The world is changing fast and to keep up you need local knowledge with global context.
In 2002, Israel-born psychologist Daniel Kahneman was a co-recipient of the Nobel prize for economics for his theory that financial decision-making, or indeed much decision-making, has very little to do with logic and everything to do with shortcuts our brains make to help us make sense of the world. As Britannica reports, Kahneman’s research, based on surveys and experiments, showed that his subjects were incapable of analysing complex decision situations when the future consequences were uncertain. Instead, they relied on heuristic shortcuts, or rules of thumb, and few people evaluated the underlying probability. South African neurologist Dr James Butler has applied Kahneman’s theory to the burning issues in South Africa, highlighting why many Saffers are very wrong about their perceptions of the country. He tackles a range of concerns, from the fear that South Africa is heading down the same path as Zimbabwe and will ultimately have the same fate as its northern neighbour, to the idea that, under the ANC, the economy has been mismanaged and that corruption is a game that only African governments play. Butler shares his fascinating insights with the BizNews community. – Jackie Cameron
Pessimism: South Africans, in general, are incorrect in their beliefs about South Africa’s medium and long-term future
By Dr. James Butler*
The human brain is remarkably prone to bias, a state that makes an accurate understanding of facts and formulation of predictions unreliable. Herding of behaviour and thinking, amplified by mainstream and social media, may produce beliefs that are widely held, yet represent delusional ideation. To quote Bertrand Russell, “The fact that an opinion has been widely held is no evidence whatever that it is not utterly absurd; indeed in view of the silliness of the majority of mankind, a widely spread belief is more likely to be foolish than sensible.”
This point is beautifully illustrated in the following talk by Hans Rosling, who shows how we, people in countries with high levels of education and the media simply get the socio-economic facts and evolution of countries wrong. He also suggests how we can remedy our ignorance about the world. This talk is not to be missed.
The following study, performed across twenty eight countries, provides more evidence that “most of us are wrong about how the world has changed, especially those who are pessimistic about the future”. Their evidence shows more incorrect that individuals are about the past, the more pessimistic they are about the future. This suggests that pessimism about the future is related to a misunderstanding of the objective evidence about the world.
There is good neuro-scientific evidence that the brain uses information to construct an imperfect representation of the world. We effectively “make up” and are prone to distort visual images rather than “see” the world like a video camera. Other constructs of the brain function in the same, imperfect way.
Neuroscience studies demonstrate that normal human memory is fragile and malleable, and is prone to temporal degradation, retroactive interference (Underwood & Postman), modification, distortion, framing, suggestion, errors of sequence, filling in gaps and fabrication (James Coan, Knott & Howe, Lacy).
Given these imperfections of the normal brain, personality and individual traits likely play a seminal role in the way individuals estimate future probabilities. Those who are pessimistic by virtue of genetic make-up and/or a pessimistic childhood environment may subconsciously perceive and distort information in a negative way, disproportionately recall and distort emotionally-distressing information, seek out new information based on these pessimistic biases and try to convince others around them of the same gloomy future with intelligently-chosen, cherry-picked, alarmist facts and predictions (the fear-mongers).
The articles below make the point that these misperceptions about the world reveal a failure of our media and educational systems.
If the tone of the mainstream and social media and of personal experience is anything to go by, South Africans are generally very gloomy about our future. One commonly hears people using phrases like “things are just getting worse and worse” and “South Africa is a basket case”.
Reading public commentary at the bottom of media articles on the internet strongly supports this contention. This article seeks to demonstrate how flawed this pessimistic thinking is and proposes a remedy to delusional thinking that may become a self-fulfilling prophecy.
To demonstrate how biased humans are in estimating probabilities, one may borrow an example from Nobel Laureate, Daniel Kahneman’s book, “Thinking Fast, Thinking Slow”. Take the case of Joe, a bespectacled man who has always been nerdy, introverted, fond of books and reading, and is meticulous in organising things.
Is Joe likely to be a librarian or a farmer? Answer: the laws of probability indicate that Joe is far more likely to be a farmer than a librarian. In the USA and in South Africa there are many more farmers than librarians.
Our biases about Joe’s character mislead us into thinking that the converse is true. Likewise, our biases in the way we assimilate and view snippets of everyday information about South African society, while ignoring much more powerfully-predictive, long-term, representative data, causes many, if not most, South Africans to incorrectly estimate our future trajectory (one is tempted to add, “by a country mile”). As in Kahnemann’s example, we focus on the wrong variables.
So how might we go about rationally predicting South Africa’s future?
1.The first step is to avoid the anecdote.
