Macroeconomics Research Group (MERG)
PERSA is partially insipired by the Macroeconomics Research Group (MERG) which was convened in the early 1990s and published a macroeconomic policy framework entitled "Making Democracy Work: A Framework for Macroeconomic Policy in South Africa".
What was MERG?
By Ben Fine, John Sender and Vishnu Padayachee
During a visit to Canada in June 1990, the then ANC President, Nelson Mandela raised the issue of the 'urgent need for a better understanding of economic policy issues in South Africa within the anti-apartheid movement as it prepares for forthcoming negotiations' (quoted in Building a new South Africa: Economic Policy, edited by Marc van Ameringen). The Canadian government moved to offer tangible support. A team of Canadian and African economists (headed by Gerry Helleiner and including John Loxley and Benno Ndulu) was appointed to make recommendations to the political leadership about how to improve the movement's capacity to formulate economic policy. Their work was co-ordinated by the Canadian International Development Research Centre (IDRC).
The Canadian team called for the establishment of a network-based Macro-Economic Research Group (MERG), to 'stimulate and co-ordinate policy research and training in the identified priority areas'. The most urgent priority, they argued, was the development of a 'macro-economic policy framework' within whose terms and parameters various policy options could be tested and economic policymaking take place.
MERG was set up in November 1991 and the research project was launched at a conference in Johannesburg in January 1992. Top international economists, including Americans Lance Taylor and Bill Gibson, were contracted for lengthy periods to train (or support) South African researchers, especially in areas such as macroeconomic modelling where South African expertise was deficient, and funding was provided for research projects and training of black economists across South Africa’s universities and trade unions, with senior academics including those from abroad to guide and advise. At this time, the whole initiative was broadly supported by those attached to the anti-apartheid movement and preparing for the post-apartheid economy, and those involved in MERG had organic connections from MERG across other activities, especially those attached to the ANC’s Department of Economic Policy from which the RDP ultimately emerged following country-wide debate. The continuing significance of MERG was marked by Nelson Mandela’s meeting the team in April 1993.
MERG’s macroeconomic policy framework was launched to the democratic movement at a formal media launch on 3 December 1993. But it was also presented to relevant ANC Departments (housing, health, education, etc). This audience reacted with extreme and apparently concerted hostility, partly because they wished to retain control over drafting policy themselves, but also because many of the audience knew that the ANC’s leadership had already been strongly influenced by orthodox economic policy advice during transitional negotiations through 1993. The volume was simultaneously published by MERG as a book entitled "Making Democracy Work: A Framework for Macroeconomic Policy in South Africa”. Although the book came out under the MERG label, the contributing editors were Ben Fine, Laurence Harris, Vishnu Padayachee and John Sender. The macroeconomic modelling was done by Australian economist, Peter Brain. The overall project coordinator, was the well-positioned veteran activist and economist, Vella Pillay, Treasurer of the UK’s Anti-Apartheid Movement and head of managing China’s international reserves in London. As the representative of the South African Communist Party in Europe, Vella had travelled to Moscow with the SACP Chairman in 1960 to begin negotiating Soviet support for the ANC’s armed struggle.
In addition to the main report, 45 research papers and reports were produced by MERG researchers over two years. Altogether, 64 university-based economists, both South African and international, were involved in varying capacities and to varying degrees in the MERG process. But the momentum that had been built to create, train and mobilise a movement of economists for providing progressive policies rapidly dissipated although MERG did continue under the auspices of the marginalised, National Institute for Economic Policy, NIEP (see here for a sample paper).
Reflections on MERG by John Sender
I chaired the Economics Research Committee of Macroeconomic Research Group (MERG) in the early 1990s. This Committee commissioned working papers from large numbers of South African and other economists, including some who probably now regret (or even deny) their involvement in MERG, such as the CEO of ABSA or the Chief Economist at the Reserve Bank. The aim was to use these commissioned papers as the basis for a report to the Mass Democratic Movement.
In practice, there were growing political pressures to publish policy proposals rapidly, well before the 1994 election. COSATU and the ANC demanded the urgent completion of the final MERG Report and of a macroeconomic “model” to wave at their enemies - as proof that policy analysis critical of the Reserve Bank and the Treasury was sensible and could be underpinned by rigorous quantitative simulations. Many of the commissioned research papers were hopelessly late or of limited policy-relevance, so the book “Making Democracy Work: A Framework for Macroeconomic Policy in South Africa” was very hurriedly drafted by Vishnu Padayachee, Vella Pillay and me. Ben Fine also made a major contribution to key chapters.
Too many of of the economists commissioned and funded by MERG failed to make any written contribution at all to the Economics Research Committee. This failure should serve as a warning to PERSA about the risks of paying people to attend policy workshops when they are unable to write (or even to read) the papers to be discussed. But MERG’s failure to work effectively with economists based at South African universities or research institutes cannot be explained by a peculiar local propensity to enjoy donor-financed free lunches. In 1993, it was hard to find political economists who were well-trained in orthodox economic theory and econometric techniques, but had the intellectual confidence and political conviction to reject these methods. This does not mean that post-apartheid government took a neo-liberal turn for lack of alternatives, although this is often offered as an excuse, but it did make it all the easier for leadership in negotiations to reject and disown the MERG Report as soon as it became available.
Twenty years later, PERSA’s aims will be difficult to achieve because there are still so very few heterodox economists working in South Africa on South African policy issues. It is disappointing that more young South African economists critical of the Treasury and Reserve Bank have not emerged, given the failure of orthodox economists to explain the performance and depth of the crisis in the South African economy. The reissue of MERG’s macroeconomic policy framework, as well as the distribution of the first booklets produced by PERSA may encourage more South Africans and, in particular economists, to believe that it is both possible and urgent to work on policy issues relevant to the poor and unemployed.
