If your parents had chosen to move to the US before you were born, your odds of becoming affluent would have improved. With few exceptions, this statement holds, irrespective of when or from where your family emigrated. By understanding why, we can better illuminate SA’s economic challenges.
With a median household income above $150,000, Indian Americans are the highest-earning ethnic group in the US, well ahead of white Americans. The two groups with the highest poverty rates are the only Americans whose ancestors didn’t choose to migrate there: Native Americans and black Americans.
Depicting such contrasts triggers misguided biases. While black Americans have lower median incomes than whites, black Americans who grew up in two-parent households have been shown to earn more than white Americans from single-parent homes. That observation can also trigger some people, but it helps to highlight that collaboration is a fundamental building block for both families and societies.
Outlook matters. The strong familial bonds of migrants to the US helped to reinforce their belief in the so-called American dream. Conversely, slave families were often split up. Choosing migration requires optimism fuelled by determination. America’s success-inducing culture was shaped by waves of diverse migrants who shared values rooted in optimism, determination and patriotism. High social trust encouraged collaboration among disparate groups, sparking creativity that induced continual productivity gains and sufficient optimism to save and invest in the next generation.
At the family and national levels, rising living standards require enduring productivity gains alongside sufficient savings and adequate returns on investment. These fundamentals are vulnerable to ruling elites exploiting commodity wealth using coerced labour, whereas this is harder with manufacturing and much harder with services-based companies which benefit greatly from having motivated workers. However, ending the politically supported oppression of mine- or farm workers won’t spur broad determination without more favourable employment opportunities.
Research by the UN Conference on Trade and Development showed two-thirds of low-income countries depend on commodities for more than 60% of export income. Roughly half of SA’s export income is from commodities as manufacturing exports have suffered from the anticompetitive effect of policies intended to redress historical inequities, such as BEE and localisation.
The US economy was shaped by European migrants who, in the country’s early years, relied substantially on commodity exporting, particularly agricultural products from southeastern states. Households saved sufficiently and earned adequate returns for the country to be able to aggressively industrialise, leading to huge productivity gains. More recently, the US has deindustrialised while becoming the world’s largest exporter of services.
In SA’s early post-1994 years, manufactured exporting grew encouragingly and it seemed the country would, contrary to expectations, rapidly achieve sufficient trust among diverse groups to create a dynamic high-growth economy. Jacob Zuma’s presidency began in 2009 and quickly became associated with corruption on a large scale, but he also spawned divisiveness through his aggressive embrace of identity politics.
Those suffering harsh oppression in the US’s first century were a modest minority of the total population, whereas a large majority of South Africans were oppressed before 1994. This distinction is key as, for more than 10 consecutive generations, the majority of Americans have become more productive and their wealth has compounded substantially.
Whereas SA’s consumer purchasing power would need to increase by at least a third to support full employment, US consumers routinely spend more than enough to support full employment. Therefore affirmative action policies can be used in the US to redress historical inequities without jeopardising growth. In SA, identity politics and BEE policies have entrenched the world’s most severe youth unemployment crisis, and no workable remedies are under serious consideration.
Our increasing commodity exports are a good idea but won’t, directly or indirectly, create many jobs. We must adapt to 21st-century realities and integrate far more meaningfully into the global economy by adding value to exports. This should be top of mind for our president, particularly this week.
• Hagedorn is an independent strategy adviser.
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