Each country chooses how to structure its economic affairs to generate economic growth so the benefits can be shared among its citizens. Since the collapse of communist regimes in the late 1980s and China’s economic transformation, the only way left to structure a country’s economic affairs is what’s called capitalism but is in reality a mixed economy in which the balance is tipped in favour of the private sector.
SA is one such economy. But its economy has been stagnant for more than a decade, failing to generate enough benefits for all its citizens measured in terms of employment. This failure threatens to erode citizens’ trust in the economy’s workings.
SA’s challenge is akin to what faced the Weimar Republic, which governed Germany between the end of World War 1 and Adolf Hitler’s rise to power. As historian Eric Weitz explains in Weimar Germany, Promise and Tragedy, “It [the Weimar Republic] was founded in the shadow of World War 1 and amid the crossfires of revolution and civil war. If it were ever to win the loyalty of the majority of the German population, the republic would require a stable and expansive economy.”
That’s the problem facing SA — it hasn’t had a stable and expansive economy for more than a decade. Combined with government failures, this development must lead to a loss of trust in government (which is already apace) and the economy. This is a global problem, as pointed out by Tharman Shanmugaratnam, Singapore’s co-ordinating minister for social policies.
The failure of the SA economy to create enough jobs — the single most important connection point for most citizens to the benefits of economic growth — is most chronic.
“The basic problem we face, and it’s interesting that you see this across a whole range of societies, is the loss of trust in both governments and markets — the loss of trust in the ability of governments and markets to deliver broad-based prosperity,” Shanmugaratnam said in a keynote address to the British Institute for Government in 2019. “There’s a loss of trust in the system giving people a fair chance in life and a fair crack at success, and there’s also a loss of a sense of togetherness.”
Shanmugaratnam cautioned that the loss of trust and confidence as well as “the sense of a lack of togetherness and of solidarity’’ reduces the quality of democracies. SA is already in that zone. One of the major factors behind this is the country’s unemployment rate, which is far higher even than in the US during the depth of the Great Depression.
Pressing challenge
How bad the unemployment situation is, was shown recently by two economists, Charles Adams and Derek You, in a research paper, “Labour Market Trends in SA in 2009-2019: A Lost Decade?”
They describe high unemployment as having been the country’s most pressing economic and social challenges for a long time. It has also proved to be its most intractable policy challenge. Most unemployed are, for obvious reasons, black Africans and those with lower levels of education and no skills. These groups remain out of work for long periods, and on average take longer than other cohorts to find jobs.
American sociologist William Julius Wilson makes the point that the consequences of high neighbourhood unemployment are more devastating than those of high neighbourhood poverty.
“A neighbourhood in which people are poor but employed is much different from a neighbourhood in which people are poor and jobless,” Wilson argues. “In the absence of regular employment a person lacks not only a place in which to work and the receipt of regular income but also a coherent organisation of the present — that is, a system of concrete expectations and goals.”
The positive effects of employment spill over to children, enabling them to absorb some of the disciplined habits of employed parents and neighbours. “Accordingly, when this youngster enters the labour market he or she has a distinct advantage over the youngsters who grow up in households without a steady breadwinner and in neighbourhoods that are not organised about work — in other words, a milieu in which one is more exposed to the less disciplined habits associated with casual or infrequent work.”
With such persistently high unemployment there must millions of SA families and hundreds of neighbourhoods that face the problems described by Wilson. These families are bound to lose trust in the economy — if they haven’t already done so.
• Sikhakhane, a former spokesperson for the finance minister, National Treasury and SA Reserve Bank, is editor of The Conversation Africa. He writes in his personal capacity.
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