Why is unemployment so high in South Africa?

by on May 2, 2012 at 6:50 am in Economics, Uncategorized | Permalink

Ryan Cooper writes to me:

Hey Tyler, possible blog post topic: I’m wondering how you would explain the situation in South Africa (or other similar countries) with stupendous persistent unemployment–SA has been above 20% since 2000:  http://www.tradingeconomics.com/south-africa/unemployment-rate

A few factors I imagine are important:

1) The education system is totally broken in a lot of places. As in, 12th graders can neither read nor write in any language nor figure out 3×3 in their heads.
2) Unions are crazy strong, and have been driving up wages like gangbusters, particularly in the public sector.
3) Minimum wage laws are stringent and have actually led to worker protests: http://www.nytimes.com/2010/09/27/world/africa/27safrica.html?pagewanted=all
4) Inflation hasn’t been TOO bad recently (~6%), but has seen spikes to almost 14 percent not long ago: http://www.tradingeconomics.com/south-africa/inflation-cpi
5) There’s a highly developed sector. On average, whites are far richer than blacks.

6) Crime and inequality are incredibly bad.
7) The ANC has won every election in a landslide and is strongly allied with the unions.

So how does it tie together? Lots of poorly-educated ZMP layabouts? Wages too high to start sweatshop-style development? Razor wire + electric fence + security guard costs deterring investment? The results of generations of systematic oppression and denial of education? All of the above, plus some?

Just trying to iron out a coherent story. I was a Peace Corps volunteer for two years there and I’m slowly building up my economics knowledge; this question has always fascinated me.

Here is one additional account.  Here is an IMF analysis.  Here are some World Bank powerpoints.  I told him I would try to answer the question, but after a bit of research I don’t find myself getting much further than his suggestions.

Mike M May 2, 2012 at 7:41 am

I’m not sure why “crime and inequality are equally bad.” If everyone has zero, why would this necessarily be better than some having $1 and others having $2? Is it better that everyone lives in poverty than only some live in poverty?

Mike M May 2, 2012 at 7:46 am

Sorry, I misread, but I’m still not convinced that inequality something that is necessarily bad, particularly if the equality alternative means that everyone is made less wealthy in the long run.

Doc Merlin May 2, 2012 at 7:59 am

Its bad any time you have a corrupt political establishment, because then the $2 guys can buy up (or be) the politicians and rent seek to the detriment of everyone else.
Its only fine if you have a system without much governmental power.

david May 2, 2012 at 8:33 am

… where the weak government nonetheless maintains a reasonably high monopoly on the use of force, sufficient to tamp down fraud and open pillaging of accumulated wealth, in a way that is politically sustainable for said government. Often sub-Saharan states are not plagued by a particular overbearing central government but no effective central government at all, so that Local Warlord Du Jour gets to form your executive, legislature, and judiciary all in one.

A country where organized rent-seekers free run of the state looks like a cronyism under a strongman state, i.e., relative success stories like the Newly Industrialized States. Got to have wealth before you take your cut. Still, better than lots of Africa.

South Africa is better off than most but still has disorganized rent-seekers – the labour groups which fought to end apartheid have too much legitimacy, but nobody in particular has so much of it that they can alter its direction. Great when a state was arresting anti-apartheid leaders. Not so great now. Remember that the ANC has nationalization and land distribution ingrained right into its charter, is historically allied with communists and the trade unions – this sort of commitment is hard to moderate. It’s like US Southerners cheering for state’s rights: too bad, you managed to completely taint even the phrase and now it’s dead, have fun rehabilitating it.

Randy McDonald May 2, 2012 at 8:29 am

The whole system of South Africa before 1994 was geared towards producing a workforce that, by and large, enjoyed very low investments in human capital, was intentionally spatially isolated from most economic opportunities, and was supposed to function as a highly-substitutable low-skill low-wage workforce.

Trying to explain South African unemployment without accounting for an apartheid system that functions with the explicit intent of producing a mostly uncompetitive workforce for the benefit of a minority population goes only so far.