No predictive model can be built on one data point (so-called n=1). South Africans are simply too fond of remembering and quoting the Zimbabwean experience and of using this to intuitively estimate their predictions for South Africa. This is like saying that one should never go into the sea in False Bay after someone is bitten by a great white shark there, ignoring the annual risk of him or her being bitten by a shark. In quoting the Zimbabwean experience, our biases are so strong that South Africans simply ignore the evidence from Zimbabwe’s neighbours, such as Namibia, Tanzania and Botswana, let alone from other globally developing and even developed countries. Don’t forget, developed countries were developing countries not that long ago in human history.
2. One should avoid recency bias.
The past decade has been a bad political and economic one in our history, but despite the horrors of state capture and failed SOEs, the economy has still been growing, albeit very slowly. It did so too in the horrible days of apartheid. Economies move in cycles and, as many commentators have pointed out, a modest shift in confidence accompanied by policy certainty, a sensible solution to the land problem and some pragmatic structural changes in economic policy is almost certain to substantially change our economic growth rate.
We have survived many destructive wars (including 2 World Wars), the Great Depression, decades of the terrible consequences of apartheid, crippling economic sanctions, cultural and sporting isolation, the HIV epidemic and the Great Financial Crisis in the past century and even before that. State capture and the Eskom crisis will simply be added to this list by historians in years to come. The same likely applies to coronavirus.
In avoiding recency bias, it is best to consider our long-term history and objective long-term data, such as longevity, maternal and infant mortality rates, other indices of health, access to housing, water, sanitation and electricity, educational levels, jobs, human development indices and GDP and Gross National Income (GNI) per capita growth rates.
The following figures and graphs are reminder of what various countries around the world have achieved in terms of human development indices over the long-term. The virtually inevitable upward trajectories on the graphs and positive changes on the maps over time are worth imprinting on one’s memory. It is worth taking time and adding various countries, including South Africa and its’ neighbours, to graphs, and using slider bars on the maps to view the changes that have occurred over time.
You may be pleasantly surprised. The transient drop in South Africa and its neighbours’ human development indices in the early 2000’s no doubt was related to the excess mortality associated with HIV. Notice the recovery thereafter. The data is virtually without exception optimistic.
3. The most important step is to rely on the biggest, most generalisable dataset possible for your predictive model, namely that of developing countries and use this dataset to estimate the future trajectory of developing countries, including South Africa.
Hans Rosling has such a dataset that demonstrates the dramatic progress that developing countries have made over approximately 5 decades in narrowing the gap between developed and developing countries. This long-term dataset and the data in the previous reference is remarkably consistent and optimistic! This talk is a must-watch.
4. Learn a little from our past about apparently overwhelming problems.
The intractable nature of decades of apartheid, entrenched by low-grade warfare, characterised by economic, cultural and sporting sanctions, deep social divisions and the massive loss of lives in townships and rural areas, such as KwaZulu-Natal, prompted many to emigrate and many others who lived in SA to believe that the situation was truly insoluble, with no hope for South Africa. In a similar vein, in the early and mid 2000’s South Africa was regarded as the global capital of the HIV pandemic.
In the context of denial about the nature and extent of the problem and with no available treatment for the infection, many very gloomy “experts” were of the view that our population would be decimated by the virus, that HIV would overwhelm the healthcare system and that the infection would cripple the economic prospects of the country, including industries such as mining, with little hope for a solution.
Yet, for several years now, HIV has disappeared from the national dialogue, and, while the infection has not disappeared, people lead long and productive lives, life expectancy in South Africa is rising and projected to keep rising, and there is widespread access to cheap anti-retrovirals, courtesy of the largest program of ARV treatments in the world. These two examples of severe, protracted and seemingly insoluble national crises are sober reminders that apparently intractable problems do not persist forever, despite extreme, near-universal pessimism at the time.
Long-term trends of life expectancy in South Africa:
Over the past 15 years mortality rates for children under 5 years have fallen dramatically from about 80 to 32 per 1000 live births.
5. We should not fall prey to our biases about the current state and projected trajectory of developed countries.
They all started out as developing countries and, contrary to popular opinion in South Africa, are not beds of roses. They have many difficult problems and face daunting future demographic and financial issues. This is not to deny the massive problems that we have in South Africa, including education, skills, inequality, unemployment, pockets of racism, corruption, the parlous state of state-owned enterprises and public debt. These are current data points, prone to change. All other countries are either facing, have faced or will face the same problems. The fundamental question is what happens to these variables (problems) over time, as shown by datasets (evidence) discussed above?
A few facts may provide a little perspective about the well-being of and problems faced by developed countries.
Over the past decade the US economy averaged 2.3% average annual growth (courtesy of ultra-loose monetary policy), with the Euro area at 1.4% p.a. and South Africa at 1.7% p.a. Our population growth rate is obviously greater than that of the Euro area.
