Monday, July 10, 2017

The hole in the jobs bucket.

And the three dimensions of radical government transformation.















If you promised the Government that you could create 48-thousand new jobs in a few months they would dance at your feet. Yet, that is the number of jobs that were lost in the formal non-agricultural sector in the first quarter of this year, according to the latest Quarterly Employment Survey.

What it reflects is that counteracting all the efforts to create jobs, are those being lost where they exist – like filling a bucket that has a big hole. It underscores the fallacy of focusing on job creation rather than job retention and being caught in an endless spiral of creation and destruction. If you understand why jobs are being lost, you will know what prevents you from creating more. Job retention demands a shift in policies, approach, attitudes and behaviour at many levels – all of which imply sacrificing some vested interests and political capital. The main causes behind job losses are systemic and behavioural in both the public and private sectors, as well as a volatile external environment. In responding to this environment, the two indispensable, mutually supportive keys are flexibility and tempered expectations. 

Global financial headlines remind us daily of a world undergoing radical economic transformation. The anti-establishment uprising seen in many countries is challenging the legitimacy of both government and economic power and has blurred ideological divisions as well as theoretical prescriptions for the role of the state and the private sector, particularly capital concentration. For a long time, it seemed to have been a stunning omission of the ruling party, not to have connected these dots to its own radical economic transformation agenda, and instead made it a spectre and divisive project.

But that may have changed. The strategic outline delivered by ANC NEC member, Nathi Mthethwa at the policy conference, clearly reflected that insight and will hopefully transform the narrative to reflect:
·        The gravity and complexity of a global struggle for inclusivity and fragmentation of economic power; (see previous article here.)
·        The role South Africa can play in being an innovator, contributor and beneficiary of global experiences, which includes inputs from international economic thought leaders.
·        Eliminating race or gender as a contributing factor, albeit a feature (or as Mthethwa put it “form”) in South Africa. Burying the term “white monopoly capital” is a good start.
·        And above all – the need for power fragmentation in both government and the private sector as a key factor for flexibility.

The last point is the difficult one for governments not only to recognise, but willingness to return power to the people in a real and tangible form. The concept that governments represent all of the people, all of the time, is patent nonsense -- even more so in a state where bureaucracy is often driven by self-gratification and power. If fragmentation of economic power simply means transferring power from private hands to government, then on the evidence of both historic and current experience, it will be the greater of two evils.

It is the outcome of that debate that will profoundly affect inclusivity, flexibility and expectations, and the ability to both retain and create new jobs. Although mutually linked, the approaches are different for government and the private sector. This article deals with the former, and a future column will examine the latter.

I am more convinced than ever that radical government transformation has to go hand in hand with RET and can do far more in changing the economic destiny of the country. The fact that we are suffering from economic pneumonia because the ruling party has a Gupta virus, points to a self-evident truth: the inordinate influence, invasiveness and power of bureaucracy. It is excessive even for a developmental state and because of that one can reach another simple conclusion: its bears a large share of responsibility for whatever ails the country. This power has three dimensions:

Physical size and share of the economy. Globally, governments have become “fat and lazy”, according to Economist, Dawie Roodt. With our government expenditure at about one third of GDP we are not amongst the most obese (see World Bank statistics here), and not totally out of line with the world average. Ultimately, size does not matter. It is about affordability and action. We are worse than lazy. There is deeply rooted and debilitating patronage; an oversized cabinet and employee contingent; poor and incoherent leadership; scandals; inefficiencies; flawed service delivery; wasteful expenditure, and corruption. The belief that government must be as small as possible to avoid crowding out private initiative is an oversimplification and not a universal truth. What really counts is whether its actions support private initiative, while still countering social imbalances.

Prescriptions and regulations. These have far greater impact than can be measured in standard statistics. Even a superficial analysis of all bureaucratic impediments is beyond the scope of this article. Even less so, and perhaps more futile, is challenging some of the regulatory holy cows to “correct past imbalances”, and the counter-productive effect they have had on inclusivity and employment. It simply makes no sense to focus on inclusion of one group and discourage others that may have skills, experience and capital and whose deployment encourages further job creation. One recent example is the proposed new mining charter which the industry estimates could see as many as 100 000 job losses.

Political posturing and populist rhetoric. When you have become as powerful and invasive as the South African government has, you simply have to watch your mouth and actions. I would argue that this now overshadows all of the above. You will find the footprint of rhetoric and irrational decisions in most of our recent economic setbacks, including an undervalued currency, disinvestment and ratings downgrades. They are triggered by a loose cannon in the President who does not distinguish between a parliamentary democracy and constitutionalism; a ruling party in meltdown; threatening and divisive interpretations of land reform and expropriation, and constant deflective racial innuendo. Even the more comical kite fliers such as the Public Protector on monetary policy, have a serious impact on economic prosperity. Ill informed Market response to an ill-informed policy discussion about Reserve Bank ownership is another example. The burying of the term “white monopoly capital” may be a reflection of growing sensitivity towards this third dimension. Clearly much more has to be done to change the mood.

A huge, ominous and potentially overwhelming cloud remains. Despite all the arguably good intentions of ANC policy, and a fall back to the more palatable National Development Plan, there is still a massive lack of trust. Trustworthiness is an imperative even for autocratic governments; not only from its supporters but also from its opponents, critics and society at large. The government’s critically large trust deficit (see graphic here) is now at centre stage. It is perhaps even beyond redemption. Opponents may hail this as an opportunity for regime change, but distrust is contagious and not easily restored even after a change in leadership or government. It is also a significant contributor to the hole in the jobs bucket.

It is that which needs radical attention.

1 comment: