What we can learn from America
It's all about the economy
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A few weeks ago, Solly Mapaila, the general secretary of the South African Communist Party, addressed a crowd in Sandton on Cosatu’s national day of action: ‘This action is the most important and critical first salvo against the neoliberal government of national unity that is already showing real signs that it is not willing to listen to the interest of the workers’.
The march ended at the JSE, where Mapaila continued: ‘These people here in the Johannesburg Stock Exchange have more money than the government. Yet, they allow this money to be invested all over the world and not here in South Africa. They allow money to be liquid form (sic), not employed in production, where workers can get jobs and can be properly paid.’
Let’s do our best to look beyond the rhetoric. There are indeed worries about an economy struggling to shift to a faster gear. Despite months of no electricity blackouts, an appreciating currency, and a lower interest rate, we do not yet see much improvement in investment; it is consumers, by and large, who are responsible for the uptick in growth. To misquote a former Nobel prizewinner, we see the GNU everywhere except in the productivity statistics.
But the lesson to take from this is not what the SACP wishes it to be.
Consider the following graph, created by University of Massachusetts Amherst economist Arindrajit Dube. It compares the real (inflation-adjusted) wages of all American workers with those of non-managerial workers between 2000 and 2024. Non-managerial workers make up 80% of the workforce; they are indeed the workers that trade unions typically proclaim to care about most.
While there is not much difference between managers and workers between 2000 and 2020, the Covid shock caused what seems to be a persistent difference between the two groups, with worker wages growing faster than manager wages. Wage inequality has fallen as a consequence. Dube explains:
The post-pandemic labour market has been shaped by unprecedented challenges, yet it has also created an environment in which workers – particularly non-managerial workers – have seen real wage growth that outpaces historical trends. This period of tight labour markets and full employment has demonstrated that strong labour demand can significantly boost wages, particularly for lower-paid workers.
Full employment is a direct consequence of fast economic growth. Here’s Mark Zandi (@Markzandi on X), chief economist at Moody’s Analytics in late September:
This is among the best-performing economies in my 35+ years as an economist. Economic growth is rip-roaring, with real GDP up 3% over the past year. Unemployment is low at near 4%, consistent with full employment. Inflation is fast closing in on the Fed’s 2% target – grocery prices, rents, and gas prices have been flat to down over the past more than a year. Households’ financial obligations are light and set to get lighter with the Fed cutting rates. House prices have never been higher, and most homeowners have more equity in their homes than ever. Corporate profits are robust, and the stock market is hitting a record high on a seemingly daily basis.
The economics blogger Noah Smith summarises it well: ‘Pretty much everyone in America who wants a job has a job. It is remarkable how the U.S. is managing to have both faster growth and lower inflation than other countries at the same time.’ He concludes: ‘America’s economic performance is amazing. It’s doing better than any rich country could expect to be doing.’
Noah is correct that this is not true for other rich countries. Take the United Kingdom, the first country to grow rich. In Foundations, a long essay by Ben Southwood, Samuel Hughes and Sam Bowman, they investigate the reasons that Britain has stagnated relative to its peers. The following paragraph summarises it best:
We fail to capitalise on these rare advantages [our legal regime, low levels of corruption, centuries-old commitment to free trade, efficient financial sector, and world-leading scientific research ecosystem] because the economy lacks the most important foundations: private investment is blocked from going where it could generate the highest returns, meaning we have lower investment than all our peer economies; in particular we do not allow investment in the infrastructure we need to allow people to access prosperous areas, the houses they need to live there, and the offices, labs, factories, and warehouses they need to work there, which, together with our high and rising energy costs, stop the companies in those cities reaching their full potential.
Sound familiar? What Britain has done is exactly what the SACP wants to do more of. In short, they want to follow the British model of impoverishment instead of the American (neoliberal?) model of enrichment. The fact is that America is growing fast, creating jobs and, in the absence of people to fill those jobs, wages are rising, particularly for those at the bottom of the income distribution. Britain, by contrast, has stagnated and is becoming poorer. There is only one winner here.
Not everything about America is great. America will go to the polls tomorrow to choose between Kamala Harris and Donald Trump. Because of their Electoral College system and winner-takes-all approach in most states, it will ultimately be a few thousand people in a handful of select states that will determine the election outcomes of a country with more than 330 million people (and 160 million voters). That seems like a precarious way to manage democracy. Despite some weaknesses in our system, I’d much prefer our proportional representation system. And given the gracious way the ANC dealt with the loss of their majority, and the less than gracious way Republican voters reacted to their previous loss, there is much America can learn from South Africa’s politics.
But when it comes to the economy, there is no better model for growth, job creation, and upward mobility than what America has managed to achieve in recent years. While its political system may have its flaws, the economic dynamism driven by market forces, innovation, and a relatively flexible labour market stands in stark contrast to the stagnation seen in countries like the UK. South Africa, at a critical juncture, must choose its own path carefully – whether to embrace policies that foster economic growth and opportunity for all, or to follow the failed models of heavy regulation and underinvestment that have left other nations struggling. The lesson is clear: economic openness and flexibility lead to prosperity, while closed, rigid systems do the opposite.
An edited version of this article was published on News24. Support more such writing by signing up for a paid subscription. The images were created with Midjourney v6.
Interesting blog, especially the point you make about how "it's all about the economy". You suggest following the American model. But here is the crucial question. As a superpower hosting a global key currency, can the United States not print money on their way to artificial success? This is, after all, their most important policy. Can South Africa do the same without pressure to devalue because of inflationary pressures? Also, while the United States has just 4 percent unemployment, South Africa is well over 33 percent. Isn't there something about the nature and structure of both economies that make them so different that copying a particular model makes it not just difficult, but unadvisable? These two countries have very different histories, economic structures, capital markets and therefore, modelling South Africa's economy against the US would be highly problematic, unless I am missing something.