The Macroeconomics of Poverty

A new conference has been announced on how to solve poverty and inequality in South Africa:  http://www.carnegie3.org.za It is noticeable that in the "new paradigm" proposed for the conference two things are never mentioned: economic growth and political economy. Consider instead this article by Moletse Mbeki: http://mg.co.za/article/2012-05-24-why-the-anc-has-failed-to-transform-sa. I think Mbeki is correct: if you want to discuss seriously poverty reduction and inequality, the functions of elites and the institutional set-up they are providing is essential. There is a real difficulty in South Africa to frame the problem in this way. Partly is the normal issue that elites do not commit suicide: the discussion about poverty and inequality sometimes sounds like a discussion about policies that would minimize the impact of inequality on the life of the elite (we could model this). Partly is an intellectual difficulty to accept the idea that a real strong growth process is revolutionary, it destroys the old society and create a new one that is unpredictable and cannot be controlled - it is not soviet planning at work: it is creative destruction.

p.s. I know that these are only notes for myself and that nobody is reading, but just for future reference the definition of elite South Africa needs to be modelled. As Mbeki points out and as we have mentioned in this paper with Lawrence Hamilton, in South Africa we have an extreme separation between political elite and economic elite along racial lines which is unique and make the political economy analysis very interesting. A paper that could be adapted to these circumstances is Esteban, Joan, and Debraj Ray. 2008. "On the Salience of Ethnic Conflict."American Economic Review, 98(5): 2185–2202.