SA unemployment crisis needs ‘war effort’, not incremental reform

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JEREMY MAGGS: Now, there’s an argument that South Africa’s unemployment crisis is being fundamentally misunderstood, with current policy debates focusing on marginal job creation targets while ignoring the sheer scale and structural nature of the problem.

It continues that even ambitious pledges, like creating millions of jobs over a decade, fall far short of what is needed in an economy where unemployment is deeply entrenched, inequality is widening, and economic policy may itself be part of the problem.

Neil Coleman is senior policy specialist at the Institute for Economic Justice. Neil, welcome, and you argue that the current jobs debate is simply missing the point. What is it getting fundamentally wrong then?

NEIL COLEMAN: Jeremy, thanks very much. My colleague, Duma Gqubule, argues that we need to treat this current unemployment crisis as something requiring something like a war effort.

If we think back to the post-war effort in Europe or the New Deal in the US, it needs an all of society effort to mobilise all available resources to address the unemployment crisis.

I always say that there are three elements to dealing with the economic challenges.

One is to stabilise the society, the businesses, the communities, and so on, facing a range of challenges. Just think of job losses, think of communities in depression and so on. The second is to stimulate investment, to stimulate employment, and the third is to structurally transform.

Now, all we’re doing at the moment is that we’re focusing on stabilising an element of the society, which services business, namely the question of getting electricity right, rail right, basically what is called network industry. This is what’s called the structural reforms.

The reality is, even if you look at Treasury’s own projections, this creates a tiny, tiny proportion of the jobs that are required.

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Because our economy is structured in a particular way, that it’s unable to absorb the huge numbers of people who are currently outside the mainstream economy, so that requires structural transformation and what we’re talking about here is that we have an economy that has a semi-colonial character.

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It’s a legacy of a minerals exporting country, largely, in which the industrialisation that we did have has rapidly disappeared with the adoption of what are called liberalisation measures.

So critical industries like the textile industry and clothing, for example, were massively hit by the removal of tariffs. So we’ve actually gone in the opposite direction of what we need to do.

If you look at the developmental state interventions that have taken place over the last century, with Asian tigers, China and a number of other societies, those relied on the state to play a very leading role.

What we’re doing in South Africa is we see a state which is stepping back and relying on the private sector to deliver.

Both the state and the private sector are disinvesting from the economy instead of the massive investment that we need to see.

We’re actually seeing a hoarding of cash by the private sector, and the state is not investing in anything like the scale that is needed.

The question is: what is the paradigm and what are the parameters that need to shift in order to stimulate this new type of economic intervention?

JEREMY MAGGS: Neil, that’s a very worrying statement, because if I’m hearing you correctly, you’re suggesting that the state is simply abrogating its responsibility to the private sector in many respects. Has government just given up then?

NEIL COLEMAN: I think there’s an element of capture. We had state capture by a predatory interest in society in the (Jacob) Zuma period, and we now have got another type of capture where corporations, and the state in a very weak position, are pushing an agenda which is very narrow.

It’s not about the state only abrogating its responsibility, it’s about the economic elites and corporations abrogating their responsibilities.

We’re see massive job losses taking place. As I said, there’s an investment strike in which you see massive resources sitting idle in the financial sector.

So as I said, it’s about an all of society initiative. We have to pull in, we have to mobilise these resources, which are not just about material resources, but also about human resources, which are being massively wasted in South Africa, and start thinking of things completely differently.

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When we talk about this conference that’s coming up at the end of this week, talk about five million jobs over the next 10 years. People are impressed by that because that sounds quite bold.

But actually, when you look at the figures and Duma’s calculated these figures, you end up with an unemployment rate of over 40% in 2035, with those additional five million jobs.

It’s just frightening about the extent of denialism that is pervasive in society at the moment.

When we saw the claim by former Capitec CEO (Gerrie Fourie) that unemployment was not really the challenge that it’s claimed, he said that it’s below 10%.

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It goes against all the evidence, repeated studies by Stats SA (Statistics South Africa), they’ve even tweaked the definitions and so on, and they come up repeatedly with the same results.

We’ve got to confront the reality that over 12 million people in this country are unemployed and that the vast bulk of those, we estimate over 10 million, are long-term unemployed.

They have not had a job for well over a year, and millions of those are now what’s called discouraged, they have given up looking for work. So there needs to be a complete rejigging of our thinking on these economic challenges.

JEREMY MAGGS: If we’re to do that then, if you’re to rejig the thinking, what role should the state realistically be playing then in large scale short to medium-term job creation?

NEIL COLEMAN: Well, in the article we refer to the policy tools that the state has at its disposal and the biggest tools that it has are its fiscal policy, the monetary policy and its trade and industrial policy.

So it’s about deploying those in an aggressive manner to crowd in investment, which means both the state to introduce a fiscal stimulus to promote economic activity and depressed communities to create the demand that business needs to expand, but we also need to bring down the cost of capital.

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We need to bring down the cost of investment, of borrowing and so on, which is much too high because of these narrow, contractionary monetary and fiscal policies that we’ve adopted. So it requires a completely different mindset.

Then in terms of industrial and trade policies, those need to be very well resourced, strategic.

We need to look at the changing international environment and look at how do we make South Africa and the Southern African region more an engine of growth in the continent. So it is a huge challenge, particularly given the crisis that is now looming.

JEREMY MAGGS: That, Neil Coleman, is difficult to do. You’ve got to find that balance because the conventional wisdom or the prevailing conventional wisdom these days seems to be one of austerity.

NEIL COLEMAN: Yes, exactly, and there’s the old saying that if I’m doing the same thing and expecting a different result, that’s the definition of insanity, and that’s basically what we’ve been doing.

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Last year, there was a moderate improvement in the budget, very, very moderate. But now we’ve pulled back again into austerity mode and we seem to be more worried about impressing the IMF (International Monetary Fund), the World Bank-type institutions and the ratings agencies.

But actually, we must remember, the ratings agencies are not only concerned with fiscal stability, they are also saying that the unemployment crisis and poverty in South Africa is unsustainable.

So retreating back into that mode is completely self-defeating.

Not only will we not achieve this five million jobs over the next 10 years, we will see growing unemployment and job losses in the country. So at what point do people say, look, this is a crisis that needs a complete shift in our mindset. That is the critical question.

JEREMY MAGGS: Neil Coleman, thank you very much indeed.

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