Tagged: Social Wage

Economic disconnect caused by Technology and Welfare disconnect

SOUTH AFRICA’S YOUTH are experiencing an economic disconnect. A generation faced with a world without jobs, a massive debt burden, and an economy that has failed miserably to gear itself up for the third-wave technologies that Asia and the West have embraced decades previously.

While you were out striking, marching or simply shopping, the world evolved, from a bipolar economy, dependent upon China and the USA, to a multipolar universe — an economy without a centre. The rise of the Information Economy — based as it is on information freedom, has been coupled with successive innovations. The Third Industrial Revolution has produced a ‘post-scarcity economy’, where having a ‘China on ones Desktop’, a 3D printer capable of printing anything, is considered de rigeur.

Successive waves of innovation have seen — the virtualisation of the economy, the dematerialisation of assets and the Internet’s proverbial death-of-distance. Pop-up factories, makerspaces, friction-free digital copies and the ‘Internet of Things’ are all buzzwords and terms which the youth are invariably going to meet on their free education journey. In the future, your neighbour will hand you a copy of an open source motorcycle, just so the two of you can go for drive. When you return, you will recycle the vehicle into any number of other open source devices.

We are rapidly approaching an era in which robots self-assemble and produce the goods, which we buy with our wages, which are in turn given to us, via a more efficient means of production and redistribution of wealth. This is an alluring proposition. Holland for instance had moved to end labour in mining. Machines are replacing humans wherever they are found, and the full automation of society is only a matter of time.

Now, Let’s talk about the welfare disconnect

Although the country is one of the few nations on the continent to have implemented a social security programme, this programme is geared towards the elderly, disabled and child-care grants. Thus the youth of today, are born into social security — their parents are recipients of state welfare not because they are citizens, but because they have children.

Once a child is over the age of 18, this grant falls away. The double-whammy of unemployment and poverty kicks in. Some 25.5 percent of the population is unemployed and this figure is worse when the youth and first-time job-seekers are concerned, rising to 63%.

Today’s student unrest is a direct result of the situation where a pupil, having generated income for his or her family, simply by being a child, turns into a liability on becoming a young adult and tertiary student. In most cases, such a person is forced to fend for him or herself.

This is an enormous shock to both the youth and the family.

So far as social security in South Africa is concerned, we are a nation which has the cart before the horse. Instead of paying families to have children, we should be paying people to stop working.

South Africa’s youth can work and play, just about anywhere there is an Internet connection or icafe, but getting connected to the Net is not sufficient to enable jobs and free education. There are other necessities, common to first world economies which we lack as a nation, and without them, being merely connected, is simply not good enough. In fact, a job, as an end in itself, may not necessarily be all that desirable, the same way that owning anything in an economy based upon abundance, is not the alpha and omega.

Fixing the disconnect

Exactly how is the country to going pay for free education, and range of services? How are we all going to live in a world without jobs? These are the questions foremost on people’s minds, as the country sobers up to the events of the past weeks, which saw the unprecedented storming of parliament and storming of the Union Buildings.

South Africa as luck would have it, already has a ‘sovereign wealth fund’ with a massive R1.5 trillion rand invested, and certainly the youth need to be tackling finance minister Nhlanhla Nene and education minister, Blade Nzimande on why they are suffering in the face of so much wealth.

Instead of a Public Investment Corporation (PIC), benefiting one privileged generation who just happened to be in power during the 90s, let’s make the public investment more inclusive of all citizens, and all generations, and recommit the fund to its Public goals, since the ruling party appears to have lost the distinction between what is public and what is private, funding Nkandla, and government pensions for party insiders.

PIC should rather be redirected to funding a social wage for all citizens, one which includes free education, health insurance and a basic income grant. Instead of a party wage, we could have a social wage reducing the worst affects of poverty and mitigating the coercion inherent to the job market, even one that is Internet-enabled, while providing free education.

Moving South Africa from a coercive labour market to a voluntary labour market, could easily be achieved by removing the compulsion, violence and necessity to seek employment.

