Combating+a+national+disaster,+Margaret+Legum,+Star



=**Combating a national disaster**=

The Star, Johannesburg, February 20, 2006

 * By Margaret Legum**

The budget obviously enables and supports the Accelerated and Shared Growth Initiative of South Africa (Asgisa), launched in the previous week - hence no real surprises.

Both suggest new thinking, including some painful rejections of previously unquestioned doctrine.

Notably, the state is assuming more space and more resources, contradicting the previous imperative to small government. That is vital - and courageous, considering the survival in powerful places of the myth that government can never work efficiently.

There is no greater challenge to governments than to change direction.

Partly because the state machine is so cumbersome. And partly because economists - the core of governments' expert advisers - tend to inhabit conservative academic personae, and change very slowly.

Employment is top priority this year. There is now widespread understanding that unemployment is a national disaster.

Officially it has doubled since 1996. That means that well over 50% of black South Africans have no jobs. And poverty bites even deeper than unemployment.

Occupations counted as jobs include those paying less than R500 a month. That degree of deprivation is unconscionable and unsustainable.

Asgisa derives from implicit acceptance that previous growth strategies - relying on the private sector's capacity to grow jobs - have not worked.

That is documented in a new publication, Growth is Not Working, based on worldwide research, published by the New Economics Foundation in London. Globally, between 1990 and 2001, for every $100-worth (about R600) of growth in per capita income only 60c of that reduced poverty, including by job creation.

Why? First, because private enterprise cannot compete successfully in the markets without capital-intensive methods - reducing wage costs is imperative for them. That means each new job costs literally millions to produce, so the growth required even for modest increases in employment is very large, and therefore unsustainable.

Currently, we know of no way to grow without increasing our consumption of fossil fuels. And we know no way to do that without threatening supplies of oil within a decade, and without hastening our lemming rush to climate change-based disaster.

Second, global competitiveness requires "flexible" labour practices. Workers will not accept poverty wages when employment is high. So private-sector growth is inevitably based on poor wages and high technology. There is a global limit to the jobs available to produce the saleable goods and services, and whoever has the lowest wage costs gets the most jobs.

But the thought persists in the government that if the private sector were better supported, we could be more competitive and so get more of those jobs.

Asgisa's investment in physical infrastructure exemplifies that idea. We have been hampered by relative inefficiency in those areas, and better capital infrastructure will help our enterprises to work better.

But like all growth directed at the private sector, it will gravitate to the top income groups. Unless tampered with, there will no "shared" about it.

The "second economy" is expected to benefit in ways that are not clear. It is part of the private sector - simply its poorer end - and subject to the same dynamic. Nothing suggests practical ways have been found to move economic activity to the local and keep it there, which is the only way to address poverty.

Asgisa will produce some jobs, largely in the construction industry. But its contribution to the employment of people at the lower income levels is not necessarily long-term.

The government might justifiably react with irritation to endless carping at new attempts to diminish the effects of Growth Employment and Redistribution (Gear) at the lower income levels. So what do we suggest?

The clue may lie in the fact that investment in human - as opposed to capital - infrastructure is very people-intensive.

Developing an educated, healthy, optimistic, entrepreneurial and skilled population will employ a lot more people than investment in physical infrastructure, as the professionals in those fields cannot be replaced by technology.

Obviously we need both.

But suppose we shifted the current emphasis to investment in developing people's education, skills, health, family and community life and mutual service in local livelihood?

The immediate effect would be more jobs per unit of capital invested. Second, the government would develop a larger pool to draw on for staff in the developmental state.

Recent research shows an impending crisis in education as teachers leave, and higher education lacks funding to replace more than a third of requirements.

There is an equally acute crisis in public health. The question is how to make the funding sustainable.

The answer is more creative ways to provide government revenue. They include replacing current red-taped individual and corporate taxes with transaction taxes.


 * **Margaret Legum is chairperson of the SA New Economics network.**


 * From: http://www.thestar.co.za/index.php?fSectionId=225&fArticleId=3118943**

797 words