Vol.3 No.16, 09 May 2003
Why South Africa's Dual Economy Persists
'Knowledge for what?' I remember my mother crying when the Carnegie Foundation financed a huge research project into poverty in South Africa during the apartheid years. 'Surely everyone knows there is vast poverty: do we need to know its exact extent to the last decimal point?, she fumed as she shelled out through purse and cheque book yet another tranche to forestall someone's destitution.
M.P. Ben Turok has publicly appealed for research material to help the government understand 'underdevelopment' in our rural areas and townships. He puts it in the context of the 'dualism' between the wealth-creating, developed formal economy, and the poor, underdeveloped, largely unemployed sector. In the apartheid era this was accounted for - depending on one's view-point - by racist ideas of Black capacity, or by the systemic exclusion of Black people through apartheid laws. Its survival today is, he says, 'not well understood' in government. And he suggests more information is needed about the economic capacity and potential in poor areas.
What is needed is not more information but proper analysis. For example, there is a popular belief that lack of skills, education and working experience accounts for underdevelopment in poor areas. But it is well known, or should be, that the townships and even the rural areas are home to hundreds of thousands of educated and/or experienced and skilled industrial workers who have been made redundant in the last ten years. They are not unemployed for lack of capacity but for lack of jobs. They are gradually becoming deskilled - for lack of jobs.
Lack of jobs for these people, and lack of resources to develop the skills of the rest, is no mystery either. While the dualism of the South African economy is, of course, rooted in the apartheid era, that is not a full explanation either. If it were, how come 'dualism' has become a feature of every economy worldwide? How come there is a new recognised 'under-class' in every developed economy in the Americas, in Eastern and Western Europe, in Japan and the Far East? In the UK, children from these areas are called 'feral': that is, having gone wild as in 'feral cats'.
How is it that all the features of chronic deprivation - welfare dependence, homelessness, blighted neighbourhoods, prostitution, malnutrition, crime, violence, drug abuse, squalor, diseases of poverty, mental illness and despair - are noticeable features of large segments of even the richest countries, most obviously the United States? You can find almost nothing in the townships of South Africa that you will not find there.
So perhaps the government needs to look for explanations internationally. The fact is that the world, and not just South Africa, is blighted by an economic dispensation that loses employment and creates poverty. It does that by creating a world market in which survival depends on international competitiveness. It does that by allowing capital to travel internationally in search of the cheapest resources, including labour. It does that by rewarding the use of state-of-the-art technology - which always sheds jobs. It does that by ensuring that competitive success, in the form of profits for capital, always goes to those already advantaged.
The result of all that, internationally, is centralisation of wealth, both individually and geographically. Wealth flows from poor to rich - areas and people. In the US, 1% of the population owns more than the other 99%. People with capital get more of it. Workers must compete with each other internationally to retain jobs by reducing the price of their labour. Unemployment is a great way to keep wages low. Jobs for the 'working poor', a phenomenon in all modern developed economies, account for the largest increase in employment in all economies, notably the United States.
So the continued dualism in South Africa is a function of our co-option into that global capital-centred economy. Maybe that was inevitable: goodness knows we were told often enough that there was no alternative, and that powerful interests would punish deviance. Maybe so. But at least let us not kid ourselves by false analysis that underdevelopment, poverty and unemployment can be understood in our own context alone.
Since our liberation we have opened our exchanges to the almost free flow of capital in and out. By that process we have lost billions of rands that could have been invested here. We have also been subjected to the ongoing anxiety that our economic and political policies will upset capital - both our own and others' - causing them to leave even faster. We have been under pressure from them to reduce government expenditure, to deregulate labour conditions, to reduce taxes, to privatise our assets and to open our trade to more advanced economies.
We have done all this. All of them have re-enforced the dual economy. The reduction of tariffs has resulted in sacking hundreds of thousands. Government surpluses have gone to tax reduction. Social expenditure is regarded as a cost, not an investment. We have privatised as fast as we can, despite job losses. We have subtly subsidised export industries, all of them capital intensive, and failed to develop our domestic markets. We have contained government expenditure in obedience to the interests of capital, which requires low inflation and high interest rates.
The result is a chronic shortage of purchasing power for the majority of South Africans, and a concentration of wealth by the minority. Of course the townships and the rural areas remain poor. We do not need detailed research to tell us why. What is needed is a deliberate policy shift designed to put income in the hands of poor people and to develop a local focus. We shall never be successful globally until we have a prosperous local economy. The other way round does not work.
© South African New Economics Network 2006. Page generated at 17:11; 24 September 2006