We need to deal with this notion that trickle-down economics works in South Africa. What has been clear over the past two decades is that the expansion of our economy hasn’t filtered through to the vast majority. Unemployment has remained stubbornly high since the mid-1980s when deindustrialisation began in earnest as an Asian factory gained in strength and through our boom years leading up to 2008 global recession.
While we’ve had terms such as “black diamonds”, made popular by the Bureau for Economic Research at the University of Stellenbosch at the height of the super commodity cycle that boosted our prospects, it was a phenomena that proved fleeting.
The emerging black middle class that was supposed to drive the country’s economic transformation has come under significant pressure over the past decade as corporate SA looked to rather invest offshore and public sector spend dried up as a result of a badly executed and corruption-tainted expansion of electricity generation in the main.
The Covid-19 pandemic has just added another dampener. While we may celebrate the first quarter GDP figures released by Statistics SA this week, the agency points out that the size of the economy is now comparable to 2016. It’s a sobering thought.
But here’s a hypothesis that the Mail & Guardian has been playing with this week as we considered the latest statistics that do point to a rebound in the economy. What if, in a best case scenario, markets turned in emerging market countries’ favour for the next decade? Would the fortunes of the regular man or woman on the street change significantly?
The structure of the South African economy and the state’s focus on primarily GDP as a marker of its success or failure warn us that once again the benefits of any sustained upturn in our fortunes would only benefit a few. Any structural reforms that would ensure a greater share of economic wealth that would affect the short to medium-term target of GDP growth at all costs quite simply mean they won’t be adopted.
This is not uniquely a South African problem. Since the end of the roaring Twenties, GDP has been the primary target of governments in the modern democratic world. It’s been a marker of their success or failure as the idea of “trickle-down” economics has largely won the argument.
This is despite the fact that over many economic highs and lows, the harsh realities for most South Africans, Brazilians and Chileans have proved impossible to escape. We have to rethink our GDP focus. British economist Kate Raworth asks a pertinent question in her seminal 2017 book, Doughnut Economics, that we should all consider, in particular our policymakers. In the context of today’s social and ecological crisis, how can GDP — “this single, narrow metric” — still command international attention?