Don?t put your daughter on the stage, Mrs Worthington? ran the old song. Today?s version might continue: ?Put her into marketing.? Why? Because in today?s world, with shrinking markets, the most highly prized and best paid profession is marketing. If you can get my product a higher share of falling demand, you are worth your weight in gold, Ms Worthington.
This fundamental fact about the world economy today is ignored because it doesn?t fit the current ideology about growth as a function of free trade and capital movement. Unregulated global competition ensures that successful economies export their problems to poorer ones, and expansion can get you into trouble.
Old Smoothie Manuel?s budget was based on a belief system that is outmoded. His critics did not pick this up because, with the exception of the Congress of South African Trade Unions, they are old economists to a person. They have consistently urged the government to plunge South Africa headlong into the global competitive market.
It has not worked. We have lost capital and employment, far from gaining them. Poverty is worse. Our people cannot buy what our enterprise can supply. We have to seek export markets because our home market is stagnant. None of this is properly analysed. So critics of the government end with anguished cries that the government should ?do something about poverty?.
Let?s get down to some basics. First, poor people are poor because they do not have money to spend. Our enterprises fail because they do not have a decent market. Half our population is wasted because it is not working. That means they are uneducated, sick, alienated, helpless, unable to afford the services the government supplies. Why is this?
The old economics paradigm claims it is because we are not fully competitive globally. This is tautology. The minister?s budget speech referred to four respects in which our economy is being depleted by our unrealistic dependence on world markets: the international recession; the unpredictability of our currency; rising food prices that are denominated in dollars; and weird perceptions by foreign investors. None of these is within our own control.
The fact is that old economics focuses on the wrong end of economic activity ? production rather than distribution of income. Production and labour productivity are no longer a problem. Technology has ensured that the world can produce as much as it needs and more. There is now internationally between 30% and 40% under-utilisation of existing capacity. That is, without any more investment we could produce between 30% and 40% more. We don?t do that, because the demand is lacking.
The problem is getting into the hands of people the means to buy what can be produced. For the past quarter century the global system has forced a focus on production: raising labour productivity (as though we were short of labour) and keeping inflation down. We need to move on to the current problems of distribution of income.
The world is not short of labour, but we have a rapidly diminishing resource base. We need ways of using people instead of finite natural resources.
So how could the minister have started that process? First, he would have told us exactly how serious poverty is. Second, he would have announced plans to bring in a Basic Income Grant when the necessary implementation processes have been completed. Third, he would have announced the renegotiation of trade agreements that have flooded our country with cheap goods, which we produce here nearly as cheaply. He would have put employment before consumer price. That would ensure that the extra money in circulation ? the point of the exercise ?would not simply result in more employment in China and the European Union. Fourth, he would have financed a massive increase in funding to regenerate poor communities, rural and urban. Local community development, through the injection of money circulating locally, gets small business going, around the use of local resources, not imports. Finally, he would look into existing taxation systems that privilege employment of labour and discourage resource use.