Vol.3 No.17, 20 May 2003
Public Works? Go For Something Simpler
It would be difficult to find anyone who disagrees with the need for job creation by spending on infrastructure through a public works programme. We have a crying need to get purchasing power by all means into the hands of poor and unemployed people. The question is should public works spending be the only way we do this.
Choosing a massive public works programme as the only solution to the crisis fails to recognise that such a programme is bureaucratically problematic, temporary, gender biased, and potentially exploitative of its intended beneficiaries. Current proposals argue for a huge increase in labour-intensive investment in infrastructure in the public sector, largely implemented by the private sector. It would require that people work for well below the minimum wage in even less regulated labour conditions than today, and that even these poverty-level jobs would be temporary.
Bureaucratically and politically this is a nightmare. Government's already stretched capacity to coordinate and control large multisectoral strategic intervention would have no previous models. The scheme is fraught with opportunities for private sector corruption of public officials. Government would have to persuade the trade unions to allow millions of people to work for wages below those paid to workers outside this scheme. This is unlikely if only because it is impossible to operate two levels of pay in the same economy, so this intervention would threaten wages nationally.
People would have to work full-time for pay too low to enable them to support family life. Labour-intensive jobs are likely to go to young men, excluding women, the sick and elderly people, who would remain dependent on their breadwinners' exploitative wage levels. Even those prepared to accept 'anything rather than nothing' would need to accept the temporary status of this inferior 'work'.
But even if all this were overcome, the scheme would require an unsustainable doubling of the rate of growth.
Despite these shortcomings, such a scheme has the backing of the powerful private sector lobby in South Africa, which is highly influential politically. It is being widely touted as a solution that has 'pump-priming' antecedents elsewhere, and as an alternative to the much simpler and more direct attack on poverty of the Basic Income Grant (BIG).
Almost all of the best ideas are the simplest. For that very reason they are often also the most difficult to sell. We are used to the idea that anything that addresses an entrenched problem simply and directly must be fatally flawed. So we must look for something as complicated as the problem is painful and dangerous.
Such is the fate of the idea of the BIG. The painful and dangerous problem in South Africa is poverty - lack of income, lack of purchasing power - on the part of at least half our population; and this has led to widespread hunger, crime, mass home dispossession and utility cutoffs, gang cultures, family abuse and massive misery. Our government has followed to the letter all the complex prescriptions for growth and employment recommended by conventional economists. And the problem is worse.
The obvious solution is two-fold. First, question the prescriptions so far applied. Second, meanwhile give people what they lack - money, via a BIG. The current proponents of a massive public works program recommend continued obedience to the current macroeconomic paradigm to produce an environment 'super attractive' to investors. This will perpetuate South Africa's vulnerability to the inherently unstable international economy, making it impossible for our government to promote our internal market and the application of our own capital to our own development. The President himself is frequently on record as pointing out the dangers to our democracy of the way the global markets fetter government's ability to design our own political economy.
A Basic Income Grant would have the prime advantage of delivering purchasing power directly and reliably and regularly to those who lack it. Small local economies and livelihoods would develop, activating local resources and skills to regenerate local development. It is developmental in a way that top-down temporary employment cannot approach. It avoids the vast expensive waste and disillusionment that donor agencies now deeply regret when evaluating aid-driven schemes. A BIG is also gender-neutral and ensures that children, including orphans, are included.
Above all a BIG is relatively simple to administer. In principle it is no more difficult than delivering the pension. It requires no South African to prove their entitlement, because it goes to everyone. It is clawed back from tax-payers through the established Revenue Service. So it remains only with poor people. At first it would cost something like R24 billion annually; but this would reduce as its developmental aspects kick in. Since everyone is entitled to the grant, there is relatively little scope for corruption.
Of course nothing on that scale can be introduced without strategic and logistical planning. But compared with the bureaucracy needed to double South Africa's growth rate from the top by a complex relationship between government and the private sector, it is chicken-feed. Its most attractive feature is that it gets resources directly to where they are needed with a minimum of bureaucracy, and with the maximum chance of growing the economy.
Unfortunately it is that feature of simplicity - plus the fact that it has no direct role for the private sector - that seems to be proving a stumbling block. That is a pity. There is no reason why a BIG cannot be combined with a simple government-directed programme of infrastructure investment. That is the ideal.
© South African New Economics Network 2006. Page generated at 17:05; 24 September 2006