So people in the US earn big, right? A very recent Brookings Institution study shows that nearly half of American workers (44% to be precise) earn $18 000 or less per year, and most of these are in the prime of their life, aged 25-54.
The debt: GDP ratios of developed countries are, to put it mildly, not flattering. This is a problem that may compound in the face of shrinking populations and explode if their economies stop growing. This is why the US Fed has quietly accelerated quantitative easing (read, printing money). They are clearly petrified of the consequences of a recession in the face of a very large debt: GDP ratio (107%).
American public debt has grown at rapid rate over the past decade, and continues to do so.
While our debt to GDP is not nearly as high as many developed countries (but at the high end of developing countries), because of the Zuma years, the markets simply do not trust us, and hence our borrowing costs have soared. Trust is earned. That takes time.
Many developed countries face a demographic time-bomb, because they have ageing populations, with potentially profound implications for economic growth, public finances and funding of people in retirement. From 2021 the European population is projected to start shrinking.
By contrast, Africa has the best demographic future (see map at the bottom of the following link)
The retirement savings gap in most developed countries is a consequence of these demographic changes. This is a potential financial tsunami that will be compounded by the current public debt:GDP ratios of these developed countries.
Recent protests in France related to an attempt to force French public servants to retire two years later in order to try and plug a big hole in the deficient bucket of retirement savings is an early sign of things to come. The unions’ refused to back down and won the battle of wills with Macron.
Japan’s women face dire financial problems.
Potentially major economic consequences of Brexit will only become apparent in due course. It is indisputable that the UK now stands alone in starting trade negotiations with potential trade partners around the world, without the muscle of its big brother, the EU. South Africa is a potential beneficiary of a weakened UK position.
The Scottish National Party won 48 out of 59 seats in the recent UK election and, on the back of this, have demanded a second referendum for Scottish independence. In order to avoid a hard border between the Irish and Northern Ireland, there is now a de facto border between the UK mainland and the greater Ireland.
Some commentators are of the opinion that there is a risk that Brexit could spark a return of The Troubles in Northern Ireland. With the divisive politics in the US and UK and a potential breakup of the latter, one is tempted to say that they should be renamed the Divided States of America (DSA) and the Divided Kingdom (DK) respectively.
What about state capture? Corruption is a massive problem for SA. White collar crime is a global problem. An Oxford wunderkind and a New Zealander have helped fleece European taxpayers of nearly R1 trillion, half of it from the German Government. The evidence indicates that Merrill Lynch in London, top investment banks and lawyers in the US, UK and Europe were part of the process.
We can also learn a bit from the history of other developed countries. Imagine living in Northern Ireland during the Troubles, or Yugoslavia during the war from 1991-2001 during which 140 000 were killed and many more suffered physical and psychological harm. If you were a citizen in these countries at the time, you would have been very gloomy about the future. Today the constituent countries are fantastic places to visit. Hence, having a longitudinal perspective is useful, rather than seeing things at a single point in time in the history of a country.
6. Realise that South Africans are not alone in their pessimism about the future.
Pessimism about the future is a global phenomenon (refer to the first link in this article). This suggests that the brains of humans, who are genetically very similar, are “hard-wired” to respond to news which constantly highlights “crises” and problems in similar ways, independently of where people live. Pessimism about the future is therefore not a function of where you live (rich vs poor countries), but rather of personality, age and knowledge about the world. Why might humans have evolved the trait of pessimism, in the face of evidence that optimism is associated with better outcomes in people’s lives?
The issue of pessimism and fear-mongering, and strategies of managing these, are aired in this summary of a book on the subject. “Their provocative book explores what they characterise as the universal tendency for negative events and emotions to affect us more strongly than positive ones. Professional fear-mongers draw a larger, more receptive audience than purveyors of restrained analysis. Public debate, they argue, tends to be shaped by people whose livelihood depends on amplifying the chances of catastrophe.”
7. Reversion to the mean over the medium and long-term is the rule, rather than the exception, for outliers in many spheres of life, including financial markets, business cycles, economies and physiological parameters in the human body.
Mood is a simple example: when you are extremely angry, over time you are likely to revert to your average or baseline state. If you have severe lower backache, left untreated, the likelihood that this will be the case 1 month, 6 months, 1 year, 2 years and 10 years later is progressively lower with each interval. A high proportion of people will have no backache over the medium and long-term. One must be careful not to extrapolate extremes of short-term mood, pain or the economic cycle to the medium and long-term. However, in the short-term, humans, as an emotionally-driven specie, are prone to do so.
So, what about our economic prospects? Mike Schussler soberly points out current and “short-term” economic realities of South Africa versus other developing countries.
