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Losing value – the middle class in South Africa has been broken

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Natale Labia writes on the economy and finance. Partner and chief economist of a global investment firm, he writes in his personal capacity. MBA from Università Bocconi. Supports Juventus.

Do we value patriotism, family, community and religion? Turns out, not so much.

What do people value the most? According to a fascinating new survey conducted by The Wall Street Journal and the University of Chicago, the priorities and preferences of what Americans value and want in life have changed materially in the past two decades. When the poll was first done in 1998, 70% of respondents said patriotism was at the top of their list as a very important value. Religion came in next at 62%, followed by having kids and community involvement.

In the past 25 years, all of those values have declined precipitously. Now, only 38% of respondents said patriotism was very important to them, and 39% said religion was very important. The share of Americans who say that having children, involvement in their community and hard work are very important values has also fallen. Tolerance for others, deemed very important by 80% of Americans as recently as four years ago, has fallen to 58% since then. 

Bill McInturff, a pollster interviewed by the WSJ, said that “these differences are so dramatic, it paints a new and surprising portrait of a changing America”. He surmised that “perhaps the toll of our political division, Covid and the lowest economic confidence in decades is having a startling effect on our core values”.

Perhaps even more depressingly, the only priority tested that has grown in importance in the past quarter-century is money, which was cited as very important by 43% in the new survey, up from 31% in 1998. 

What could be driving this change?

The tectonic socioeconomic shifts of the past 50 years provide a clue. Data show that in the US, incomes rose more or less in line with the economy up until the 1970s. Being a professional afforded one the benefits of participating in a solid middle-class existence, perhaps enabling people to prioritise other non-material values. 

Life was comfortable enough, so having a family and loving your country simply made eminent sense. With the democratisation of comfortable suburban living, believing in God and being socially tolerant were self-evident truths.

Read more in Daily Maverick: It is time to reinvent France’s broken republic

After that, capitalism lost its way. Incomes started to stagnate while asset prices continued to rise, even accelerating. That meant that unless one was part of the ownership society, with a house and a stock portfolio, achieving a middle-class life became impossible. Housing, healthcare, and decent education prices have been rising at three times the official inflation rate in the last two decades.

The financial crisis only accelerated this trend. Quantitative easing and low interest rates further inflated asset prices and made borrowing on existing assets such as homes and stock portfolios effectively free, while productivity and wages went into reverse. Neo-Marxist economist Yanis Varoufakis called this “fiscal austerity for most and state socialism for bankers and the 1%”.

Conspicuous consumption obviously doesn’t help. Twenty years ago Generation X was perhaps best summed up by the dropout character played by Ethan Hawke in the cult indie film Reality Bites. After being fired from yet another job for stealing a Snickers bar, he muses with Winona Ryder: “You see, Lainie, this is all we need… couple of smokes, a cup of coffee… and a little bit of conversation. You and me and five bucks.” In this era of Instagram, the Kardashians and Dan Bilzerian, his insouciance seems quaintly laughable, if making one deeply nostalgic.

South Africa abandoned

We are all saturated by images of people who want and get more and more and more, while we are supposedly meant to be building our “personal brands” and “human capital”. Loss of trust in government does not help either. As Senator Elizabeth Warren memorably said, we live in a world of: “I’ve got mine, you are on your own.” 

Sadly, these trends do not only apply to the US. In South Africa, they are even more pronounced. Due to a paucity of productivity and economic growth, the middle class in South Africa has been broken. It is forced to deal with the parallel realities of stagnating incomes and a failing state which is incapable of delivering even decent roads, power and potable water, not to mention healthcare, security and education. 

No wonder middle-class professionals are abandoning South Africa in their droves. If a similar survey were run in South Africa, it would most likely show even more starkly extreme conclusions.

In the last two decades, neoliberal capitalism failed to deliver the democratisation of opportunities it once promised. Combined with a maliciously extractive state, this is brutally apparent in South Africa almost more than anywhere. The question now is simply, for those sticking around, how much worse can it get? DM/BM

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  • Karsten Döpke says:

    Very important article. One of the biggest consequences of the above is that people start loosing faith in capitalism and the free market, it opens up the floor to more radical and potentially destructive systems.

    • Natale Labia says:

      Thank you Karsten. Fully agreed.

    • William Kelly says:

      What has failed has not been capitalism. We haven’t ever had capitalim other than arguably for a fee years around the change of government. Since then we have had state mandated extraction through cronyism, which has been painted as capitalism, which is simply not true.

  • Robert Pegg says:

    The grass is not always greener on the other side. Living expenses is countries like Cananda, Australia, New Zealand and the UK are far higher than South Africa. Many people who have emigrated long to come back to South Africa if the political situation changes. If common sense prevails in next years elections we could see a massive influx of South Africans returning home.

    • Rod H MacLeod says:

      What is your empirical basis for saying this? I have many friends and family who have gone – not one is talking about coming back, even with a change of government (which definitely won’t happen anyway).

  • Brian Ruff says:

    Radical individualism and the disabling of the State – by ideology and looting – are clearly related. In our case, this also goes back to the failure of any economic post apartheid redress for the discriminated against population in favour of an embrace of the ‘unfettered’ market by Mandel, Mbeki and Manuel by 1996, persuaded by the Anglo boys and the neoliberal Treasury. The fact that our leaders in government and the business sector still believe this is the ongoing tragedy.

  • R S says:

    “In the last two decades, neoliberal capitalism failed to deliver the democratisation of opportunities it once promised.”

    How so? You can’t say it failed when in the next sentence you point out that members of the state have been sucking the system dry.

    • Natale Labia says:

      Thanks Rowan – I would argue you can, because even in countries where it has existed without a purely extractive state (such as the subject of the study, the US) the effects of neoliberal capitalism clearly do not include “the democratisation of opportunities”

  • Vanessa van Vliet says:

    Someone help me with the neoliberal capitalism and extractive state in the same paragraph

  • David Walker says:

    Another option for the despairing South African middle class is to semi-grate to the Western Cape. There are challenges of course, but a good life can be built and a positive impact can be made. There is a sense of optimism and a general feeling of growth and development. Every day we feel the difference that is made by having responsive and accountable town and provincial governments.

  • Andrew Blaine says:

    It was Napoleon who said “There are no bad soldiers, only bad officers”!
    Right now that is true of almost all Western countries and is completely appropriate for our kleptocratic leadership!
    We need leadership which inspires confidence and encourages, and justifies our trust

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