A job should not be a requirement in order to survive or be a South African citizen.

Labour should never be compulsory, or forced under the barrel of a gun. As Marikana has proven, people are willing to die for their freedom, and this message is now being taken up by students, who rightfully are demanding free education. The same generation will soon be demanding social security, a social wage for life.

Only the most productive labour and most capable persons would enter the wage economy. One has merely to look at social democracies in Europe to see what a social wage economy looks like:

The State disburses funds, seeing an immediate benefit to the fiscus, via the value added taxation system, which recoups the money spent, in a virtuous cycle.

Citizens with a social wage, are able to purchase the necessities of life and thus avoid the worst pitfalls of extreme poverty.

There are compelling reasons for embracing wealth redistribution in this way.

Alaska for example, pays its citizens to purchase services that would normally be gained from the state, from the private sector. In this way, the state avoids creating enormous bureaucracies which are costly and unsustainable by their very nature, and avoids the cost escalations that come from tenderpreneurs, and mega projects, whose only aim, is to keep people employed, in a world in which labour not leisure is the goal.

Societies with some form of social wage, whether social security or social welfare, produce more scientists, artists, musicians and thinkers. They are better equipped to innovate and create. They experience stability and longevity, both in terms of health extension and the extension of the period in which these societies exist, and remember.

[This is a condensed version of the previous five part series on the economy: Fix the Economy Stupid and Provide Free Education]

Fix the economy stupid and provide free education (part 4)

SOUTH AFRICA is an astonishing country. Not only are we home to more millionaires than any other African country, (40% of all African millionaires live in South Africa) but this wealth coincides with extremes of poverty and unemployment. Some 25.5 percent of the population is unemployed and this figure is worse when the youth and first-time job-seekers are concerned, rising to 63%.

The reason why this picture is so, is not all that difficult to understand.

Let’s talk about the welfare disconnect. Although the country is one of the few nations on the continent to have implemented a social security programme, this programme is geared towards the elderly, disabled and child care grants. Thus the youth of today, are born into social security — their parents are recipients of state welfare not because they are citizens, but because they have children.

Once a child is over the age of 18, this grant falls away. The double-whammy of unemployment and poverty kicks in.

Today’s student unrest is a direct result of the situation where a pupil, having generated income for his or her family, simply by being a child, turns into a liability on becoming a young adult and tertiary student. In most cases, such a person is forced to fend for him or herself.

This is an enormous shock to both the youth and the family.

So far as social security in South Africa is concerned, we are a nation which has the cart before the horse.

The Focus on Labour at the expense of the Market

Command economies have failed wherever they have been attempted. Creating industries, whatever the cost, in order to create jobs, instead of producing efficiency, achieves the exact opposite. Labour for the sake of labour, is tremendously wasteful. Wherever it has been a state policy, communism has resulted in economic distortions and failure to deliver goods. Shifting the goal of humankind towards labour is therefore an exercise in futility.

Instead of paying families to have children, we should be paying people to stop working.

A social wage, comprising an unconditional basic income grant, health care and free education, would be the means by which the worst ravages of poverty and last vestiges of coercive labour was removed from our society.

The coervice labour market is a legacy of the apartheid system, which was dependent upon a labour pool, where workers were treated as nothing more than a resource to exploit. This situation has not improved under the ruling party, in fact it has gotten far, far worse. BRICS under Gwede Mantashe, has birthed South African sweatshops producing goods for Russia, low-wages and a shrinking Rand have become a factor of life.

Instead of forcing people into employment (or joblessness as the case may be). A social wage would redistribute income to each and every citizen, not by virtue of being a child, but by virtue of ones ability to vote.

Leisure should be our goal, not labour.

Labour should only be a means of achieving other goals.

Making goods should go hand in hand with Buying Goods. While Henry Ford may have had his faults, he produced cars for the workers who worked in his factories, not for the wealthy elite.

Citizens should thus be more than simply workers, they should be treated as adults and consumers.

While labour has certainly contributed to better work conditions — the invention of the long weekend, and other public holidays — it would be even better if labour were to permanently depose itself, by creating a 360-day-Vacation. Allowing robots to self-assemble and produce the goods, which we buy with our wages, which are in turn given to us, via a more efficient means of production and redistribution of wealth, This is an alluring proposition. Holland for instance had moved to end labour in mining. Machines are replacing humans wherever they are found, and the full automation of society is only a matter of time.

See Part 5

Fix the economy stupid and provide free education (part 3)

EXACTLY how is the country to going pay for free education? This is the question foremost on people’s minds, as the country sobers up to the events of the past weeks, which saw the unprecedented storming of parliament and storming of the Union Buildings.

Surprisingly, South Africa, ( as previously alluded to in part 2), already has a ‘sovereign wealth fund’ with a massive R1.5 trillion rand invested, and certainly the youth need to be tackling finance minister Nhlanhla Nene and education minister, Blade Nzimande on why they are suffering in the face of so much wealth.

Instead of a Public Investment Corporation (PIC), benefiting one privileged generation who just happened to be in power during the 90s, let’s make the public investment more inclusive of all citizens, and all generations, and let’s call the PIC what it deserves, by the term Publica, since the ruling party appears to have lost the distinction between what is public and what is private —  funding Nkandla, and government pensions for party insiders. Publica should rather be redirected to funding a social wage for all citizens, one which includes education, health insurance and childcare grants. Instead of a party wage, we could have a social wage reducing the worst affects of poverty and mitigating the coercion inherent to the job market, even one that is Internet-enabled, while providing free education.

Publica, unfortunately, like so many self-aggrandising programmes run by the ANC, appears to have evolved and deformed into a strange facet resembling one of the pillars of the previous regime, the apartheid equivalent of cadre deployment.

The Independent Development Corporation (IDC), cooked up by apartheid cronies Anton Rupert, Chris Stals, Nico Diederichs and Owen Horward, was really nothing more than an efficient scheme to create bantustans. Escaping international sanctions by moving state capital into Swiss offshore bank accounts for the exclusive benefit of the politically-connected. In reality, a state-within-a-state, a fund that was part-and-parcel of the covert government which created apartheid and the oligarchs, technocrats and apparatchiks, that existed, hand-in-glove with the state’s volkscapitalisme.

The missing apartheid millions are all documented by news journalist Sylvia Vollenhoven, but her documentary ‘The Spear’ was banned by the SABC, as no doubt any similar investigation of the fiscus under Zuma would also be.

An investigation of the corporation we may now call Publica, i.e the massive state corporation created out of public funds drawn from the public purse over the past two decades, would undoubtedly uncover a lot more than the Nkandla millions. These funds need to be returned to the people.

The youth of today, deserve free education, and they deserve connectivity, to be online. But in saying this, we want a youth who are able to grasp the many opportunities that exist, at the same time as they are cushioned from the worst forms of economic exploitation, inequality and poverty. This can only come about through a social wage that includes free education.

Part Four examines what South Africa would look like with a social wage

Fix the economy stupid and provide free education (part 1)

IN 1994, the ruling party charted an economic course born out of the Interim Constitution and the Codesa negotiation process. Essentially, it involved embracing a ‘mixed economy’ approach, in which a market economy would exist side-by-side with a “dirigiste” economy, that had, as its antecedent, the ‘volkscapitalisme’ of the former National Party.

Thus the country’s industrial base was given new life, with local conglomerates such as South African Breweries emerging into global entities. The once fiercely nationalistic beer cartel, is now a thriving international business called SAB-Miller, which, as it turns out, is in the process of merging with another beer giant, AB inBev. A testimony to South African can-do attitude and the country’s ability to embrace internationalism.*

State industries such as SASOL and ISCOR were privatised, while others like Telkom, Eskom, and Transnet remained in government hands.

SASOL went on to repeat the success of SAB, while ISCOR under Mittel, faired a lot differently.