He shows that while our economy’s manufacturing output has changed at the about the same rate as developed countries, we are well behind the trajectory of other developing countries.
But what about the long-term? One is left wondering whether South Africa, with its rapidly diminishing reliance on natural mining resources, might finally cure itself of Dutch Disease, described below, with the attendant economic benefits of such a sustained systemic shift.
Dutch Disease afflicts countries rich with natural resources. During the boom years of the resource cycle, exports of mineral wealth (in our case) earn the country disproportionate amounts of money in offshore currencies, effectively bringing this offshore income into the local country. This causes the local currency to strengthen markedly, with the effect that SA manufacturing industries are globally and locally uncompetitive.
This discourages investment in manufacturing industries. During these fat years, because the local currency is relatively strong, imported goods relatively cheap and local industry uncompetitive, locals consume globally manufactured products (imports), while their governments are prone to spend excessively and take on more debt, rather than save for the lean years. During the lean years of the often long economic resource cycle, because of the lack of foreign earnings from exported commodities, the currency weakens.
With little manufacturing infrastructure developed during the fat years, the country is simply unable to take advantage of a weak currency and cannot export many manufactured goods when it would be opportune (read competitive) to do so. It may also battle to service debt, imprudently incurred during the fat years.
During these lean years of the resource cycle, locals are forced to buy many imported products, given the lack of manufacturing investment during the boom years for resources. Hence, while gold mining is a sunset industry for South Africa, this may be a very good thing. Might this be the catalyst for us to become more like other industrialised, tourist-orientated developing countries, with annuity income from these sources, rather than be a victim of the boom and bust resource cycle? History shows that individuals, families and governments get used to earning big, spending big and taking on debt in the fat years, when they should be saving for the lean ones.
When the lean years arrive, adjusting to earning less (think taxes), spending less (think government personnel and salaries) and servicing debt becomes very difficult. Cutting state expenditure during these lean years by reducing the state salary bill or state service is politically unpalatable. Curing Dutch Disease and earning annuity income increases the likelihood of a more stable economy and currency (read stable family budget and sustainable debt) over the medium and long-term. So while we are behind other rapidly industrialising, developing countries, one may be forgiven for thinking that, as is so often the case with any extreme data point, our outlier status is more likely than not to result in a regression to the mean over the long-term. The cure of Dutch Disease may surely be a catalyst.
As for Eskom, history shows that the economics of “creative destruction” is likely to produce a transition to a cheaper, green energy supply that likely will bolt onto what Eskom has in place, while the dinosaur of coal dies a slow, but inevitable death. What about funding? With government out of money, they will almost certainly be forced to “crowd in” the private sector. We are in the middle of painful, forced “creative destruction”. Check this out in 10 and 20 years’ time.
What about expropriation of land. This immediately sets off polarised, very strong emotions, no doubt related to the Zimbabwean history and the scourge of forced land removals in SA. Before entering any debate, let alone becoming emotional and sleeping badly, ask yourself, “Have I read the Kgalema Motlanthe document, the Dan Kriek document and the draft bill?” You likely will be far less emotional afterwards.
Although this is a process with potential, profound risks (food security, investor’s won’t invest without knowing that their investment will be arbitrarily taken away from them, with harm to the economy), it is morally correct to right the wrongs of the past and it is necessary to engage in problem-solving. When faced with a difficult problem, inversion often produces an excellent solution. Few people appear to recognise the massive potential upside of a sensible solution to the problem.
Poor South Africans who suddenly have land with a title deed will rapidly be able to borrow money against their property or develop it, encouraging entrepreneurs and small and medium-sized businesses. The economic boon to the country may be enormous. A recent article in the Economist draws attention to the importance of property ownership, rather than income, in the determination of inequality in developed countries. Our inequality is begging for a sensible solution. Education and skills form part of the solution. But the equivalent of a land Codesa will be a massive win for SA, especially the poor and the economy.
What about the virtually inevitable downgrade of SA by Moodys? As many experts point out, markets are forward-looking and this likely has been priced into currency, bond and stock markets. What will happen in the medium term? The Brazilian experience is that their stock market has trebled since they were down-graded to junk status at the end of 2015. This a case of n=1: there is no large dataset to guide predictions, but be careful of adding this to your list of reasons to be pessimistic about South Africa’s future, and especially about your retirement savings.
The case for diversification of savings around the world is the cornerstone of good investment advice, irrespective of which country you live in. This is easily achieved with a few clicks of a computer mouse and you can sleep peacefully at night. Buying a global exchange traded fund (a global ETF is a basket of the world’s most successful companies) at extremely low cost, even by international standards, has never been easier, and you can buy such an ETF for as little as R10 at a time with EasyEquities. Few people realise what a massive advance this is for the man in the street. Every South African, no matter how rich or poor, ideally should have such a stockbroking account.
