpaid workers to buy back the totality of their own production. Brian Ashley’s analysis is dismissed by Woode-Smith for two reasons: Ashley’s claimed poor grasp of economics, compounded by his forays into Marxist economics. The most un-Marxist British economist, John Maynard Keynes, was made a baron in recognition of his three- to four-decade-long economic analysis, which fundamentally changed the theory and practice of macroeconomics and the economic policies of governments worldwide.
Keynesian economics gave way to neoliberalism in 1979, for it offered only a short-term solution to the shortage of what he called “aggregate demand” in all capitalist countries. For Keynes’ class-based politics, aggregate demand did not mean that insufficient demand was a product of a whole population being satisfied that their basic needs have been met. Capitalism leaves each capitalist to decide what to produce to maximise their profits rather than what is societally needed.
This leaves each economy with a surplus of commodities produced for “consumers” with money surplus to what is required to meet their basic needs. However, this domestic surplus is invariably insufficient to buy the totality of what is produced. This totality is now called GDP.
In Keynesian economics, the government’s role was to provide public money to create the aggregate demand on which each capitalist depended for their acceptable rate of profit. A limited increase in wages, which means a limited redistribution of wealth, creates a limited domestic demand, which, all other things being equal, is sufficient for the short-term reduction in unemployment, and hence poverty and inequality. It is Woode-Smith’s politics that makes him blind to the short-term, but needed, South African version of Keynesian economics.
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