It’s time that every economic neoliberal and scoffing “libertarian” accepts a basic fact about South Africa: the welfare state isn’t going anywhere. We need it. The end.
It would be nice to end this column right there, but that won’t do, would it? South Africa has millions of poor and unemployed people, certainly too many for the government and society to simply ignore. If we did leave the poor to fend for themselves, the London riots would look like a Winnie the Pooh picnic compared to what could happen in South Africa. To use a phrase so often employed by market-orientated thinkers: it is in our best interest to take care of the poor. That is the reality around which we must now craft a working and prosperous state.
In a veiled grimace at what it sees as South Africa becoming a socialist state, the Sunday Times said in its editorial, “The launch of the National Health Insurance plan has taken South Africa another step down the road to becoming a welfare state that seeks to redistribute resources from its tax base to a population which faces dimming job opportunities”. The paper goes on to juxtapose the image of a prosperous South Africa being one which adopts neoliberal market policies and a failing one being a South Africa with an expanded welfare state by fretting over the economic policy debate in the ANC.
Unlike the Sunday Times, I don’t believe that abandoning the welfare state is the best solution.
The welfare state is going to cost South Africa – there is no debate over that. The people who are going to feel the pinch the most are the middle class. If the economy doesn’t grow fast enough and we don’t create enough jobs, the burden on the middle class may become too onerous to bear.
The government should therefore seek to expand the middle class as aggressively as possible, whilst at the same time expanding the welfare state to capture those who will never be able to have jobs. South Africa pays social grants to 15 million people, paid for by tax revenue from five million citizens. Clearly we need to have more taxpayers.
Government’s expansion of the middle class can be mounted on two fronts: stripping small business labour and tax requirements (ironic, isn’t it?) and also pumping trillions of rands into the hands of the previously disadvantaged by giving away state assets. Leon Louw articulated the second idea best when he said that the government should be giving away land and putting many state owned enterprises (which once were private businesses nationalised by the apartheid state) into the hands of black business. They could start by simply giving the titles to the land upon which RDP houses are built to the people who get the houses. It’s fine if the new land owner decides to sell the land. This idea alone would put about R100,000 (by Louw’s estimation) on average into the pockets of the recipients and inject R1 trillion instantly into the economy. This is money that these people could use to start businesses, educate themselves and their children, or whatever they please to do with it (and if a tiny minority blows it on strippers and booze, well, so be it).
As for the first idea, the government needs to realise that it isn’t the best employer of people. And I don’t believe that big business is either. It isn’t in business’s interest to be labour intensive. It is too expensive and time-consuming for such businesses, and would destroy their global competitiveness. Rather, it should make it easy for small businesses to thrive. How about exempting businesses that earn less than certain revenue from wearisome labour obligations? A significant part of South Africa’s economic backbone could be small-to-medium enterprises.
If done well, this plan could expand the middle class enough to fund the ambitious social grants programme and other arms of the welfare state such that it would not be necessary for the government to take on too much debt.
The NHI and social grants programme shows that the government understands that we can’t just abandon those who can’t afford such things. We should be concerned with making these government programmes work, not with whether they should exist at all. DM