SHAWN HAGEDORN: Confronting trickle-down presumptions

Polling misses how the ANC has made time its chief adversary. Its leaders can no longer presume the 2024 elections will position them to form a coalition national government of like-minded parties. Our situational awareness requires a rethink.

The ANC’s electoral competitiveness, despite horrendous economic stewardship, indicates that those reliant on its enormous patronage machine aren’t dissuaded by corruption or power outages. If participation patterns hold, our governing party may retain the electoral support of about four out of 10 voters. Alternatively, SA’s perilous trajectory could persuade millions of poor SA adults who don’t vote to support a growth-enabling party. 

As a Western Cape resident I don’t doubt that a DA-led national government could achieve vastly better service delivery and substantially higher economic growth. The poor and unemployed would benefit, but only marginally. Nearly all of them would remain poor and unemployed, in the near term at least.

Supporters of opposition parties convince themselves that higher growth would swiftly generate trickle-down economic benefits. They overlook both the scale of the challenges and the likelihood that long time lags would tempt much political mischief, such as patronage beneficiaries who face criminal prosecution organising large-scale social unrest.

As most of those who would escape poverty due to such trickle-down benefits haven’t been born yet, the voter apathy is in fact rational. Advocating for slow-motion trickle-down solutions risks Zimbabwe-like political and economic outcomes. Might our poor be more realistic than the private sector taxpayers who want their many legitimate economic gripes prioritised? 

That the ANC can frame — with little pushback — our youth unemployment crisis as a tradeoff between benevolent subsistence payments and the pursuit of fiscal rectitude is telling. Solutions are absent for lack of looking. Too many presume that electing a competent national government would promptly deliver broad benefits. 

Some even blame disaffected poor voters for our political malaise. Rather, much empirical evidence indicates that the “have nots” are being rational while we, the “haves”, are deluding ourselves.

As business executives have a duty of care to shareholders, they routinely advocate for pro-investment policies. This would be perfectly acceptable if our politics hadn’t seen universal suffrage followed by an unemployment crisis. 

Most SA adults are poor, unemployed or both. This situation has become deeply entrenched as our annual economic growth potential is barely 2%, while the labour force expands at a similar pace.

Of course we must encourage capital mobilisation. But our globally unprecedented level of entrenched youth unemployment imperils our political economy. Expanding fixed investments won’t fix this.

Despite the unemployment crisis being our key political-economic challenge, President Cyril Ramaphosa focuses on increasing investment flows. This makes job creation conditional upon rewarding capital. To cut our youth unemployment in half, which would still be extremely high and destabilising, through mobilising capital would require an absurdly unrealistic spike in investment flows. For this to be viable, particularly given the tolerance for Ramaphosa’s localisation policies, we would need to be exceptional at trickle-down economics.

To spur such investments an emerging economy must surge value-added exporting or rapidly grow domestic spending. High growth countries emphasise value-added exporting alongside high domestic savings. Then, a generation or two later domestic consumption can further expand healthy growth.

Instead, our delusions about investment-led growth presume magical trickle-down benefits will provoke rapid growth in domestic spending. To grasp how flagrantly unrealistic such thinking is, ask yourself: is SA the worst country in the world at trickle-down economics?

SA is routinely identified as the country with the most unequal income distribution. Our per capita income continues to stagnate after having peaked long ago. Ten-million funeral policies confirms that meaningful intergenerational wealth transfers remain the exception. Most tellingly, we respond to obscenely elevated youth unemployment not with workable solutions, but rather with perpetual subsistence payments.

Some presume people are poor because they are lazy or dumb. Yet Asian countries, particularly China, have swiftly uplifted hundreds of millions of people from dire poverty in recent decades. They didn’t make their economic success contingent upon unrealistic educational upgrade paths. Rather, they designed job-creating economies.

Many countries, starting in Europe, then in North America and later across Asia and beyond, have carved out niches where they can compete internationally. Probably the best indicator of a country’s long-term prospects is the portion of its young adults who add value to exports. Yet we reject this proven path while putting our faith in unachievable trickle-down expectations. This was always going to provoke a politically destabilising youth unemployment crisis.

Poor people appear to make irrational decisions because they constantly battle with harsh financial stresses. The ANC has exploited this through creating a huge patronage network, which perpetual subsistence grants will greatly expand.

It is as if productive South Africans are rowing shallow river boats watching the poor splash about erratically without boats or much swimming experience. But what lies ahead for those with much to lose are rocky cascades. Carrying the boats around the hazardous river sections leads to an ocean of possibilities for all, but it requires that both the rowers and the swimmers adapt and co-operate.

Broad prosperity requires much domestic co-ordination and global integration. That is very different from tossing some fish to those less fortunate and then realising, when it’s too late, how interests could have been aligned to benefit all. 

The poor have been rational to withhold their votes as a form of protest. The fortunate must produce a plan whereby everyone’s prospects can rapidly improve. This is doable but it requires a major rethink.

• Hagedorn is an independent strategy adviser.