What about crime trends, given our place in the world with a disproportionately high crime rate?
Wikipedia reports, “The murder rate increased rapidly in the late-1980s and early-1990s. Between 1994–2009, the murder rate halved from 67 to 34 murders per 100,000 people. Between 2011–2015, it stabilised to around 32 homicides per 100,000 people although the total number of lives lost has increased due to the increase in population. There have been numerous press reports on the manipulation of crime statistics that have highlighted the existence of incentives not to record violent crime. Nonetheless, murder statistics are considered accurate.”
Africacheck reports that the murder rate for 2019 was about 36 per 100 000 people. Notice the association of the downward trajectory of murder rates with GDP growth per capita over the past few decades. Stagnation of GDP growth over the past few years has been associated with an unchanged murder rate. Crime is not an insoluble problem. In 1996 Washington and Detroit had higher murder rates than Cape Town.
What about the rand? I will start with the anecdote and then explain the economics of it. Forty years ago my parents generation were no more likely to afford to buy imported electrical equipment, cars, TVs, washing machines, clothes, food and farmers were no more able to afford to buy imported tractors.
Many people simply project irrational fear about the weakening Rand, while ignoring the facts and likely trajectory of currencies, given global experience, cited in post below. Look at global experience of “purchasing power parity”. To quote from the article below, “Changes in countries’ exchange rates vs.the US dollar have been approx equal to inflation differential w/ the US over the same period…relative purchasing power parity has held to a reasonable approximation.”
As long as the Reserve Bank does its job, you need not worry about the Rand. Any country with higher interest rates than another will see its currency weaken against the other at an average rate of the differential between the two currencies. The Rand has done just that against the dollar, weakening by an average of 6% p.a. against the dollar, because that is the differential between our inflation rate and that of the US dollar.
In other words, what should happen according to economic theory, has happened exactly as predicted over the long term. If the Rand did not weaken at the differential between inflation rates (changes in the costs of goods and services), we would not be able to sell our goods and skills at internationally competitive rates. Bottom line? Ignore the hysteria about day to day rand-dollar exchange rates (determined by human emotion and traders), just like you should ignore the emotions of the day to day swings in the prices of the share market.
There is little doubt that we are in the midst of the seven “lean years” in South Africa, economically-speaking, and that fixing the major problems like Eskom, public debt, education levels and unemployment will take years. However, history is on our side and mean reversion is a more likely scenario than SA remaining an outlier, when comparing local economic trends with those of other developing countries.
8. What does global and our own economic history teach us about the probabilities of economic growth?
The data shows that the vast majority of countries in the world, including South Africa, have had positive growth, measured by GDP (in US dollars) per capita since 1950.
What about South Africa’s growth rate over the past 50 years? The following graph of GDP per capita tells an important story (select either “MAX” or “50 Years” below the graph for a long-term view). Imprint this graph on your memory.
Notice that SA GDP per capita in US dollar terms declined precipitously in the period 1980-1992. The argument that the ending of apartheid had nothing to do with economic sanctions and declining economic fortunes is easily dismissed. The period from 1994-2008 was, in spite of HIV, characterized by impressive growth: any statement that says that the ANC was responsible for economic decline during this period is not grounded in fact.
The Mandela and Mbeki era from 1994-2008 saw a dramatic reversal of South Africa’s economic fortunes when compared to the 14 years preceding this period. The commodity cycle boom contributed to this, but prudent management of public finances produced a substantial diminution in South Africa’s debt to GDP (from 43% in 2000 to 28% in 2008).
The period from the Great Financial Crisis (2008/9) until now has been characterised by negligible growth in US dollar terms (the rand has roughly halved in value over this period, while the population has grown substantially, both of which adversely effect the GDP per capita ratio ) and therefore this is not an implosion, simply stagnation in dollar terms, no doubt related to the decade of corruption and state capture. Notice the modest, transient effect of the Great Financial Crisis of 2009 on the graph.
The lesson is that the SA economic performance, like elsewhere, has been cyclical and that it is a myth that ANC rule has been characterised by a sustained downward trajectory measured in dollar terms. The trajectory since 1994, viewed on the the long-term graph, has been generally very favourable ( with the exception of the past 10 years, when dollar-denominated growth has been flat in a period of halving of the value of the rand and with population growth).
If the SA government fixes a few key things, which currently concern many of us, there is no reason why we should not again see substantial progress over the medium and long-term: the historical, local and global, long-term evidence suggests that this is likely.
What about South Africa’s Gross National Income (GNI) per capita? https://data.worldbank.org/country/south-africa
The overall trajectory of the graph for GNI per capita provides similar conclusions to those described in the previous paragraph. View the data and come to your own conclusions.
