Fanciful thinking drives DA policy
- DA long on jobs, short on equality
- DA unveils its single economic plan
- DA stands firm on jobs plan
- Economists question DA's new economic plan
Sometimes one can only be thankful for modern technology. In the old days, the Democratic Alliance's 88-page economic manifesto would have been another weighty tome to carry around. As it is, its virtual weight is just about equivalent to its intellectual heft.
That said, the document does point out some important questions about how we set growth targets, evaluate economic evidence and think about the factors behind inequality and the role of the labour movement in that context. Admittedly, the DA's document illuminates these issues mostly inadvertently by pushing its rhetoric so far that inherent contradictions become more obvious.
The DA's plan for growth and jobs is built on an 8% growth target. As it says, "the aim of this document is to provide a policy programme to build a better life for all South Africans with 8% economic growth as the essential ingredient".
It is a pity that 8% growth is so essential, because since 1994, when South Africa won democracy, just five countries have achieved it. The World Bank's world development indicators list these well-known, deeply equitable powerhouses, which are – wait for it – China, Bosnia-Herzegovina, Azerbaijan, Angola and Turkmenistan. As this very short list of countries demonstrates, sustained high rates of growth are neither easy to achieve nor inherently linked with the creation of a more equitable and inclusive society.
The exaggerated emphasis on rapid growth as a panacea appears most clearly when the DA singles out Brazil as "one of three examples of what high growth has achieved in selected developing countries". It points out the substantial fall in the poverty rate in Brazil and reiterates that "with annual growth in gross domestic product of 8% or more we could begin to see similar trends in South Africa".
Moderate rates of growth
Actually, Brazil grew more slowly than South Africa since 1994, according to the World Bank's data. South Africa's growth in this period came to 3.3% a year, compared with 3.1% for Brazil. Both countries were slightly below the average of 3.6% for all middle-income economies, excluding India and China.
The Brazil story is actually about something else. It is about how moderate rates of growth, if associated with rapid improvements in equality, can lead to popular enthusiasm and social cohesion. The extraordinary gains in equality in Brazil in the past decade meant that the majority of the people there experienced substantially better working and living conditions despite only average growth rates in the overall economy.
Inequality in South Africa has remained almost unchanged in the past decade and economic growth brought only relatively modest gains to the majority of our people.
In contrast to the DA story, Brazil and South Africa have adopted almost identical approaches to growth and inequality. The state has played a stronger role in financing development in Brazil, as well as undertaking more protectionist trade measures. But the two countries have both provided relatively generous social grants to poor families and both have extended the minimum wage.
The main difference is that, historically, Brazil has had much lower rates of joblessness, thanks in large part to a stronger agricultural industry that generates employment on a larger scale. A third of its exports come out of the agricultural value chain. South African exports are still dominated by mining, which provides comparatively little employment.
In Brazil, the combination of social grants and higher minimum wages, in the context of the commodity boom of the 2000s, contributed to a qualitative improvement in overall equality. In South Africa, although similar measures improved the lives of millions, they did little to address inequality because higher mining rents went mostly to investors and not to workers.
The emphasis on an exaggerated growth rate as a panacea for all South Africa's economic and social ills is not limited to the DA. It mirrors a deeper debate – whether it is easier to achieve unusually high rates of growth or to accept more realistic growth rates and ensure that more South Africans benefit through the creation of employment and other measures. If you are at the top of the current economic structure, really rapid growth seems the easy way out. It would permit everyone's living standards to rise even as equity improves – or, as the DA puts it, "growth creates wealth and with more wealth there is more to share: enough, for all, forever".
If we must accept normal rates of economic growth, equality can be achieved only by moderating income gains at the top. The sacrifice need not be oppressively large, and, as in Brazil, they may be offset by improvements in the social and political atmosphere.
These economic and social realities are difficult to accept for a political party that wants to extend its base beyond the well-off by promising, well, everything to everyone, forever.
The DA document does make some effort to explain inequality. It boils down to an argument that vested interests maintain the status quo, or, as the DA puts it, "for business and political elites with privileged access to employment opportunities, or those in positions protected by South Africa's rigid labour regulations, life is relatively comfortable. They have an interest in maintaining the status quo ... Closed business networks, excessive bonus payments, steady wage increases and generous government spending have enriched this minority." This approach does lead to some interesting and worthwhile proposals on achieving more equitable ownership.
The argument about union federation Cosatu's members is less tenable or fruitful. Although it is repeated consistently, the DA gives no evidence to support its contention that they form part of a privileged elite.
There is a reason for that: the data shows that, although formal workers, and specifically union members, are better off than the poorest and the jobless, they are hardly a true middle class. If they were, South Africa would not rank among the most inequitable economies in the world.
According to the Quarterly Labour Force Survey, the median pay in 2010 for a union member in the private sector was just R4300 a month. That hardly aligns with the view of a privileged, self-serving labour elite. In the public sector, pay was better, with the median at R8000 a month.
Furthermore, the share of labour in the national income declined during the 2000s, largely because of soaring mining rents. The increased share of profits in the national income helped to shore up deep inequalities despite economic growth.
Portraying Cosatu as part of some amorphous elite group that holds down everyone else does not make much sense from the standpoint of the economy, but it has a compelling political logic for the DA. On the one hand, it dilutes the focus on the real rich – those who benefit from the status quo of deep inequality. On the other, it provides a basis for arguing that the state should actively seek to undermine one of the most effective organisations of working people in South Africa. That hardly seems a recipe for equality.
The animus towards Cosatu reflects the political underpinnings of the DA's economic policy document, which in turn explains why it is so short on effective proposals and so long on rhetoric.
The DA seems to have embarked on a quest to build a political base by appealing to those who feel wronged by the status quo, while still maintaining support from the most privileged groups. This deeply inconsistent policy document is best understood as a step along that hazardous path.
Neva Seidman Makgetla, deputy director general for policy in the economic development department, is writing in her personal capacity