Achieving fair growth in South Africa

The current global economic recession is bound to provide a convenient excuse for the liberal and conservative establishment to prescribe an austere, minimalist state and major cuts on social spending as a panacea for all the economic woes of society. Already the Youth League of South Africa's ruling African National Congress (ANC) is admonishing workers to take it easy on demanding wage-increases and placing other labour demands. They are urging workers to make their contributions to help the country weather the storm of economic depression. South Africa is back to the rampant neoliberal macroeconomics of the Mandela–Mbeki era where workers are asked to tighten the belts to help kick-start and push–push the skorokoro capitalist economy.

But in tackling the problem of economic recession and depression, it is important to take cognisance of the huge income and livelihood disparities between workers, managers and bosses as well as the colossal chasm between the capacity of the rich and the poor. Unfortunately, our economic analysts and politicians have been sipping too much sherry to celebrate the country’s jobless economic growth to worry about the fact that socio-economic disparities and wage-inequalities have almost tripled in post-1994 South Africa. High income- and livelihood-inequality undermine social cohesion, and societies with high levels of inequality are more vulnerable to external shocks such as a global economic recession. High income-inequality is mostly responsible for regular labour strikes and greater political instability, which undermine the development agenda. The sad reality is that inequality is intrinsic and indispensable for the capitalist system. The most basic reason why income inequality causes economic crisis – what Marxists call 'the crisis of overproduction' – is that if workers aren’t paid enough to buy what they (and others) produce, capitalists don’t have enough consumers to buy their products and so they try to maintain their profits by encouraging debt.

The economic recession provides South Africa with an excellent opportunity to shift from perceiving redistribution as a gradual by-product of economic growth to using redistribution as a means to grow the economy in a sustainable way, as well as to promote greater social cohesion and political stability. This implies that the government will have to focus on policy programmes aimed at improving the income and livelihood of the majority of the population, which will in turn enhance the savings levels as well the possibilities for active participation in the economy for the majority of the population. At the moment there is sufficient research that skewed income distribution tends to limit the domestic market, and that redistribution will provide the impetus for consumption, increase aggregate demand, help to do away with access capacity and encourage further investment in capital.[1]

On the other hand, improved income and livelihoods of the majority and greater income equality could boost levels of savings and promote greater social cohesion, thereby creating an environment conducive to economic growth and development. Greater equality improves government structures by enhancing cooperation and trust, therefore reducing the need for costly enforcement of expenditure through policing and various security measures. This calls for a redistributive social policy grounded in the understanding that egalitarian income redistribution would broaden domestic markets, stimulate better capacity utilisation and encourage new investments.[2] The fact of the matter is that the current GEAR (Growth, Employment and Redistribution) strategy of hoping redistribution will be the outcome of the trickle-down effect of economic growth does not work. The story of economic growth in South Africa has actually been the tale of a growth in consumption mostly by the wealthy rather than a growth in income or an improvement in the livelihoods of the general population. When one considers that this mass consumption is itself spurred on by credit rather than improved incomes and enhanced livelihoods, we will realise that there really was little economic success to celebrate.

Before they can even consider ways of improving the income of poorly paid workers or creating jobs for those who have no income, the government and the corporate sector need to review the salaries of top and middle management, political officials and Chief Executive Officers (CEOs), whose huge earnings have no relation to their contribution to the economy. The government should reduce the wages of its CEOs and top government officials and tax the salaries of corporate bigwigs (since they’ll never decide to reduce their own wages) and redirect the money towards job-creation and social services. The first steps in the direction of a redistributive social policy will (or should) be to:

1) Hold onto the ruling party’s election manifesto with regard to bettering the scope and reach of social grants and expediting land redistribution and rural development
2) Improve the quality and access of social services and enhance the social productivity of labour through the provision of free, quality education and healthcare as well as a minimum labour standards, including a living wage and safe and healthy working and living conditions
3) Do away with labour brokers or so-called ‘secondary employment’
4) Introduce a basic income grant and widen and accelerate public works programmes
5) Implement anti-poverty programmes focused on asset creation, livelihood improvement and community-run micro-credit and savings projects
6) Foster the devolution of resources at provincial and local levels and build the capacity of local governments to deliver quality services.

In terms of policies aimed at ameliorating the conditions within local industry and the broader population, the government should increase tariffs on foreign industries and foreign products that are harmful to local industries and local products. They should also increase taxation on tobacco and alcoholic beverages and use the capital accumulated to improve government social spending and push the developmental agenda. As a measure to improve the overall level of savings and foreign exchange available for importing capital goods – as well as a means of promoting social cohesion – the government should seriously consider developing policy programmes aimed at restraining luxury consumption. The government should also cancel apartheid debt and cancel the payment of foreign debt and redirect the money to social services and development.

The government should also develop policies and programmes geared towards redirecting big capital from industries that produce luxury products and those that use little labour to industries that provide essential products and services as well as job creating, labour-intensive industries. Today's difficult economic conditions also call for the government to seriously consider reducing interest rates by a reasonable percentage and to seriously consider moving the goalposts away from aiming at keeping the rate of inflation at 5 per cent to keeping the country away from a two-digit inflation rate. This basically means keeping inflation rates between 5 per cent and 9 per cent until such time that the country is out of economic recession.

Even as we propose these policy reforms, it is critical that we emphasise that the depression (which the corporate media calls a recession), the escalating inequities and uneven development are simply indicators of the rotten state of crony, speculative and profiteering capital. To do away with the rot and decay forever, we have to disabuse ourselves from the lie that there is no alternative to unbridled capitalism. The time is now for us to wear our thinking caps, put on our working gears, roll up our sleeves and work hard for the realisation of the ideal of an egalitarian socialist society. For the sake of humanity we cannot afford not to believe that a more humane world is possible, and it begins with each one of us.

* Mphutlane wa Bofelo is a writer-activist with a passion for using creative education, literature and theatre as tools for transformation and development.
* Please send comments to [email protected] or comment online at http://www.pambazuka.org/.

NOTES

[1] See Thandika Mkandawire, 'Social policy in a development context' and Ha Joon Chang, 'Reflections and lessons from East Asia'.
[2] See Mkandawire, 'Social policy in a development context'.