Randy McDonald May 2, 2012 at 8:36 am

Unemployment in Brazil, another highly-unequal middle-income society stratified by race, has been consistently at least half as high. There might be an interesting contrast/compare there: why was unemployment lower in Brazil?

david May 2, 2012 at 8:44 am

Was the level of stratification ever in the same ballpark?

Brazil’s historical problem was hilarious inflation, anyway, which might account for a bit.

Randy McDonald May 2, 2012 at 8:46 am

The level of intentional stratification? Don’t follow.

Randy McDonald May 2, 2012 at 8:56 am

Despite high levels of dysfunction and inequality linked to race, there was no colour bar in Brazil the way that there was in South Africa, and no explicit intent to worsen racial divides by–say–preventing Afro-Brazilians from becoming an urban population. Brazil didn’t set out to make things worse the way that South Africa did, and that may well have been key to lower levels of violence and unemployment in the former country. (Lower relatively speaking, mind.)

TallDave May 2, 2012 at 1:05 pm

They’re actually pretty close in terms of homicide rates.

http://en.wikipedia.org/wiki/List_of_countries_by_intentional_homicide_rate

Interestingly, Central America and the Caribbean are actually the worst in the world.

So Much For Subtlety May 3, 2012 at 5:52 am

I am not sure that you can claim that about Brazil. There has been a color bar in Brazil – in the Navy for instance. There is clearly a strong de facto Apartheid system across Latin America. Either that or magically non-White people are unable to compete. How many non-White billionaires are there in Mexico for instance? There were strong efforts in places like Peru to exclude the indigenous population from urban areas and I will bet there was in Brazil too. The fact that so many Afro-Brazilians live in illegal and informal settlements suggests as much.

But it is bizarre to compare Brazil and South Africa. Both are dysfunctional. Both are highly unequal. Both are strongly racially divided. Both have incredible murder rates. The difference is that Lula abandoned his Marxism and adopted something not dissimilar to the Nordic countries – mild redistribution on top of a fairly liberal economy. While the ANC remains a front for the South African Communist Party which is busy looting the state a la Turkmenistan or any other post-Soviet kleptocracy.

Anti-Gnostic May 2, 2012 at 8:31 am

What in the world is going on with South Africa? It’s a democracy, isn’t it?

Truly an impenetrable mystery. A paradox, an enigma. Just one of those questions the gods have declared the mind of man shall never unravel.

Randy McDonald May 2, 2012 at 8:46 am

It would be difficult for even the most competent government to overcome the effects of a half-century of intentional disdevelopment.

The South African government’s sustained underinvestment in health (http://www.ncbi.nlm.nih.gov/pmc/articles/PMC2803032/) and education (http://countrystudies.us/south-africa/56.htm) was part of a sustained policy of protecting high-status/high-income jobs for whites by ensuring that that whites wouldn’t face competition from a much larger, and much poorer, black population. By 1994, according to HDI indices white South Africa was as developed as Spain, while non-white South Africa composed to Congo-Brazzaville.

http://hdr.undp.org/en/media/hdr_1994_en_chap5.pdf

The intentional spatial segregation of non-white populations, too, is also key. More rational economic policies wouldn’t have seen the discouragement of migration to urban areas altogether, the concentration of migrants (disproportionately adult males, no families allowed) in underserviced townships on the peripheries of cities and the consignment of their families to rural ghettos, and the destruction of pre-existing non-white urban settlements (Cape Town’s District 6 comes to mind).

As for entrepreneurship among non-whites, an unstable legal environment that made that things difficult even for those few who managed to accumulate the necessary capital, along with political system’s crying lack of legitimacy, didn’t help.

South Africa under the apartheid

jim May 2, 2012 at 9:05 am

Willful ignorance is a wonderful thing.

Randy McDonald May 2, 2012 at 9:07 am

Can you explain what you mean?

anon May 2, 2012 at 12:20 pm

Psst. Randy. Old South Africa was better for blacks. Much better.

Randy McDonald May 2, 2012 at 9:35 pm

Lacking political representation, any state investment in their communities, or–in many cases–citizenship owing to their consignment to ethnic homelands they didn’t want, I’m sure they did superbly.