Our average growth rate over the past decade, widely perceived to have been a very bad one, has averaged 1.7% per year. Based on historic data, the probabilities, especially if lessons are learnt, favour progress rather than regression over the medium and long term. We obviously need higher rates to alleviate the scourge of poverty, given SA population growth rates. To contextualise our long-term growth rate graphs with that of other individual countries, use this excellent World Bank website, by typing in the name at the top, and comparing this to South Africa.
As an aside, let us also not forget that the JSE is the best performing stock exchange in the world in dollar terms over the period from 1900-2016, despite 2 World Wars, the Great Depression, apartheid, crippling economic sanctions and the Gupta years (see figure 8 below). This is not to say that the JSE will remain the best performer in the world (reversion to the mean suggests that it won’t be).
The lesson is that despite a dreadful socio-economic history in South Africa, the country has cultivated world-class businesses that have prospered, perhaps in part because we are geographically remote from the world’s most competitive businesses (would we have Pick ‘n Pay, Shoprite, Spar and Woolworths if Walmart and the USA were next to us?). Data from global stock markets show that stock market returns are inversely correlated with a country’s past economic growth (see figure 46 in the link below). Fund managers know all too well that the economic growth rate of a country is not correlated with stock market returns, perhaps at least partly related to the fact that rapidly growing economies attract much competition, reducing company profitability and success.
9. What can we learn from current and future economic growth rates of countries in Africa?
You may view Africa as a “basket case”, but you would be factually incorrect in doing so.
Six of the top ten fastest growing countries in the world in 2018 were in Africa. Things are changing rapidly in Africa.
What about predictions, based upon available data, for the world’s fastest growing economies? The predictions for economic growth in Africa are among the rosiest in the world. Most of the predicted fastest growing countries in the world are in Africa. On balance of probabilities, the relative laggards in Africa (see the map in the article below) likely will be beneficiaries of systemic shifts that are currently manifesting across the continent.
In looking at the above, you should think about how you viewed African countries, including Ethiopia and Rwanda 20-30 years ago (if you were alive then). These 2 countries were beset by famine & poverty (Ethiopia, 1983-5, 1.2 million people died of famine) and war/genocide (Rwandan, 1994; Ethiopian-Eritrean War, 1961-1991). Contrast your biased views about their prospects then with the current, most objective evidence about these 2 countries today. In a world of uncertainty, the above IMF data shows that the odds are strongly in favour of above world-average economic growth rates in most African countries over the medium and long-term. The “Rosling predictive model”, formulated more than a decade ago, is, unsurprisingly, being validated in Africa.
10. What can we learn from projected population demographic changes? Fast-forward to 2060.
Projections, with their inherent limitations, are that South Africa will have one of the lowest ratios of elderly people to workers in the world (2 elderly people for every 10 workers), while much of Europe, Japan (8 elderly for every 10 workers) and South Korea (9 elderly for every 10 workers) will have very high ratios. The potential economic implications of this burden of dependency and age-related, costly diseases in the elderly (dementia, cancer, strokes etc.) is self-evident. Also, do not forget that some of these developed countries have very high debt to GDP ratios. A shrinking, aging population with substantial debt is a toxic mix!
11. What about the predictions of “experts”?
The available evidence of Philip Tetlock and others is that “experts” are very poor at prediction, and these largely reflect personality, personal experience and personal biases.
What are the financial consequences for you if you listen to the advice of American, financial “experts” who are “Armegeddonists”.
You may find similar financial “experts” who are “Armageddonists” in South Africa too.
In the days before Tito Mboweni’s budget speech, I made point of reading and listening to the predictions of every economist and finance expert. There was universal agreement that we were in for more taxes ( in the face of evidence that we were over the top of the Laffer curve: there comes a point at which increasing taxes reduces government income, as people leave the country, stop working or engage in tax avoidance ) while cutting the public wage service wage bill was not predicted by anyone (but wished for!). Needless to say, the scoreboard shows that the experts were abysmal at 1-3 day predictions. Taxes did not rise, while the wage bill was cut. Almost unnoticed by the media, foreign exchange controls have effectively been abolished, provided your tax affairs are in order.
To quote the well-known expression, “you are entitled to your own opinions, but not your own facts”. The “facts” are that human development indices demonstrate improvements for the vast majority of countries in the world over the past 100 years or more. This evidence is far more likely to predict outcomes than “expert” or personal views and/or short-term socio-economic trends, especially given the vagaries of short-term economic and political cycles, and the particular biases of “experts”.
