Prince Mashele

The other side of job creation

2011-02-14 13:33

Nothing is more pleasing to the ears of political followers than parrots singing to affirm the words of the one who occupies the high chair in society. Indeed, history teaches us that, in an atmosphere of self-serving credulity, truth is not considered true, especially if it confutes what politicians want voters to believe.

Consider, for example, the case of John Maynard Keynes. At the Paris peace conference, held shortly after the First World War, Keynes marshalled facts in an attempt to convince the victorious Allies that their zeal to impose a heavy load of reparations upon Germany would only serve to cripple the economic recovery of the whole of Europe.

In the anti-Germanic climate of the time, neither the populations nor leaders of the Allied countries were prepared to listen to such voices of reason as John Maynard Keynes. In the end, political expediency prevailed over economic reason: Germany was ordered to pay $12bn in war reparations.

This is not the space to chronicle the dramatic episodes of the economic chaos precipitated by the vanquish-mentality of the Allies; save to say that, in 1932, they eventually brought themselves to recognise that - consistent with Keynes’ warning - it was impossible to squeeze money out of an industrially castrated Germany. When they decided finally to forgive all reparations, Europe was in a veritable economic quagmire, and Germany had repaid only $4bn out of the foolishly decided $12bn.

Don't create expectations

How was it possible for wisdom to escape even such respected statesmen as Woodrow Wilson? In his famous book, The Economic Consequences of Peace, John Maynard Keynes answers the question:

The expectations which the exigencies of politics had made it necessary to raise were so very remote from the truth that a slight distortion of figures was no use, and that it was necessary to ignore the facts entirely. (1920: 149)

From Keynes’ wise counsel, we learn that under no circumstances must we succumb to the magnetic pull of political expediency, and that not even presidents must be allowed to create expectations that are at variance with facts.

And so must we interpret President Jacob Zuma’s declaration of the year 2011 as the year of job creation. Indeed, the President told our nation that he will create jobs through the New Growth Path. Given the abundance of faith that the President seems to have in this "magic" document, citing what it says is in order:

The New Growth Path targets opportunities for 300 000 households in agricultural smallholder schemes plus 145 000 jobs in agroprocessing by 2020, while there is potential to upgrade conditions for 660 000 farmworkers. Initial projections by the Industrial Development Corporation (IDC) suggest that mining can add 140 000 additional jobs by 2020, and 200 000 by 2030, not counting the downstream and sidestream effects. Much of manufacturing is included under other job drivers, but IPAP2 targets 350 000 jobs by 2020 in the industries not covered elsewhere. High level services can create over 250 000 jobs directly just in tourism and business services, with many more possible in the cultural industries. (p. 11)

Given that no explanation as to how these figures were arrived at is offered, and how the supposed jobs would be created, we are left with no conclusion other than that we are witnessing a spectacle of wishful thinking, in a bizarre environment where numbers are as disrespected as are marbles by children.

We are not robots

Indeed, there are those who will be quick to remind us that - in his State of the Nation Address (SoNA) - President Zuma announced that his government will introduce a R9bn Jobs Fund; that the IDC will set aside R10bn to support job creation; and that the state will give tax breaks worth R20bn to companies making new investments that meet the threshold of R200m, or to expanding operations worth R30 million or more.

Before the torch of logic illuminates, all this sounds like jobs soon to happen. While we have been instructed to wait for details from our wise Ministers, only robots stop functioning at the whims of their operator. Given that we are not robots, none should scream at us when we use logic to explore the possible meanings of the figures that the President has thrown in the air.

We all know that, through its Expanded Public Works Programme (EPWP), government already employs labour directly. Given that the Jobs Fund was announced as a separate intervention, we would be safe to conclude that it is not part of the (EPWP).

Therefore, we are left with the reasonable option of a jobs-subsidy. If the pre-SoNA statements made by the ANC are anything to go by, the Jobs Fund will be there to subsidise employers who will create work for young people. Noble as the intention may be, the decision will still rest with a private investor whether to invest or not. Unpleasant as it is, let it be remembered that investors are driven more by a profit motive than the intention to create jobs.

The same applies to the R20bn tax-break, job creation scheme; none, including President Zuma, can tell with precision as to how many companies will be motivated by this, and how many jobs will be created. In other words, it is not impossible - due to factors beyond tax-break offers by government - for investors not to respond as we would like them to. There is no need to state that investors do not think like Zuma.

Joblessness

Before we get excited about the R10bn earmarked by the IDC, we should remember that, in the 2010 SoNA, President Zuma announced to the nation that the very institution had set aside R6bn as part of government’s anti-recession response. Indeed, we know that, in spite of this, more than a million workers still lost their jobs. Hopefully, someone will someday tell us what happened to the R6bn, and where the jobs that were saved are.

How the private sector is supposed to create jobs in a human resource environment characterised by an acute shortage of skills is a question President Zuma clearly did not want to blemish his speech with. Hopefully, the President is aware of the survey conducted in 2009 by Higher Education South Africa that revealed that a great number of first year students at our universities can barely read or write. Indeed, those of us who teach at university were not shocked by these findings.

With regard to EPWP, the President himself knows only too well that the best that this Programme can do is to provide temporary pain relief, hence the opiate phraseology: "job opportunities”. After closing a donga that interrupted the flow of their gravel road, poor ruralitarians are flung back into joblessness with nothing resembling a skill. Such is the nature of the so-called "public works" for our people.

Some among us may think that, by merely announcing that 2011 will be a year of job creation, so shall millions of jobs created. In the same way that the solo voice of John Maynard Keynes warned populations of the Allied countries against the quixotic belief that a mere edict would make it possible for Germany to pay reparations, we have the obligation to caution our people never to think that jobs can be created simply by a presidential decree.

Scorn and condemnation

In the real world of economics, what one intends to do matters less than how to do it. So, when a president anywhere in the world stands on a platform to utter gigantic declarations about job creation, the rational in society must ask: "How, Mr President?"

Indeed, the one who questions what a president wants voters to hear is often met with scorn and condemnation. Also, the ears of human beings generally do not want to hear bad news. Fortunately, the veracity of a Cassandra does not depend on the incredulity of those who choose not to believe. Were this the case, the victorious Allies after the First World War would have preferred history to confute John Maynard Keynes.

- Prince Mashele is Executive Director of the Centre for Politics and Research (www.politicsresearch.co.za) and a member of the Midrand Group

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