Sustained, if moderate, growth; inflation relatively under control; the rand strengthening — on the face of it, our economy has been doing well. “The tide has turned,” President Thabo Mbeki could say in his February State of the Nation address.
However, Mbeki quickly added that “there are many in our society who are unable to benefit directly from whatever our economy is able to offer. This reflects the structural fault in our economy as a result of which we have a dual economy and society. The one is modern and relatively well-developed. The other is characterised by underdevelopment and an entrenched crisis of poverty.”
Interestingly, the Democratic Alliance has also begun to evoke this notion of duality. Raenette Taljaard bases her recent plea for export processing zones (“SA must enter this no-go zone”, April 11) on the premise that “we have a dual economy, with substantial First World and Third World components …”
Is this the beginning of a consensus on a growth and development strategy? I think not. The idea of a “dual economy” is open to two radically different interpretations.
One view, Taljaard’s, sees no systemic relationship between our “First” and crisis-ridden “Third” worlds. The “modern” economy is the locomotive that will pull our entire society forward.
Taljaard extols our “sophisticated economy” and “superior financial infrastructure”. The “Third World” needs to be hitched on to this, by providing, for example, cheap labour for export processing zones (EPZs), and the “First World” to be given an unimpeded run.
For Taljaard, the current shortcomings of our economy are essentially externalities. In particular, there is “insufficient political commitment” from government to its own “liberal” policies.
Ravi Naidoo, in his response to Taljaard (“Sweatshops are not the solution”, April 17), does an excellent job in savaging the DA’s new but retrograde policy package, with its flagship proposal of EPZs. These are zones in which some of South Africa’s poor, largely unprotected by legislation, will have the privilege of competing against other Third World workers for the lowest pay in the world.
Consider the DA’s moral justification for advocating this variant of unsafe, unprotected globalisation: “Confront any of the millions of jobless South Africans with the simple option of no job or a job in an EPZ — how would they choose?” It is an argument familiar to every kerb-side pimp.
Across the African National Congress-led alliance, there is consensus in rejecting this free market fundamentalism. But how do we conceptualise the linkage between “First” and “Third” worlds within our economy?
One significant view within the ANC would see the “Third” world as a persisting “left-over” from the past. The remedy becomes active, but perhaps time-bound, political interventions to correct market failures — targeted skills development (to enable the unemployed to make it into the formal sector), the temporary retention of some parastatal capacity to address “back-logs”.
From this intermediate perspective, the critique of the formal sector is less systemic and more moral, rights-based, even righteous: ownership and senior management are excessively dominated by a racial minority. What is required is not so much transformation as the rightful transfer of some existing power and wealth.
A more substantially alternative approach to our dual economy would be to understand systemic linkages between the “First” and “Third” worlds. Progress, stabilisation, competitiveness in the “First” world enclave are the structural determinants driving persisting and deepening under-development in the semi-formal zones (the Khayelitshas) and informal (deep rural) zones.
The more the “modern” enclave advances along its current accumulation path, the more it reproduces casualisation, informalisation and structural unemployment. The resurgent and remarkable export competitiveness of our auto industry, for instance, has seen a net loss of jobs in the sector, and deepening poverty in the Port Elizabeth-Uitenhage area.
Taljaard is in denial about the actual accumulation path under way within our economy. She tells us that “unit labour costs are rising, and productivity declining, with inflationary consequences”.
Ann Crotty, Business Report correspondent, is more to the point when she observes wryly of the past decade: “You have to go back 21 years to find another period in which capital did as well … The return on capital has been significantly enhanced, while the return to labour has been mercilessly squeezed.
“In real terms labour costs in South Africa have fallen exceptionally fast in the past decade, which is why our productivity has recorded the fifth-biggest increase of the 46 largest economies in the world.”
Policy responses to this reality are, unfortunately, not easy. Allowing the “locomotive” of our formal economy unimpeded space for more rapid growth will deepen, not ameliorate the crisis.
On the other hand, we cannot simply opt out of the world, abolish our auto industry, or proceed with macroeconomic populism.
So what do we do? While full employment is desirable, our formal economy will not seriously dent — whether by way of EPZs or training — the 40% unemployment rate in any foreseeable future. We need to enhance job creation and retention, but we also need to think about sustainable livelihoods outside the formal sector, and we need to see this as integral to any growth and development strategy.
Some small, medium and micro-enterprises, including cooperatives, might be on their way to becoming fully-fledged, formal sector entities, but that should not be assumed to be the only trajectory.
Success might also be measured in terms of relative autonomy from the market — so that the poor are not coerced into Taljaard’s option: starvation outside the market, or starvation wages within it.
The parastatal sector should be seen as a long-term and systemic response to underdevelopment, not merely as a temporary compromise to deal with apartheid backlogs.
Social security must not be an unfortunate, dependency-producing stopgap, but a major effort at structural redistribution to foster sustainable livelihoods for the long-haul. Urban planning and infrastructure must encourage densification, and not perpetuate our endemic enclave and periphery patterns.
In the late 19th century, South Africa was one of the world’s major destinations for fixed direct investment. Growth was stupendous, as SA Inc was floated as an export processing zone, parasitic upon cheap labour coercively reproduced in native reserves.
A century later, despite our best efforts, we have not yet transformed this deep-rooted, dual economy accumulation path.
Jeremy Cronin is deputy general secretary of the South African Communist Party and an African National Congress MP