It is therefore best to ignore the forecasts of “experts”, as scientific studies show that they are dismal at forecasting. This evidence is summarised in “The peculiar blindness of experts” article, cited above. Prediction in science requires probabilities based on systematic, objective, long-term datasets, mindful of the inherent limitations of such data, including the size of the derivation cohort, the availability of a verification cohort and the generalisability of the findings.
12. Be mindful of your subconscious biases
These include “motivated reasoning” and “involuntary opinion-confirmation bias,” where your selection of evidence is based upon the conclusion(s) you subconsciously wish to draw. The following links may be useful:
These foibles of the human brain likely explain the presence of the anti-vaccination movement, the flat earth society, denial about climate change and the role of humans in this, and the polarised opinions about Donald Trump’s impeachment. It is strongly argued by his opponents, but vehemently denied by his supporters, that he withheld funding to the Ukraine in order to pressurise them into investigating the son of his likely opponent in the US election later this year. His party, which controls the Senate, refused to consider listening to testimony of crucial witnesses before deciding whether he is guilty or not. We are hard-wired to dismiss facts that do not fit our worldview.
Some general comments
To modify an existing expression, there are only three certainties in life, namely death, taxes and uncertainty. Predictive models based on the highest quality datasets are the best tools that we have at our disposal for prediction, but their individual, inherent limitations should be understood. These predictive models may be used for outcomes of various stages of different cancers, 1-2 week weather forecasts, survival in an ICU, the long-term prospects of stock-markets, actuarial calculations for life insurance and for the future trajectory of countries. Such predictive models are often practically useful (especially when presented as ranges of probabilities and doubly so when there is both a derivation and a validation study) but don’t expect certainty, which is what human beings constantly seek.
An objective appraisal of South Africa’s economic and social progress over the past few decades, including the dismantling of apartheid, should be a reminder of what we have achieved as a nation. In thinking about the future, we should consider the progress we have made as a nation, using objective social and economic measures, remind ourselves that Zimbabwe is an outlier in the historical dataset of developing countries (and even they likely will eventually mean-revert), and understand the compelling evidence that the vast majority of developing countries have made tremendous social and economic progress, and in so doing have, in the vast majority of instances, narrowed the gap with developed countries over the past few decades.
We should be very careful not to allow fatalistic thinking to determine our outcome. The impartial evidence indicates that the probability that a developing country, such as South Africa, will catch up with developed countries in the medium and long-term, is good. Given these probabilities, recent and current, pervasive, dismal forecasts represent our greatest risk, as this incorrect herding of opinions about our future, based on factual inaccuracies, biases, fear and the anecdote of the Zimbabwean experience will continue to result in an exodus of skills and capital, and diminish investment in our people and the economy. Our problems are substantial.
These include education, poverty, Eskom, systemic corruption, unemployment and debt, but each country has and/or has had similar, massive problems. However, the world’s and our own history has taught us that these problems are not insurmountable. It is how we perceive and solve the problems that matters. Historical data shows that in most instances humans solve these problems over time, almost certainly because our genes, which determine survival in a competitive and ever-changing world, force us to do so. Necessity really is the mother of all invention.
Similarly, our genetic make-up causes humans across the world to constantly angst about immediate survival and well-being. We presumably have little institutional memory in our genes that, in the past hundred or so years, long-term well-being and progress is the rule, rather than the exception. Hence, few are easily able to override this angst that South Africans and other global citizens feel when confronted by a myriad of everyday problems and bad news.
This is not likely to change. Humans will continue to be constantly confronted by new problems (e.g. climate change, natural disasters, human-made environmental disasters, mutating and new viral epidemics, nuclear war, data theft and who knows what else) and we will constantly shift our angst, the magnitude of which will be determined by individual perception, personality and resilience. That is the nature of the beast.
The objective, global, historical evidence suggests that there is a strong likelihood of a good medium and long-term outcome for South Africa. By contrast, while not impossible, a Zimbabwean outcome is unlikely. By thinking otherwise, the evidence shows that one is engaging in delusional ideation and self-destructive behaviour.
At a personal level, we should pretend that we are sitting on Mars and remind ourselves of this unbiased, historical, factual evidence, and the probabilities of our future economic and social trajectory will become self-evident. By understanding the evidence and probabilities, while setting aside personal biases, we are more likely to invest in the skills and education of those around us, especially the disadvantaged, which will increase the probabilities of a favourable economic and social trajectory for South Africa. The above does not require unrealistic optimism, but simply a healthy dose of realism.
As an aside, one can see why optimists, especially groups of optimists, are more likely to succeed. The boy at school who thinks that he will fail an exam and therefore does no work (i.e. invest the time), increases the likelihood of failure.
