Why it makes sense to build the goddamned train

It may not be fair on a Sunday but I am going to introduce to you a concept in economics called secular stagnation. It might be what’s wrong with us. Secular stagnation is a Great Depression concept brought back to life in 2013 by Larry Summers, once Bill Clinton’s treasury secretary. It describes the phenomenon of low economic growth despite the conditions being ideal for growth. Low interest rates, low inflation, low unemployment. Why can even advanced economies not grow faster? Where’s the demand?

The question hovered as I watched the scenes of mayhem as mobs of thugs roamed parts of the Witwatersrand this week burning and looting mainly foreign-owned businesses and hurting people. It looked like the final meltdown. Some among us, as Thabo Mbeki used to say, may even wish it had been, just so they could have been first to say they were right.

But, of course, it wasn’t. Even the next time won’t be the final time. Nor the one after that.

The thing is, the obvious answer to the stress in our society is economic growth. The government knows it, business and unions know it and so does the wider Left community of economists and activists. Larry Summers knows it. Ask the Japanese. Where’s the demand?

But the really interesting thing about secular stagnation is not that it implies a long period of low growth no matter how good the macroeconomic environment appears to be. It is that it leads a serious establishment economist like Summers to roughly the same conclusions as left-wing economists in SA get to via their own ideological paths.

The pilot fish of low growth is almost always low demand. We see it here. No-one is buying anything.

Stroll the Rosebank Mall in Johannesburg any afternoon. There’s no-one there. Try selling a R5m house for what you paid for it.

And the answer to it, all these economists across the ideological spectrum seem to agree, is to stimulate demand. To somehow find a way to get people to buy things again.

In SA we would want people to buy things we make here. Your internal market, as big economies like the US and China prove, is key to kick-starting not only your economy but

also its complexity.

The more things you make that people want to buy, and the more complex the things are, the better your chances of driving further growth through exports.

Take the train from Boston to New York and you can see in an hour what made America rich — it is infrastructure. Steel bridge after steel bridge. Made in America. Look at modern China building airports and railroads like there was no tomorrow. It’s crazy. It’s infrastructure.

And that’s what Summers has settled on and that’s where a lot of local economists are too, Left and Right. It makes sense to build a high-speed train line from Johannesburg to Durban.

It makes sense to build a new city. Imagine the jobs it would create, the skills and the experience. Imagine the TV sets and fridges and stoves a new city would need. The transport, the connectivity and the maintenance.

All President Cyril Ramaphosa got when he suggested these things was abuse from people who had decided he had already failed. And that’s because we do not know how to talk to each other.

We’d better learn. Summers’ answer to secular stagnation is for the US government to build infrastructure, and lots of it. He answers people who say it’s difficult by reminding them that in World War 2 US general George Patton built a bridge across the Rhine in a day.

We are also at war. This week is a reminder. The way to win is to fight it together. To get out of our ideological foxholes and together at least try to make a plan. Conventional economists and left-wing ones, business and unions. Everyone needs to be heard. And the state can lead by giving the private sector its lead.

If you’re going to build a fast train to Durban, map out the route and get business to build it and run it for 20 years.

But there’s nowhere left to have the necessary conversations. Nowhere to have an idea without getting shot down. The media is the worst place to try.

You want to cut interest rates? Sure, but then you damage savers and may also lower demand as they try to save more. The solution to every problem always complex.

The best thing is just to decide. Build the goddamned train to Durban.