So Much For Subtlety May 3, 2012 at 4:36 am

South Africa got immigration, mainly illegal, from as far away as Nigeria under Apartheid. As bad as the system was, the rest of Africa tended to be worse.

Tracy W May 2, 2012 at 11:59 am

It would be difficult for even the most competent government to overcome the effects of a half-century of intentional disdevelopment.

South Korea strikes me as an example (albeit Japanese rule was only for 40 years, not 50).

david May 2, 2012 at 3:44 pm

Japan intended to permanently annex Korea; as a colonial power it was certainly no less interested in development than, say, Britain generally was in Southeast Asia. Korea’s chaebols today have their roots in Japanese Korea and the duplication of the then-zaibatsu (similarly morphed to the modern horizontal keiretsu), not in American Korea.

Randy McDonald May 2, 2012 at 9:36 pm

Japan did many things in the Korean peninsula, but its economic policies arguably primed both Koreas for their post-independence growth.

So Much For Subtlety May 3, 2012 at 5:47 am

China also discourages migration to urban areas. They too concentrate migrants – not always adult males but rarely married couples – in under-serviced townships on the peripheries of cities. Their families are left in rural poverty that is worse than South Africa’s.

As for a legal environment, what legal environment? Legitimacy?

All of this must suggest China’s economy is not growing, right?

HeyBrosItsMeAgain May 3, 2012 at 3:57 pm

Uh guys I think he was being sarcastic, with his thinly veiled answer being something like “it’s because of all the black people”. He’s a Steve Sailery kind of person.

HeyBrosItsMeAgain May 3, 2012 at 4:01 pm

Oh, guess the person right below me already covered this

Lee May 2, 2012 at 8:32 am

here’s some relevant research on labour market segmentation – http://www.rovingbandit.com/2012/04/segmented-labour-markets-south-africa.html

go May 2, 2012 at 9:27 am

This is in reply to Randy McDonald (May 2, 2012 at 9:07 am).

Anti-Gnostic is an HBDer. He’s using the usual tactic of Steve Sailer acolytes, which is to dance around, tease, and hint at their real point: that racial IQ differences explain most of the ills of the world. (In this case, the low employment in South Africa.)

They know that they can’t just come out and say it because when people understand what they’re trying to say, they get angry and argue with them. So they do this weird guerrilla-warfare type of debate where they make little sarcastic jabs at those of us that haven’t seen the light on HBD and thus are not okay with, you know, condemning a good portion of the world to a second-class existence forever.

The “game”/”status”/PUA types are the same way, except with inherent behavioural differences between the sexes, not with IQ differences between races. Sadly, Marginal Revolution, otherwise generally a good blog, has become infested with both groups over the past couple years. In the latter case, it’s because the head honcho of the Game bloggers, one “Roissy” (who now blogs under the name “Chateau Heartiste”) has a weird hatred for Tyler Cowen (Roissy calls Cowen “Cheap Chalupa”) and often directs his readers here.

Anti-Gnostic is one of the real winners who is a member of both groups. I suggest ignoring his opinions and posts with great prejudice.

msgkings May 2, 2012 at 11:31 am

+ a googol

anon May 2, 2012 at 12:23 pm

I think it was Cheap Challupas, as in plural. I doubt Tyler would sacrifice the civilization that created him for a single Challupa.

Tom May 2, 2012 at 5:00 pm

Thanks! Very helpful explanation for a relative newcomer.

go May 2, 2012 at 9:29 am

This is in reply to Randy McDonald (May 2, 2012 at 9:07 am).

Anti-Gnostic is an HBDer. He’s using the usual tactic of Steve Sailer acolytes, which is to dance around, tease, and hint at their real point: that racial IQ differences explain most of the ills of the world. (In this case, the low employment in South Africa.)

They know that they can’t just come out and say it because when people understand what they’re trying to say, they get angry and argue with them. So they do this weird guerrilla-warfare type of debate where they make little sarcastic jabs at those of us that haven’t seen the light on HBD and thus are not okay with, you know, condemning a good portion of the world to a second-class existence forever.

