Our expert says:
In practice, it obviously depends on the family and its policies and customs. Nowadays, I'd think it was uncommon. But as we've discussed so often, physical punishment is both much less effective than psychological re-training - a clear set of rules, unwanted consequences for breaking them ( such as no TV for a day, grounding, whatever ), and rewards for keeping to the rules ( something parents too often forget, giving rewards randomly, so they are not truly rewarding and don't encourage anything except just expecting goodies to arrive frequently ).
In the situation you describe, it's not surprising the kid feels scared of oupa, as the smacks came pout of the blue, unexpectedly, and probably in his small mind aren't really related to his playing with his cars.
Maria is right, oupa must be calmly and pleasantly told that this is not his role and that his parents have drawn up the rules and penalties, and want to stick to those, and he should report to them if the boy is being outrageous. The actual offense on the child' side sounds trivial and not deserving of a violent response - and of course that is the other snag with oupa's sort of discipline - it teaches kids that its OK to be violent to get what you want, and to be violent when you're angry.
And she's right, too - where was ouma in all this, and how can she help ?
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