Suddenly, the favoured way of talking about South Africa’s poor and marginalised is to call them members of the ”second economy”.
Politicians and those aligned with the government now frequently refer to a modern, wealthy formal ”first economy”. The first is then contrasted with the second.
This ”two economies” characterisation first cropped up in President Thabo Mbeki’s weekly letter in ANC Today. That the idea has taken such firm hold is testament to Mbeki’s powerful influence on economic thinking.
One use of the two economy view is as a marketing tool, assuaging foreigners’ Afro-pessimism by directing their attention to the sexy, modern economy. After all, this is a South Africa that manufactures Mercedes-Benz passenger cars, among others, to world standards, that is wirelessly connected for e-commerce, tailored and groomed to take its place in the world.
The other application is to focus attention on the possibility that higher growth rates may not mop up unemployment. In this view, the unskilled or semi-skilled in the second economy will not benefit from the higher skills needed as growth takes off. Resources need to be directed to these people, in the form of basic services to lessen the burden of poverty, and training programmes to try to give them the skills to enter the first, formal economy.
There is some cogency in this. Grand apartheid designed the homelands to be separate, Third World states, and townships as their satellites. The all-white South Africa was to remain First World. So it is an inherited reality perhaps best understood by an old cliché — South Africa is a country where First and Third World exist side by side.
The trouble with such dualism is that its use is limited and — because it may be imperfectly understood or misused — dangerous. Those of us who live within South Africa’s borders are all part of one economy.
One danger is that too many people can be trapped into a new apartheid thinking. Sometimes ”second economy” is short-hand for ”African”. Yet many black people are very much at home in the formal economy, and more white people post-1994 have found themselves in the informal sector, either subsisting or in forced self-employment.
Another danger is that we can be too easily distracted from the stark reality of inequality. Increasingly, this is appearing within race groups as more black people climb into the middle and upper middle classes.
But hasn’t the government put poverty alleviation high on the agenda? Yes, but concern about absolute poverty and improving the lives of the poor is not the same as concern about inequality.
To quote Branko Milanovic’s paper, Why We All Do Care About Inequality (But are Loath to Admit It), the concern with poverty may act as an anaesthetic for the bad conscience of those on top of the pile.
”The concern with poverty is a price that the rich are willing to pay so that no one questions their incomes.”
Inequality in South Africa is so immense that it could well move from being uncomfortable to dramatically destabilising.
Concern with inequality is usually associated with South Africa’s ”left”, mainly in the union movement. Its prescriptions tend to be anti-market, and simply see the first economy as a milk cow to feed the second, in the process turning the poor into passive recipients of state largesse.
To the extent that the two economies approach leads to freeing up the economy through careful deregulation, privatisation, liberalisation and support for competition legislation, it is to be welcomed. The larger tax base can be used for sharply focused interventions to boost public services, such as health, public transport and education, that help overcome inequality in the economy we all share.
As Mbeki understands it, the first economy must be supported to function maximally, as the country’s wealth-generator. Resources need to be diverted from the first to the second economy so that they can be integrated.
That understanding can be distorted into policy choices — or political pressures that distort policy — that unintentionally keep the second economy separate and unequal. The government’s policy on black economic empowerment is deliberately broad-based and emphasises a range of measures to bring black people into the formal first economy. Yet pressure continues for equity transfer, which in itself could exacerbate inequality. If improperly handled, it could damage the first economy.
Let us all concentrate on making a market economy work well, especially for the poor. It should not, in King Lear’s words, merely be used to ”shake the superflux” of the wealthy to them.
Reg Rumney is the executive director of BusinessMap