The “game”/”status”/PUA types are the same way, except with inherent behavioural differences between the sexes, not with IQ differences between races. Sadly, Marginal Revolution, otherwise generally a good blog, has become infested with both groups over the past couple years. In the latter case, it’s because the head honcho of the Game bloggers, one “Roissy” (who now blogs under the name “Chateau Heartiste”) has a weird hatred for Tyler Cowen (Roissy calls Cowen “Cheap Chalupa”) and often directs his readers here.

Anti-Gnostic is one of the winning specimens of humanity who is a member of both groups. I suggest ignoring his opinions and posts with great prejudice.

Randy McDonald May 2, 2012 at 9:36 am

“He’s using the usual tactic of Steve Sailer acolytes, which is to dance around, tease, and hint at their real point: that racial IQ differences explain most of the ills of the world.”

I look forward to the explanation of the persistent differences in GDP per capita between Canada and the United States in the terms of issues with the Canadian genome.

Thanks for the warning!

Jack Fraser May 2, 2012 at 9:45 am

As the one American in a Canadian family, I may have some insight. Our genetic adaptation to living near polar bears makes us very cautious and polite, hindering economic growth.

lords of lies May 2, 2012 at 10:33 am

“I look forward to the explanation of the persistent differences in GDP per capita between Canada and the United States in the terms of issues with the Canadian genome.”

IQ is necessary but not sufficient. duh?

Randy McDonald May 2, 2012 at 10:38 am

And history, geography, culture, politics–all other factors are irrelevant?

Making IQ the primary explanation for low income among South African blacks is the same sort of mistake as making IQ the primary explanation for low income among post-Communist central Europeans, only taken up to eleven. South Africa was run by people who systematically enforced wealth-destroying policies on blacks for the explicit benefit of whites: of _course_ South African blacks would be substantially poorer!

Anti-Gnostic May 2, 2012 at 11:14 am

That would explain why Hong Kong is just a barren rock in the sea and Rhodesia, er, Zimbabwe, has to import food. Nobody is saying such things are irrelevant, but people generate culture. The South African minority handed their resources and institutions to the democratic majority and they’re making a hash of it. The variable is “people,” but any inquiry along those lines is practically outlawed. So the globalist Blank-Slaters have a hissy fit: import Africans here! export British institutions there! education! money!

Before handing over power the apartheid government, in one of the most far-sighted acts in modern times, dismantled its nuclear weapons.

TallDave May 2, 2012 at 11:26 am

What AG said. S Africa has the largest GDP in Africa. The correlation between economic success and European influence seems to the opposite of what “systematically enforced wealth-destroying policies on blacks” would suggest.

Culture dominates. The impact of racial characteristics seems marginal.

Cliff May 2, 2012 at 11:32 am

Well, what specifically are the policies the new government pursued that resulted in this persistent high unemployment? That is the question at hand and you are just avoiding it.

lords of lies May 2, 2012 at 11:48 am

“Culture dominates. The impact of racial characteristics seems marginal.”

but culture and biology are intricately entwined. culture does not spring up out of the ground unseeded, like a summoned monolith, prepared to act as amorphous expedient for blank slaters. human genetic disposition seeds the ground and creates culture, unleashing a feedback loop where culture and genes interact in perpetuity. culture is best understood as melodious arrangement of ancient biological rhythms.

TallDave May 2, 2012 at 12:03 pm

Yes, it’s very hard to transplant culture. But I’m not sure there’s much reason to believe genetic factors prevent any race from achieving success — there are many countries that have successfully adopted Western politico-economic culture and thereby enjoy some of the highest living standards.

josh May 2, 2012 at 12:24 pm

“And history, geography, culture, politics–all other factors are irrelevant?”

Randy,
You’re 19-25. Am I right?

affenkopf May 2, 2012 at 4:22 pm

TallDave: Isn’t GDP per capita much more important here? In that measure SA only has the seventh highest of African countries.

