Framing our “failed state” debate

“Democracy dies in darkness” is the tagline of a leading newspaper in the world’s oldest constitutional democracy. As our economy and politics stagger amid intermittent illumination, our unfettered news media explore “failed state” characterisations.

Tolstoy’s “Anna Karenina” famously begins "Happy families are all alike; every unhappy family is unhappy in its own way." Today’s successful economies are intensely integrated into the global economy; our nation’s path to perdition is a domestic journey. We are living through the story of a nation’s decline which will long be retold and reexamined.

Perspectives

In response to students graduating with narrow perspectives, a century ago Oxford University invented a curriculum emphasising Philosophy, Politics and Economics. It seems likely that future generations of such interdisciplinary students will associate today’s era with the branch of Philosophy that addresses social justice. Will SA be seen as the country most undone by an inability to navigate, politically and economically, this era’s social justice yearnings?

That descriptions of SA’s economy rarely fail to mention “inequality” has paved the way for our ruling party's rolling out its massive patronage network. Conversely, it was the father of history's highest-volume upliftment success that said, “let some people get rich first.” In the late 1970s, the percentage of the Chinese population living in extreme poverty was around 97 percent, versus less than 1% today.

Might future generations deem our policies prioritising inequality ahead of employment and poverty to be unjust? In seeking to understand how social justice, economics and politics interact, many future PPE students will read about John Rawls’ fairness theory of distributive justice and his “Veil of ignorance” thought experiment. They might then consider that for those born into their countries’ median-income households as the 21st century dawned, nearly all countries offered better prospects than SA.

Apartheid-to-Mandela

The fall of the Berlin Wall commemorates the end of the Cold War and the emergence of a new, more fervent, era of globalisation. SA’s apartheid-to-Mandela transition similarly portrays the arrival of the social justice era.

Future researchers will not, however, be impressed by how social justice ideals have been exploited in early 21st century SA. Our inequality now transcends race and this ironic development came at the cost of entrenching massive poverty and youth unemployment. Today there are more blacks in the high and middle income categories than whites, but most SA households are poor and 95% of our poor households are black.

For wealthy countries with low unemployment and little poverty, prioritising inequality might be sensible. Our youth unemployment rate is the world’s worst (ignoring: Djibouti, population one million). Six-out-of-ten young South African adults are unemployed but this is a sugar-coated statistic. Economists expect economic growth to indefinitely struggle to outpace workforce growth. Politicians debate not solutions but meagre sub-subsistence payments. A majority of SA’s next generation are being locked into permanent destitution.

Our political transition needed to induce a high-growth economic transformation. Instead, our constitutional structures were gradually enfeebled as social justice concerns were manipulated to undermine electoral accountability. This smoothed the expansion of the patronage club that now resembles a shadow government.

“Insiders”

Free speech is alive and well in SA. Yet, despite journalists and public commentators playing critical roles, the ANC can still use racial injustices to frame our political narratives. Our political and business elites, the “insiders,” then seek mutual accommodation. Opportunities for “outsiders,” the poor, don’t feature.

Our public debates about whether we are becoming a failed state barely mention our youth unemployment crisis. The ANC’s success at framing this issue as a moral tradeoff between fiscal restraint versus meagre grant payments evidences the party’s ongoing success at shaping how we frame core challenges.

What percentage of our “born free” adults will have never been meaningfully employed ten years from now, when the oldest of this group approaches middle age? That the answer is probably greater than 50% constitutes a sweeping indictment of our ruling party.

There is no plan to tackle our youth unemployment crisis. Instead, our various elites cohere around pursuing investment-led growth. Yet reaching the targeted investment goals - even while significantly reducing corruption and incompetence - will not noticeably reduce our volume of permanently unemployed young adults.

Trickle down economics

We are not just subordinating employment objectives to investment objectives, we are making small progress at the former contingent upon achieving the latter. This is a weak form of “trickle down economics”. Yet for the same underlying reasons that we have the world’s highest inequality and youth unemployment, ours is probably the world’s least well-positioned economy for trickle down policy initiatives, like investment-led growth, to spur upliftment.

