Economist Explains Why Black South Africans Are Still Extremely Poor


By Victor Ochieng

For years, there has been widespread outcry over economic imbalance in South Africa, one of Africa’s most developed nations. Efforts have been laid down to empower the black community, but no notable success has been registered.

Thomas Piketty, a French Star Economist and author of the widely referenced best seller, Capital in the 21stCentury, recently said during his Nelson Mandela lecture that South Africa’s strategies to empower the black South Africans haven’t been successful in spreading the wealth. The sad reality about the country is that a whopping 60-65% of the country’s wealth is controlled by a mere 10% of the population, with up to 80% of that 10% being white. Comparing these figures to other countries draws a stark reality in the sad economic state that the country is going through. In Brazil, for example, the country’s wealth is controlled by 50-55% of the population, while 40-45% of Americans control the U.S. wealth.

The fact that whites only account for 9% of the South African population, yet they’re the ones who control the country’s economy even adds more insult to the injury. Currently, South Africa ranks high among the world’s most imbalanced nations, economically.

Why are efforts to bridge the gap not being successful?

According to Piketty, skin color is a factor. Citing France as an example, he says that a majority of the French population is white and they’re the ones who control the economy, making it easier to address economic inequality. He clarifies that after generations, people tend to forget who came from what group, which isn’t possible where skin color defines the difference.

The state of economic imbalance in South Africa is saddening to say the least. In fact, there is a general feeling that the inequality has to be addressed, now. A number of programs, including Broad Based Black Economic Empowerment (BBBEE), that have been formulated to address the issue haven’t yielded demonstrable results and so a more effective approach has to be devised. A big chunk of the South African labor force still remains unskilledand education is also imbalanced as a result of the same economic inequalities.

Former South African finance Minister Trevor Manuel said that the issues aren’t necessarily economical, but are political.

“We’ve got the framework in place but I think the problems are not in the economics: it is not even in the tax law. Our problems are in the leadership and how we convene society to understand we’re in this together,” Manuel allegedly said, according to a South African media report.

In his Mandela lecture, Piketty floated a few suggestions that he believes would go a long way in addressing the imbalance: “a national minimum wage, workers on corporate boards, and accelerated land reform.”

Comments (1)
No. 1-1

This article seems to lay the blame squarely on economic inequality and the white man. I'd like to start by saying that it is foolhardy to pursue any sort of socioeconomic and political reform without ensuring basic freedoms. I say this because where there is oppression/coercion, the government is invariably the culprit through broken institutions it creates and hence economic stagnation. For those who think I'm making this up should freely consult the Economic Freedom Index (EFI) to see the correlation between freedom and prosperity published annually by the Heritage Foundation and the Wall Street Journal. Let them tell us which countries are faring well and where they lie on the EFI spectrum.

Now back to the "drastic" economic imbalances the article identifies; income inequality is not necessarily bad because in the best of worlds it exists and depends on the preferences and choices that individuals make not by government fiat or the white man. A person who enjoys a certain degree of liberty to pursue his or her objectives stands a better chance to improve his/her socioeconomic status than a person who relies on government mandates. China did not lift 300 million people out of poverty because of the Great Leap Forward or the Cultural revolution that took away 65 million lives in 25 years of Mao's communist rule, it was because they started to espouse free market economics in 1978. Granted it is not perfect but that is what makes them what they are today and they can be better if they continue to do so.

Now the case of South Africa is special for the simple reason that there was a systematic disenfranchisement of blacks during apartheid with all its nasty attendant results. However, this ended some 23 years ago so the argument that whites are somehow conniving to make sure blacks don't survive is at best ludicrous. The next question is why haven't they progressed when almost all the important and lucrative jobs are held by the blacks? The truth is those who were once the hope of the black community are now practicing reverse apartheid. How? In the State's attempt to strong arm and impose so called equality of outcome programs like the Black Empowerment program and other affirmative action type initiatives to supposedly give blacks an advantage due to historical wrongs, ended up hurting the same people they set out to help. Many whites certainly gained from the preferential policies during the apartheid days (it was to the detriment of blacks but many of them earned their education and skills by diligently going to school, and many were vehemently against the policies that favored them (cf. Prof. William Hutt); was it fair to maltreat blacks ? No. Should they now be punished for what their forbears did? Certainly not and it doesn't undo the harm) but many whites also lost a lot because of the choices they made and because they thought the racist establishment would last forever. Today, by trying to craft post apartheid policies that say you get a job because you are black and were once denied it for racist reasons doesn't help because people (blacks and whites) have different motivations.

The South African government has tried to tell blacks how they must conduct their lives, tried to give them jobs they were unfortunately not properly trained for, provided some with business opportunities through cronyism and biased corporate welfare with zero entrepreneurial skills all in the name of equality of outcome with whites and supposed fairness instead of improving the school quality in poor districts like Soweto and other poverty stricken areas first. The new black elite have taken over and are doing what the apartheid regime did and even worse .

Many blacks in South Africa are richer today by availing themselves of the new found opportunities and have made strides. That's a good thing. But for the majority, they are lagging because their own kind have become so corrupt, vindictive and oppressive toward other blacks and whites as well. The result is terrible black schools, crime, sickness, socioeconomic and political gridlock for the many, etc... If anything, the new management team in South Africa is to blame for the woes of blacks and others today. The government has refused to grant the black South Africans economic license to decide for themselves and has played the role of a nanny state thereby destroying all incentives for them to be productive citizens. If the South African government wants to help, they should get out of the way, free the poor South African, protect their freedoms to decide, make the law equal for all and champion self determination. This is the only way entrepreneurship and and any other forms of prosperity will be created and eventually thrive in that country.

The author also mentioned Piketty who is essentially a leftist economist championing redistributionist policies that are discriminatory for all the wrong reasons. How? First by saying that the problem is skin color. No it's not. Of course there is prejudice everywhere but the numbers do not add up to justify the author's or Piketty's point. If the South African government were to roll back affirmative action policies, it'll be giving everyone an equal opportunity to compete at the outset. What it is doing now is telling blacks that you are special and you don't know as much as whites so I'll give you a leg up. Black South Africans have come a long way and they are quite capable of gradually ascending the economic ladder like it is done in any relatively free, open and competitive society if only their government will stop infantilizing them. It is condescending to say the least. And to be fair since the author presumably is saying it is lacking in the current state of affairs, is there anything more racist than that!?

Secondly Piketty and the author invoke the minimum wage law. This law by definition cuts off the bottom rungs of the economic ladder in any society. This law is a racist one on which much of South African apartheid was based as well as much of US Jim Crow laws were based. It was set up by some racist labor unions to protect white jobs from black competition. (Cf. The Davis-Bacon Act. 1931 in the US case and the South African Labor laws under apartheid). The law simply means that if the minimum wage is X dollars, only employ people who can produce goods and services who have the skills that match X dollars at least. Who are those who don't meet that requirement in South African society due to fewer skills? In South Africa many blacks have very little education and marketable skills like the article rightly states so by implementing such a law how are the current black law makers different from those racist unionists of the 20s,40s,60s, and 70s?

The only thing I'll like to say is there is no benevolent or benign government economic policy that helps its citizenry apart from ensuring equal protection of their liberties and private properties under the law. All is not lost. Like Milton Friedman used to say if you put equality before freedom you get neither, but if you put freedom before equality you get a measure of both. The black South African politicians who are engineering the down fall of their fellow South Africans and blacks in particular should take heed and stop pursuing failed socialist and communist policies. Venezuela is a good contemporary example. In a free market society, racism, prejudice and all sorts of ill will die a natural death!