Randy McDonald May 2, 2012 at 9:37 pm

You’re not saying that Britain applied the same policies throughout its empire, right, that Newfoundland was of a piece with Upper Canada with New Zealand with Scotland with Bengal with the Princely States with … ?

Jack Fraser May 2, 2012 at 9:43 am

By your spelling, I’m guessing you’re from the Commonwealth. Too bad, I wish I could count you among my fellow Americans.

lords of lies May 2, 2012 at 10:43 am

“which is to dance around, tease, and hint at their real point:”

who’s dancing? black africans have lower IQs and shorter time horizons than white afrikaners. this has real world implications for both groups’ labor participation and productivity, as well as income distribution.

“They know that they can’t just come out and say it”

just did.

“because when people understand what they’re trying to say”

they’ll point and sputter and slander and smear.

“those of us that haven’t seen the light on HBD and thus are not okay with, you know”

the truth.

“The “game”/”status”/PUA types are the same way, except with inherent behavioural differences between the sexes”

chicks dig power. men dig beauty. boys are better at math. girls are better at social politesse. again, who’s dancing?

“Sadly, Marginal Revolution, otherwise generally a good blog…”

…has not sufficiently censored those voices who disturb my mood affiliation.

“has a weird hatred for Tyler Cowen”

provocation is not hatred.

“and often directs his readers here.”

what a steenker!

“I suggest ignoring his opinions and posts with great prejudice.”

of course you would suggest that. how magnanimous of you.

Alex' May 2, 2012 at 11:24 am

Some people appear to mistake statistical tendencies and trends as inviolable laws of nature, or even worse, in the case of many roissyites, as moral directives.

black africans have lower IQs and shorter time horizons than white afrikaners.
First, there’s more genetic diversity in subsaharan Africa, than the rest of the world combined, making your statement about “black africans” completely useless, but that’s beyond the scope of this discussion.

Yes, certain subsets of the human population, in aggregate, may have lower IQs. But it’s only a statistical tendency, and probably not that large given ceteris paribus. You’re ignoring the effects of poverty, malnutrition and failed institutions, all of which have a negative effect on brain development and a host of other variables.

You are grossly misinterpreting and oversimplifying scientific data in order to give a thin pseudo intellectual veneer to your racism.

Anti-Gnostic May 2, 2012 at 11:53 am

We are talking about differences in IQ distributions between blacks and whites, not differences between black neurosurgeons and white neurosurgeons. These group differences have real world-effects and should be considered in crafting policy if, as the statists insist, we must have some policy.

dirk May 2, 2012 at 12:55 pm

“Some people appear to mistake statistical tendencies and trends as inviolable laws of nature, or even worse, in the case of many roissyites, as moral directives.”

I agree that not viewing individuals as individuals is the great prejudice of many HBD/ Steve Sailer acolytes, however if we are talking about groups not individuals, and we are, group IQ may be very relevant. I’m surprised nobody has brought up GMU economist and TC colleague, Garret Jones, who appears to be a leading researcher in studying how the average IQ of a country predicts economic development. See here: http://mason.gmu.edu/~gjonesb/ . He also now blogs for the Atlantic. It’s going to be interesting to see if the PC police ever come after this guy. Hopefully, he will stay just a bit over their heads.

mpowell May 2, 2012 at 1:53 pm

Somehow you missed the point that groups may demonstrate IQ variation due non-genetic or hereditary factors. Like childhood malnutrition. Or generally growing up in ghettos. The tendency or willingness to overlook these very powerful factors has a lot to do with what makes these people racists.

msgkings May 2, 2012 at 11:36 am

Is there some new directive at the Klan where you don’t use capital letters? I’m sorry, the klan.

lords of lies May 2, 2012 at 11:51 am

thank you for proving my point.

ps mood affiliation butthurt much?

msgkings May 2, 2012 at 11:55 am

Here you go again, getting all angry. Why u mad?

lords of lies May 2, 2012 at 12:26 pm

classic case of projection.

josh May 2, 2012 at 12:30 pm

You implied he was a member of the Ku Klux Klan. Scroll up a bit.

