Socio-economic inequality in South Africa is due to the institutionalised ideological mismatch regarding labour and economic policy
Economic growth is shaped by policy context and promoted most effectively when it is consistent with either liberal market or co-ordinated market ideal type varieties of Capitalism. Policy inconsistency dampers economic growth
post-apartheid South Africa attempted to adopt a social-democratic and co-ordinated variety of Capitalism. This failed due to the adoption of macro-economic neo-liberal policies. Organised labour protected labour market policies which lead to policy inconsistencies with regard to trade liberalisation. Trade liberalisation combined with labour market protection leads to unemployment. (Nattrass 2013, 56)
Insert some definitions
VoC approach highlights policy inconsistencies
There did exist the possibility of a post-apartheid political economy shaped by social accords/ tripartite negotiations, but the State preferred to act unilaterally with regard to macro-economic policy. Business was divided and preferred bilateral engagement with government. Organised labour has an ideological preference for managing capitalism through a developmental state tasked with promoting wage and productivity growth.
Economic growth has been slower in MME’s compared to either CME’s or LME’s
But Hall and Soskice have shown that government can create a win-win situation through institutional design. Firms gravitate towards strategies that take advantage of opportunities provided by institutions (2001:15)
South Africa is like an LME as it has high levels of market capitalisation and inequality but labour regulations are coherent with that of CME, which makes it a MME with the accompanying problems of policy incoherence (Nattrass 2013, 59)
The initial CME approach was thwarted by the adoption of macro-economic policies and institutionalisation of BEE. Like a CME SA has social grants but no sustainable support system for the unemployed (Nattrass 2013, 62).
Unemployment is the key economic impasse, this means South Africa has different challenges than those that are in Eurocentric CME/LME paths to growth. In South Africa the divide is propelled by those with some work and those with no work. Creating jobs would aid the process of poverty alleviation and reducing inequality. However the trade Unions focus on protecting and increasing real wages.
Labour productivity is on the rise, this is good in terms of the economy because it means the economy is becoming more efficient. The negative side of rising labour-productivity for a labour surplus economy is that fewer jobs are being created for each additional unit of output
Unemployment in SA has historical roots Mining and Agriculture were major employers of unskilled labour (Mining and agri % GDP pre 94?), however during recent times the relative and overall contribution to employment has fallen. Manufacturing and service sectors expanded and there was a shortage of...