SA remains a divided nation economically and politically

South Africa remains a state with two economies divided along racial lines, with a minority white population getting richer while their black counterparts are getting poorer. Siyabonga P. Hadebe explains why radical economic transformation needs to happen now.

While doing my late night readings I stumbled on a very interesting article on the recent work of a Massachusetts Institute of Technology (MIT) economist Peter Temin. 

In his book titled: “The Vanishing Middle Class: Prejudice and Power in a Dual Economy”, reviewed by the Institute for New Economic Thinking – a New York City-based non-profit think tank – Temin argues that the United States is “regressing to have the economic and political structure of a developing nation.” 

He says one of the easiest ways to see this is in infrastructure – US roads and bridges look more like those in Thailand or Venezuela than the Netherlands or Japan.

The economist basically says America is no longer an advanced economy.

Temin adds that “the fracture of US society is leading the middle class to disappear.”

To understand developing nations as well as to describe how far inequality has progressed in the United States, Temin employed a famous economic model developed by the West Indian economist W. Arthur Lewis, the only person of African descent to win a Nobel Prize in economics. 

As part of his research findings, Temin discovered that much of the low-wage sector had little influence over public policy; the high-income sector was keeping wages down to provide cheap labour; and social control was used to prevent subsistence workers from challenging existing policies and social mobility was low.

Although the storyline concerns what is happening in the United States, I sort of appreciated that what some of us complain about in SA is actually happening elsewhere. We are not “race obsessed” or always wanting to talk about apartheid to conceal failures of black leadership in this country.

Temin further claims that the dual-economy, of high-income sector (20% of the population) and low-wage sector (80%), has a “racist” undertone.

Many poorer Americans live in conditions resembling those of a developing country – substandard education, dilapidated housing, and few stable employment opportunities. And although almost half of black Americans are poor… 

Temin explains: 

The desire to preserve the inferior status of blacks has motivated policies against all members of the low-wage sector.

We have a structure that predetermines winners and losers. We are not getting the benefits of all the people who could contribute to the growth of the economy, to advances in medicine or science which could improve the quality of life for everyone — including some of the rich people…” 

This is a telling finding in that race remains a structural factor in the US as it is in the South African economy. Unfortunately, this is an indisputable fact that the likes of Helen Zille and AfriForum want us to ignore. 

Twenty percent of Americans enjoy college education, have good jobs, and sleep soundly knowing that they have not only enough money to meet life’s challenges, but also social networks to bolster their success. These citizens see economic growth all around them and exciting possibilities for the future.

The wealthier 20% citizens rarely visit the country where the other 80% of Americans live: the low-wage sector. 

People in low-wage sector are burdened with debt and anxious about their insecure jobs if they have a job at all. Many of them are getting sicker and dying younger than they used to. 

They get around by crumbling public transport and cars they have trouble paying for. Family life is uncertain here; people often don’t partner for the long-term even when they have children. 

If they go to college, they finance it by going heavily into debt. They are not thinking about the future; they are focused on surviving the present. 

According to Temin, “The world in which they [the low-wage sector] reside is very different from the one they were taught to believe in. While members of the first country act, these people are acted upon.”

The economic downgrade of South Africa was probably felt more in the monied section of society.

Temin proposes that education is the solution to offer everyone in society better opportunities and calls for investments in public schools and public universities.

This proposal is a serious indictment to all those who are proponents of the neo-liberal economic system, which sees markets as a panacea to everything. Temin therefore advocates for state intervention in correcting inequalities and other ills in society.

A government that invests in education, primary health care and other basic goods/ services will surely realise better social outcomes.

Temin says: “Knowing how to think, how to get on with people, how to cooperate. All the social skills and social capital … [are] going to be critically important for kids.”

This takes us to Thabo Mbeki’s “two economies” in South Africa: one mainly white and formal against the under-resourced mainly black economy in township and rural areas. The gap between the two is growing in leaps and bounds everyday. With that said, the black family does not have anything to smile about. 

Low wages and unemployment mean that they can barely make ends meet. Let alone affording food, clothing, education and quality healthcare.

If the US drops to a level of developing countries – then it means South Africa is at the level of Haiti, Nicaragua, Togo or Bangladesh. 

Those who fear to engage Wits academic Chris Malikane on his “radical” economic thought should be very much aware that neoliberal economics are indeed failing us. Markets are not capable of helping us to get rid of apartheid dirt and problems that beset our society to this day.

South Africa needs to claim its economic sovereignty now before we are sunk further into an economic abyss.

We remain two nations that are economically and politically divided.

Hadebe holds qualifications in management and global affairs. His interests are politics, economics and international affairs. 

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