msgkings May 2, 2012 at 12:40 pm

Soooo angry. Fists balled with rage. Spluttering on his keyboard.

anon May 2, 2012 at 1:07 pm

go be fat somewhere else, king of small letters

Matt May 2, 2012 at 10:58 am

One need not posit any racial IQ differences to notice that apartheid SA was a first world country and post-apartheid SA is a third world hellhole seemingly bent on extermination or ethnic cleansing of what remains of its productive class. Maybe the key lies somewhere in that momentous event? Perhaps it is possible that a people really are not ready for self government? It is wacky, I know, since we all know that was discredited in WW2 or something, but what if?

Jack Fraser May 2, 2012 at 11:08 am

I get the feeling some black South Afrikaners would disagree with your assessment of pre-Apartheid South Africa.

Anonymous coward May 2, 2012 at 11:19 am

Just look up crime statistics in pre-, the- and post-Apartheid SA. Wikipedia doesn’t show stats before 1994, because the comparison with earlier periods is not flattering at all.

Matt May 2, 2012 at 11:40 am

I don’t see your point. Whatever your opinion of apartheid, certainly not a very nice regime, it is simply a fact that SA before 1994 was a nice place to live; a place that people wanted to live in. Now, it is a place people don’t want to live in, and in fact are leaving. I imagine there was a way to transition out of apartheid without turning the country over to the terrorist ANC. It makes no sense to me that the answer to most of the country being miserable was to make the entire country miserable.

mpowell May 2, 2012 at 2:02 pm

So I take it you agree that Iraq was better under Hussein? SA was not a nice place to live for blacks before 1994, but even if it was better than it is now, so what? The white afrikaaners fucked up by instituting apartheid and never made an attempt to walk it back. You run a non-representative government, you can’t complain when it’s overthrown. The problems the ANC is having are not really avoidable given the forces necessary to overturn apartheid. Maybe it will work out better in the end, maybe not. But apartheid policy laid the groundwork for the post-apartheid problems being experienced. It is hardly evidence in favor of apartheid.

Matt May 2, 2012 at 2:58 pm

I don’t know who in their right mind would disagree that Iraq was better under Hussein.

affenkopf May 2, 2012 at 4:25 pm

Matt: Most of Iraqs’ Shiites probably would disagree.

maguro May 2, 2012 at 7:31 pm

And the Kurds.

JWatts May 2, 2012 at 7:32 pm

“I don’t know who in their right mind would disagree that Iraq was better under Hussein.”

And the Kurds as well.

Paul Rian May 4, 2012 at 8:10 pm

Yeah, the Kurds were much worse off when they faced no threat of rule by other citizens of the misamalgamated territory known as Iraq, protected by a US no fly zone. Now they have no protection against the rest of the ‘Iraqis’. Clearly they are better off now.

farmer May 2, 2012 at 11:44 am

i know it’s not ZA specifically, but it is *very* worth noting that the majority of the Rhodesian Light Infantry (the ones who did most of the heavy lifting in the Rhodesian bush war) were african blacks. A very large portion of “native” black africans fought, incurred harm and died in defense of rhodesia. I don’t know to what extent we can impute this to ZA, but the narrative of “eeeeeeeevil whites oppressing blacks” does not fit with unit profiles in rhod/zim

dearieme May 2, 2012 at 4:02 pm

But then Southern Rhodesia wasn’t an apartheid state, was it?, whereas South Africa was.

farmer May 2, 2012 at 4:32 pm

@ dearieme

“Whites never comprised more than 5% of the country’s total population, but up to 1979 they never had less than 95% of the total vote in national elections”

John Allham May 2, 2012 at 9:27 pm

@farmer May 2, 2012 at 11:44 am:

Rhodesia: successful, economically self-sufficient state.
Zimbabwe: a hellhole with chronic food shortages.

