Jeff Rudin accuses me of believing there is “only one economics”, while proceeding to do exactly that himself (“Letter writer blind to need for SA version of Keynesian economics,” January 5). His letter is not a rebuttal of my arguments so much as a declaration of faith in wage-led Keynesianism, wrapped in the assertion that economics is merely politics by other means. That is not a revelation.
But it does not follow that all economic claims are equally valid or that evidence, incentives and historical outcomes can be waved away as matters of political preference. Gravity is not a political argument, and nor are the constraints faced by an economy with low productivity, weak institutions, capital flight and chronically high unemployment. Dr Rudin’s central inversion — that higher wages create jobs — is not new, radical or insightful.
It has been tried repeatedly in South Africa and elsewhere. The results are visible in our unemployment rate, our expanding informal sector, and our youth being locked out of the labour market entirely. Wages set above productivity do not conjure demand out of thin air.
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They price marginal workers out of employment. The claim that the ANC has been a faithful disciple of “neoliberalism” is simply false. South Africa is one of the most heavily regulated economies in the developing world, with rigid labour laws, extensive licensing requirements, punitive compliance costs, race-based procurement and an interventionist state that dominates energy, transport, water and large swathes of finance.
If this is neoliberalism, the term has lost all meaning. Dr Rudin invokes Keynes as if this settles the matter. It does not.
Keynesian stimulus presumes a capable, disciplined state, able to spend countercyclically, invest productively and withdraw support when conditions improve. South Africa has none of these characteristics. What we have is permanent deficit spending, collapsing infrastructure and a government unable to deliver basic services, let alone fine-tune aggregate demand.
The uncomfortable reality is that South Africa’s binding constraint is not insufficient demand but insufficient production. We do not lack consumers. We lack jobs, skills, energy security, functioning logistics and an environment in which businesses can form, expand and employ without being smothered by regulation and policy uncertainty.
Raising wages without addressing these fundamentals does not empower the poor. It entrenches exclusion. It protects insiders while condemning millions to permanent unemployment.
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