The ruling party thus presided over a long boom, which lasted approximately 15 years, coming to an abrupt end in 2009. The economy has been running in fits and starts ever since, and it is not simply because the global party of low-interest rates and easy finance has come to an end.

Arguably, more South Africans were pulled out of poverty under the administrations of Mandela and Mbeki, than under several decades of National Party rule, but under Jacob Zuma, the economy has been on the skids.

Now with talk about another credit ratings downgrade, jitters over the Rand, and looming threat of junk status for the nation’s debt, the question needs to be asked: What exactly went wrong?

For starters, the “dirigiste” economy took on a tragic life of its own.

Not only did we witness a massive expansion in state enterprises, but with the exception of Transnet, state enterprises today, operate under the illusion that annual bail-outs from central government are sustainable, that a de facto command economy, is the norm.

The effect on the nation’s fiscus has been dramatic. The public service wage bill under Zuma, (R61Bn and counting), has swelled by 80% and shows no signs of abating.  Coupled with a massive bureaucracy that has produced the largest cabinet and government ministry in the world (64 ministers and 64 deputy ministers), the country has began looking a lot like its former self, under the National Party.

As the slowing down of GDP and growth to 1.4% (2015)**, has shown, growth in the private sector is not enough to accommodate a bulging public sector. Areas of the economy which could have provided benefits, face massive obstacles from central government.

Red-tape and statute inflation (too many laws) has dramatically affected tourism, impacting small-and-medium businesses. The recent opening of the economy to Independent Power Producers, and likewise, the entry of wireless companies into the home fibre and cable market, has come a decade too late, for meaningful economic growth to benefit the class of 2015.

see part two

  • * The SAB part of the equation however, is ironically on the decline, a result of the much diminished Rand.
  • ** With a bit of luck could increase to 2.4% in 2016,  projected by Deloitte.

Kiss NHI good-bye

UNLESS we include striking miners and the 25% unemployed in our economic debates, South Africa risks losing its ability to pay for National Health Insurance. The rise of radical political formations in the form of AMCU, EFF, DLF, WASP and PAC and the decline of the ANC centrist administration, amidst scandals and corruption, could very well see the collapse of GEAR and the NDP, as welfare benefits become a thing of the past.

While Liberal parties such as DA and Agang are competing with the ANC for votes, these parties may fare no better than the ruling party at the polls. The reason is the eminent collapse of the democratic revolution, or rather, its realignment with ultra-leftist political formations that share none of the centrist dogma of the ANC. Any alternative to this picture would need to speak to the continuity of struggle for human rights with tangible policies for realising the demands of the electorate.

Although the ANC election campaign has focused on telling a good story, the prevailing image of a corrupt and inept post-Mbeki administration tarnished by the Marikana Massacre and Nkandla, is the one being reproduced across local and international media.

How did we get into a corner, in which NHI pilot projects are only being rolled out 20 years after the promise of health-care for all?

Why does South Africa have a welfare system skewed towards non-productive labour, in which demands for a Social Wage that include all citizens, are ignored?

In 1994 South Africa embarked on a duel economic path. In essence there were two separate and distinct South African economies. The first economy –  the market economy was opened up to trade liberalisation through economic policies such the Growth, Employment and Redistribution (GEAR) programme under the Mbeki administration. It resulted in the creation of black billionaires and the rise of a black middle class who now enjoy a standard of living on par with those living in the West.

The second economic paradigm, the dirigiste economy, was created by transforming the apartheid regime’s earlier volkscapitalisme and parastatal projects, in which state-enterprises maintained monopolies in certain key areas, such as arms manufacturing, telephony, oil production, energy, postal services, rail transport and harbours. These enterprises were allowed for the most part to continue. In other areas, parastatals were allowed to compete with the private sector (and vice versa), in some instances, state enterprises were listed on the stock market where private capital could take an interest as partners alongside the state.

In one isolated example, ISCOR the apartheid-era steel monopoly was privatised and sold to ArcelorMittal which no longer represents a monopoly in the steel market, allowing junior miners and steel producers to come to the fore.