Enough said.

msgkings May 2, 2012 at 11:33 am

I love that this got posted twice by ‘go’, since it’s a nominee for post of the year.

shannon May 2, 2012 at 9:35 am

So why are unemployment really so high in SA , its not really that hard to figure out ,somewhere some one just aint doing his job properly but are we going to point fingers?no

John Allham May 2, 2012 at 9:32 pm

Unemployment is really so high in SA for the same reason it is in Detroit: blacks left to their own devices tend to destroy the best of Western civilization. It’s that simple and needs to be said without euphemisms that fill this thread so fully.

R Richard Schweitzer May 2, 2012 at 9:37 am

There does appear to be a confluence of factors:

1. An inchoate (non-cohesive) social order.
2. Fragmented social organizations of diverse, and inchoate, interests.
3. Social groupings still largely derived from or patterned on family, clan and tribe.

A “workable” social order is made upf cohesive units of social organizations, which in turn are composed of social groupings having necessary and sufficient commonalities of objectives and interests.

The persistent constraints of tribal affiliations which have dominant effects on “access” to the forms of affiliations necessary for the formation of effective civil instrumentalities (such as schools, voluntary associations, business organizations, etc.), which have to precede institutions.

A quasi- Speenhamlan approach through wage laws to deal with the dislocations of excessive Urbanization (beyond needs of productive capacities).

An incompetent electorate.

Rahul May 2, 2012 at 1:12 pm

No doubt Tyler is right about S. Africa’s terrible employment stats., yet interestingly they seem to be doing something right: <a href="http://www.tradingeconomics.com/chart.png?s=ehupza&d1=20000101&d2=20120531&quot; Unemployment came down from 32% 10 years ago to 24% now.

They have been steadily improving.

frank May 2, 2012 at 9:47 am

As a South African business owner, I have some first hand experience and many of the commentators have touched on relevant points.

- Businesses are very regulated, lots of compliance issues and regulations making it difficult to start up & costly to run
- Labour laws militate against rapid hiring & firing, and firing is nearly impossible and can be very expensive
- Government wages are very high compared to the private sector, difficult to compete against this
- Quality of staff is abysmal, some can barely read or write even at university level
- Tendency to replace labour with capital in any labour intensive business
- AA and Black Economic Empowerment laws are difficult to implement as previously disadvantaged earn more in government
- Tender rigging is rife with government employees handing out tenders to connected black owned firms with government employees being stakeholders or owners. These firms take a margin and pass along the work to competent contractors. This rent seeking behaviour also reduces opportunities to employ more labour.

It is difficult to grow the economy when 5 million taxpayers subsidise social grants for 14 million uneducated or under-educated people. SA also has one of the highest incidences of HIV/AIDS per capita in the world and productivity takes a hit when teachers, nurses and policemen die in their hundreds and thousands every year because of it and no-one is there to replace them because of the sub-standard education system

Anti-Gnostic has his tongue firmly in his cheek

msgkings May 2, 2012 at 11:37 am

No, A-G has his tongue firmly in Steve Sailer’s cheeks.

The Original D May 2, 2012 at 12:12 pm

Wasn’t the ANC pro-Communist for most of existence? That would explain a lot right there.

josh May 2, 2012 at 12:34 pm

So was much of the American “Civil Rights” movement, which also explains a lot.

The Original D May 2, 2012 at 4:51 pm

Classy how you put Civil Rights in quotes.

ChacoKevy May 2, 2012 at 10:31 am

The OP and I appear to have a lot in common. I didn’t think about how the world works, let alone from an econ perspective, until I did my service in the Peace Corps too. I’m the same, trying to make sense of that Socialist uprising in Bolivia I witnessed.

V May 2, 2012 at 11:13 am

Not mentioning IQ in this context when it seems to play at least some part in driving differences between outcomes in rich (e.g., the US) and poor societies (e.g., India), in multiracial and homogeneous societies, and in well-educated and badly-educated societies seems like extreme blindness.

Look, Sailer and his ilk may or may not be virulent racists depending one’s prior beliefs but excluding IQ from the discussion is a very American elite-driven social convention and is against the spirit of academic inquiry and frankly, common sense.

Can anyone here honestly argue that IQ doesn’t drive some of the differences we observe S. Africa when it seems to do so in the US?