We could have been well on our way toward achieving broad prosperity by now. But this always required transitioning from excessive reliance on commodity exporting by sharply expanding value-added exports. Unfortunately, commodity exporting and capital intensive investments are much more popular with ANC leaders, and other elites, than those that create large numbers of jobs.

While business leaders and opposition parties still show little interest in adopting powerful upliftment solutions, the ANC appears to be updating its playbook. They are making it easier for politically-linked actors to spark enough social unrest to justify authoritarian measures. Does our obscene level of youth unemployment, along with recent experiments in relaxing constitutional protections due to Covid or Eskom, not lay the groundwork for subverting legitimate elections? Does this not explain our cozying up to the pro-authoritarian Russians and Chinese?

Multiplier effects

Tucked within the subtext of how our economic and political insiders seek mutual accommodation is the notion that, as the poor have little to lose, they must wait their turn. But even the poorest of teenagers and young adults have hopes and aspirations. Expecting them to accept their being more entrenched in poverty than their parents is only sensible if the intent is to provoke uprisings as an excuse to undermine constitutional privileges.

Being a commodity exporter with anti private-sector employment and localisation policies suits a patronage focused, authoritarian-leaning ruling party. It also assures dangerously elevated unemployment, poverty and inequality. To better scrutinise the core disconnects, we should acknowledge the perils of focusing on GDP rather than employment or upliftment.

As services, not manufacturing, increasingly dominates global economic growth and job creation, the importance of commodities will continue its long decline. Yet, if commodity prices somehow double, SA’s GDP will spike even if output and employment don’t change. If, conversely, future demand for a commodity, such as coal, is systematically reduced by major economies, GDP accounting won't pick up the negative wealth effects of such previously valuable deposits becoming stranded assets.

Nor do GDP data reflect the depletion of commodity deposits. The five years of nearly five percent annual growth ending in 2007 also overstated GDP growth perceptions in the important sense that the multiplier effects which accompanied that growth spurt were not sustainable. A surge in China’s demand for commodities led to a strong rand, lower interest rates and much debt-funded consumption.

This levering of a commodity boom has meagre potential to be repeated. Future consumption was brought forward by surging consumer indebtedness - which is then perpetually diminished by expensive consumer debt.

Stagnating per capita income and stagnating economic growth became mutually reinforcing. Without having a significant portion of workers adding value to exports, it was all but inevitable that per capita income would soon stagnate. This began shortly after the 2010 World Cup.

Dozens of striking Marikana miners being fatally shot offered cruel clues. As their work is brutal and dangerous, they were relatively well paid. But, largely due to imprudent indulging of expensive debt, they would often be cash poor before payday arrived.

From the perspective of the “outsiders,” our politics is about elites squabbling among - and for - themselves. One group wails about apartheid; the other corruption. Such valid charges distract from the requirement to integrate far more meaningfully into the global economy to broaden prosperity.

By the late 1990s, it had become clear that large clusters of poverty could be alleviated through having low-skilled, poorly educated workers integrate into global supply chains. Unfortunately, the ANC does not have the DNA of a building-focused organisation. Its liberation movement heritage mixes union activism with Marxist-Lennist framing of issues around conflict. This and its patronage proclivities explain its hostility toward basics such as commercial merit, productivity and global integration.

As remarkably anti-development as these characteristics are, abundant examples have emerged of equally anti-development attitudes within universities, media and legislatures in North America and many parts of Europe. Social justice movement roots preceded our 1990s transition but SA could be the society that has, at least thus far, over indulged them the most flagrantly.

Focusing on the “failed state” label misses the point. If we don’t want our democracy to die, we must recognise that our inward facing economy has become non-viable. We can’t possibly achieve a tolerable level of youth unemployment without becoming much more integrated into the world economy.