Cees Bruggemans: Consulting Economist Bruggemans & Associates
Cees Bruggemans: Consulting Economist Bruggemans & Associates

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Choice & Path Dependency


I came across an observation that the 14 million in formal and informal SA employment have a 93% chance of remaining in employment. On the other hand, the 4.7 million unemployed only have a 13% chance of becoming employed. As to the 2.5 million discouraged, I suppose they have zero chance.
The starkness of this picture shows itself in numberless ways daily, between those in a hurry and having the means to do so, or leisurely leaning backwards while comfortably watching the passing scene with a watchful eye for talent.

And those having no means, no income, no wealth, no education, no contacts, no hustle and frankly no hope.

And the open invitation remains one of "join us, the deeply satisfied and successful, and be happy". In other words, do not expect us to join you.

Yet the political process is already much more advanced than that. There are the many conventional political parties, entreating the poor to get a high quality education and join their bulging conventional ranks.

And then there is the newcomer seeing a gap in the market, saying that the poor should be uplifted by lowering the boom on those having something to share but who for some or other reason are not doing so willingly.

With another, worker based party, also taking shape in the wings.

It could get quite busy in this part of the political spectrum before we are much older of have exited the decade.

If that is the shaping political debate, there clearly is an economic corollary. It has nothing to do with socialism or capitalism, but everything with an old standby, developmentalism.

Our poor, uneducated, downtrodden, low productivity, marginal labour has two choices, the traditional one and an unconventional one.

South Africa is by now a maturely developed post-industrial service-dominated economy. Its foundation is commodity exporting and import-substituting industry. It has strong labour unions, high entry labour costs, high capital density, and its employable labour force tends to have relatively high education levels. And lives the high life.

This modern, progressive, well-off economy could absorb still considerable numbers of low-education labour, but at an entry wage in many instances apparently no longer acceptable to them and now increasingly with demands made no longer acceptable in turn to potential private employers.

Indeed, as the platinum strike has made plain, the entry demands have suddenly risen explosively, making many marginal labour jobs potentially redundant.

Instead of adding some more labour without them substantially upskilling, we seem to be in the process of jettisoning yet more low-wage, low-productivity labour, potentially even shrinking the job pie in the private sector, while artificially partly compensating by expanding the public sector.

This way, the glaring gaps won't be overcome, won't disappear, yet likely become more contentious politically with every passing day.

The alternative is for the larger number of 7 million unemployed and many discouraged to have the economy rigged in their favour.

This means a need for lower entry labour costs, a much more competitive Rand, more saving, fewer private investment outlets, far fewer luxury consumer goods, and fewer channels to show displeasure.
In other words, yesterday's China.

Besides not being popular, this route would be a sure fire way of losing many skills to welcoming overseas destinations. A more primitive  early industrializing economy is of course in need of fewer high-level technical skills.

Such political positioning would fundamentally change who would be favoured and who would be invited to go along for the ride of a life time. Russians in Stalin's time could tell you all about it, were they still around.

Given the composition of society, however, the number of potential losers in such a forced dispensation would be of such magnitude that they are likely to overcome any such drastic ideas. That is, if the full implications were to be understood before anything was attempted.

Adding it all up, history has put us into the spot we are in, yet we don't seem at present to have the focus to get out of it, by whatever route, needing more time to contemplate the old navel. Instead we muddy waters, take another sip, burb, and talk about something else.
Cees Bruggemans
Consulting Economist
Bruggemans & Associates
Website   www.bruggemans.co.za
Email   economics@bruggemans.co.za
Twitter   @ceesbruggemans

Choice & Path Dependency

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