Having the world’s highest inequality and youth unemployment is not a coincidence.
Efforts to maximise reliance on the state have benefited the politically connected while pummelling growth and employment. ANC elites have retained their privileges through exploiting “inequality”, a catchphrase for social injustices, to undermine accountability while entrenching widespread patronage.
Rarely are three or more words used to describe our economy when one of them isn’t “inequality”. But if we could choose between having either normal unemployment rates or a normal distribution of incomes, surely we would instantly choose the former.
The pursuits of income equality and full employment are not compatible when worldwide growth is driven by rapid innovations amid hyper levels of competition and integration between and within global supply chains. The two goals are particularly incompatible for countries with high unemployment.
Despite a profound need to prioritise job creation, our economic deliberations lack a vision which could possibly achieve normal workforce participation rates for school leavers within a generation. We have many millions of frustrated jobseekers, most of whom are, or will become, permanently marginalised. A substantial portion of school leavers will continue along this conveyor belt to economic exile for the foreseeable future.
While it is prudent to attract investment flows through adopting pro-growth policies and purging growth obstacles, job creation must be our top priority. The two goals align, but only if job creation is prioritised. If they were serious about creating jobs, our policymakers would pivot to adopt vastly more formidable growth-inducing policies. Investment flows would then surge.
Accountability
The core impediment is that our dominant political party is run by a mix of Marxists and rentseekers united by their mutual support for redistribution ahead of growth. As this entrenches poverty by precluding adequate job creation, the party must dodge accountability.
It does this by selling the grand narrative that it is fighting inequality. Despite the World Bank having recently identified South Africa as the world’s most unequal country, the ANC is rarely challenged in this regard. It should be. The majority of voters who are poor, unemployed or both aren’t focused on inequality.
Our political deliberations have been deformed to interpret ubiquitous patronage as a legitimate response to high inequality. Instead of directly challenging such fallacious thinking, our centres of influence have accepted the seemingly middle-ground position that investment-led growth constitutes a credible plan.
It doesn’t because we are on track to continually sideline a huge portion of our young adults. When people have been out of school for several years without having ever gained valued skills, their life prospects are crushed − particularly if most of their contemporaries are similarly stranded. Employers will routinely prefer recent school leavers or older workers with experience.
Noticeably reducing unemployment among those, in their late-twenties and older, who have never been employed is unachievable even among the most favourable of our realistic long-term growth scenarios. Our national dialogue simply ignores that having a huge bulge of long-term unemployed creates a massive impediment to sustaining high growth.
Black-white disparities
The unemployment rate for young adult South Africans is solidly over 60% for blacks and under 8% for whites. If we had a functioning national discourse around economic policies, such black-white disparities would dispel delusions around BEE’s effectiveness − particularly given that whites constitute less than 5% of South Africa’s youth population
BEE and localisation policies are hard enough to defend individually. There is no basis for defending the embrace of these mutually reinforcing growth anchors.
Localisation must be ditched in favour of prioritising export-led growth − with the emphasis on value-added exports. BEE has also proved to be counterproductive.
Governance of state-owned institutions can be much improved and privatisation can help to accelerate such progress. Combining such measures with potent pro-growth policy reforms would unleash sustained high growth alongside significant capital commitments. Might such efforts provoke even higher inequality? In the near-term, that is a real possibility. Progress doesn’t happen uniformly.
Broad prosperity is an achievable long-term goal if appropriate policies are adopted. Instead − and despite voters having identified jobs as their top priority − the number of unemployed South Africans becoming permanently marginalised is set to rise indefinitely.
When it comes to policy debates the sane among us are not losers. To be a loser you need to be in the game. If we were genuinely contesting policy options, we would topple the political exploitation of inequality by political elites.
[Image: Frantisek Krejci from Pixabay]
The views of the writer are not necessarily the views of the Daily Friend or the IRR.
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