Beware the infectious fear-mongers and prophets of doom in our midst. They represent the greatest risk to South Africa and its people. Just as we should ignore the short-term noise or volatility of stock-exchanges and think about the long-term probabilities, we should do the same with short-term socio-political noise.
Or, to put it another way, if short-term volatility or noise bothers you, “don’t check the share markets each day” and “turn off the news”. Rather check them every 10 or 20 years.
Alternatively, why not become an activist for social cohesion and a just and better society? The evidence from our state capture experience is that active citizens and journalists are very capable of effecting favourable outcomes. An already strong likelihood of progress in the important aspects of the quality of life of South Africans will be augmented by active, optimistic, cohesive citizens.
Ask yourself, “Am I paying up for well-researched journalism that will expose all of our political, economic and social weaknesses, and, in paying for such journalism, contributing to a better life for all of us, including me”? Such exposés are immediately painful and emotionally uncomfortable.
Paradoxically, the widespread availability of reliable, unpleasant information and data makes it more likely that we will evolve into a society where misrule, corruption and injustice are simply not tolerated. Hence, if anything, being confronted by bad news every day is a sign that we are on a healthier, but continuously difficult journey in life. Journalists are often criticised for simply presenting bad news all the time because it “sells”. The likely reason for this is that humans, as we have for aeons of our history, want and need information at our disposal in order to adapt, plan, prosper and survive. We are therefore naturally drawn to “alarming” news. The massive decline in SA childhood mortality rates over the past few decades will not make the front pages of our newspapers.
Confronting the crises of the world has always and continues to require resilience. To reiterate, if you feel that you are not resilient enough or have had enough, “turn off the news”. The alternative to a stream of “bad news”, namely a lack or failure of independent journalists to investigate and publicise the ills of our society (in South Africa as in any country) will simply promote misrule and tyranny. We should be prepared to pay up handsomely for and strongly support high quality journalism in South Africa, in order to provide the broader public with the most reliable information and data possible.
As is the case with misinformation about other aspects of life across the world, including healthcare, there is abundant misinformation about socio-political life in SA on the internet and in social media: this is best countered by high quality information/data. Each one of us wants a better life for all South Africans, and those in positions of power will be constantly reminded by active, informed citizens and groups of citizens that misrule, prejudice and corruption will not be tolerated.
This will foster a culture of service, rather than rule, among elected leaders. Human evolutionary history, including that in South Africa, has clearly shown how effective citizens can be in holding leaders (i.e. public servants) to account. In the digital age, citizens now have greater and broader access to information about miscreants than ever before. To paraphrase Mandela, in the face of the well-known national problems, ask yourself, “What am I doing to contribute to a better life for us all”? Every contribution is helpful, no matter how small, even if it is in the way you greet, let alone treat, fellow South Africans. Studies show that humans feel most contented in life when they have contributed to the well-being of others. This satisfaction likely is the consequence of our evolutionarily-determined genetic make-up that promotes survival of the species.
In thinking about South Africa’s future, believe the (long-term) evidence and probabilities, not the opinions of “experts”, and especially not the fear-mongers and “Armegeddonists”, whose biases and personalities generally reside on the one end of the spectrum of human anxiety and/or pessimism. Ensure that you are able to identify the dooms-dayers and fear-mongers, especially so-called “experts” who are fear-mongering, as they are likely to appeal to most people’s basic instinct of fear and, in so doing, unintentionally harm the future of South Africa, by promoting fearful, herd thinking and behaviour.
By contrast, “real experts” try to present you with reliable, preferably long-term information (data) that has not been cherry-picked, mindful of their own biases, and allow you to shape your own, preferably considered, opinions. This is easier said than done. Be particularly mindful of “motivated reasoning” and “involuntary opinion-confirmation bias”. In thinking about South Africa’s future, it may be helpful to try to erase your worldview as best as you can, and first seek as much long-term data and evidence as you possibly can. Then try and formulate an opinion based on that evidence, rather than being a victim of the biases described here.
- Dr. James Butler, Neurologist, Cape Town
- Disclaimer: I am no expert in these matters, but simply a citizen seeking to humbly try to separate my biases and opinions from the best, longest-term, most widely available, global evidence about the future of our country, mindful of the inherent limitations of the data and of the uncertainties of life on this planet. It is self-evident that the above is evidence, presented by a single citizen, prone to recall bias, biases of data searches, data presentation and opinion. All quality, preferably “long-term”, evidence that contributes to the prediction of South Africa’s future is welcome. For ultra long-term data, the book Sapiens is a worthy read. “Prediction is hard, especially when it is about the future” goes the saying, attributed to various people.
Cyril Ramaphosa: The Audio Biography
Listen to the story of Cyril Ramaphosa's rise to presidential power, narrated by our very own Alec Hogg.