The history of South Africa’s economic transformation, in particular the role played by the parastatal sector deserves a lot more attention than one article, since it represents the socialised side of the economy, in an experiment in which both capitalism and socialism are competing for the attention of the electorate.

As previously argued on medialternatives,  with the rise of the market economy, South Africa’s state-run enterprises have increasingly became irrelevant in terms of creating value and generating profit. While they may have once represented a form of directed national development and state-aided economic activity geared towards providing sheltered employment, the sector, aside from Denel and Transnet (the only parastatals to show a profit in 2013) is a startling testimony to maladministration and mismanagement.

Government bail-outs of parastatals are in the region of R25bn per year and mounting. Massive public debt underpinning a credit bubble which shows no signs of abating, present clear challenges for the economy. challenges which a radical restructuring, including nationalisation of industry as proposed by the EFF and its coalition partner will only serve to exacerbate.

EFF polices signalling a return to volkscapitalisme under apartheid, could seriously trip up the macro-economic drivers and low interest rates which have thus far saved South Africa from the ups and downs of the global economy. South Africa, along with emerging markets, escaped much of the fallout from the 2009 meltdown. While its stock market took a knock, the bourse quickly rebounded into double digit growth and with inflation in check, consumers have by and large benefited at the cost of labour.

A social wage given to all citizens as an unconditional basic income, rather than an inflexible wage demand, would be a lot cheaper in the long run*. Forcing businesses to pay inflated salaries to mineworkers in an industrial strike which is now in its third month, when there are other options on the table such as a citizen’s dividend which includes National Health Insurance, needs urgent and serious attention.

Despite South Africa’s current trade surplus, booming stock market, cheap Rand and diversification into the African continent, real growth in human terms has been skewed towards the middle class, alienating workers and a sizable proportion who do not directly benefit from the supposed trickle-down economics punted by neoliberals and who do not possess any material reason, except an emotional connection, to believe in the great society of Mandela.

South Africa relies mainly on foreign investment in stocks and bonds to help finance its current account deficit. Risk factors such as, a potential meltdown if interest rates are affected by a drastic change in power and governance, are bound to weigh heavily on foreign perception of local risk, as this negative picture painted by a Forbes blogger aptly demonstrates.  The country is by no means out of the rough so far as its emergence from isolation to a developing nation is concerned. The only solution is to include all citizens in the economic life of the country, either via a social wage, or by other means, such as government bonds awarded to all citizens as a mechanism for redistribution of wealth and investment in our nation’s future.

* it will take between 15 and 22 years for workers to recover what they have already lost in wages – estimated by the employers as R4.8-billion to date

Towards a Social Wage

The first Muslim Caliph Abu Bakr introduced a guaranteed minimum standard of income, granting each man, woman, and child ten dirhams annually; this was later increased to twenty dirhams.

American revolutionary Thomas Paine advocated a Citizen’s Dividend to all US citizens as compensation for “loss of his or her natural inheritance, by the introduction of the system of landed property” (Agrarian Justice, 1795).

French Emperor Napoleon Bonaparte echoed Paine’s sentiments and commented that ‘man is entitled by birthright to a share of the Earth’s produce sufficient to fill the needs of his existence’ (Herold, 1955).

In 1918, philosopher Bertrand Russell argued for a basic income in Roads to Freedom as a means to decrease the average working day and full employment

In 1963, Robert Theobald published the book Free Men and Free Markets, in which he advocated a guaranteed minimum income (the origin of the modern version of the phrase).

In his final book Where Do We Go from Here: Chaos or Community? (1967) Martin Luther King Jr. wrote

I am now convinced that the simplest approach will prove to be the most effective — the solution to poverty is to abolish it directly by a now widely discussed measure: the guaranteed income.

—from the chapter titled “Where We Are Going”

In his 1994 “autobiographical dialog” Friedrich Hayek stated “I have always said that I am in favor of a minimum income for every person in the country.”

SEE: South Africa’s Welfare Debate