TallDave May 2, 2012 at 11:31 am

IQ seems to measure culture more than genetics. I don’t believe differences in genetic intelligence are actually large enough to be measurable.

Of course, you can see the effect of culture right here in the U.S.

Cliff May 2, 2012 at 11:37 am

Your belief is mistaken. IQ is highly heritable (~0.6). This is easily demonstrated with adoption studies and the like.

TallDave May 2, 2012 at 11:52 am

High heritability of a trait does not necessarily mean that average group differences are due to genes

Jack Fraser May 2, 2012 at 12:00 pm

That applies to individuals. That doesn’t speak to the variance across groups of people.

Plenty of other things influence IQ. Hell, your sibling order matters almost as much as your SES (which matters a great deal).

TallDave May 2, 2012 at 12:58 pm

Also, one problem here is that they didn’t vary culture much in these studies as they were generally done in the same country or between OECD countries. Switch the children of median parents in Chad and the United States and I have very little doubt you will find culture dominates.

Engineer Dad May 2, 2012 at 3:43 pm

It’s extremely difficult to determine through experimentation how and what environmental inputs shape an individual’s intelligence. The high costs and time involved, and established laws make it overwhelmingly difficult.

However, it could be determined with dogs.

Dogs are mammals, yet social creatures, who benefit from education, and respond to incentives.

By raising, training, and testing puppies of various breeds, we can control for the effect of nurture and nature. Once food, shelter, and training are be controlled. success and failure can be quantified. Once an education baseline is established, experimenters could determine the effectiveness of extra training. The experiment could last 3-4 years and be relatively cheap.

TallDave May 3, 2012 at 12:53 pm

Interesting notion, but I’m not sure it would tell us much about humans. Breeds of dog have been deliberately bred and culled for specific traits over millennia. Races of humans, by and large, have not. And of course we have a breeding cycle about 10x longer, so it would take proportionately longer to achieve similar results even if the effort had been made.

mpowell May 2, 2012 at 2:06 pm

Heritability is not the same as genetics. Womb factors are enormous and adoption studies cannot remove these. Or in other words: prenatal nutrition is a big fucking deal for brain development. And this is fundamentally the same social problem as childhood malnutrition or poor education.

Ranjit Suresh May 2, 2012 at 2:44 pm

Prenatal nutrition is a big fucking deal… but only at the extreme end of undernutrition. In the same way, only severe under/malnutrition stunts height in developed nations. This is why you don’t see stunted children, by and large, in poor urban communities. Height used to correlate with class, but it ceased to do so once even the poor had access to food and starvation was banished to late night Christian charity commercials. Likewise, prenatal nutrition matters in desperately poor Sub-Saharan Africa, and probably even in South Africa, but not very much in the U.S. and Europe.

Micronutrient supplements can help provide modest boosts to IQ in Sub-Saharan Africa and India. But we shouldn’t overstate its impact.

Ricardo May 3, 2012 at 1:12 am

Ranjit, research on prenatal nutrition appears to reject the idea that there is a clearly defined “extreme end” of malnutrition. For instance, women born in 1950 in southern Europe were about 3 to 4 inches shorter at adulthood than women born in 1980 in the same region. In northern Europe and the U.S. the gain was less than 2 inches but it was still a gain. If these gains can be attributed to prenatal nutrition — which seems likely in view of the research on the subject — there appears to be a spectrum where even average people in relatively wealthy countries may not have reached the optimum level of nutrition until around 1970 or 1980.

Other DW May 3, 2012 at 11:53 am

You can both be right. Heritability is a measure of how of the variation within a population is due to genetics, relative to environmental factors. It is not an absolute measure of the absolute contribution of generitics to IQ variation. If adoption studies are done in a population with low environmental variability (which they usually are), then that would make the genetics component appear larger.

It would be unethical to separate identical twins at birth, raise one in the US and the other one in South Africa, in order to study the relative impact of enironmental and genetic factors on IQ in the population being discussed here.

Deedee May 2, 2012 at 11:33 am

What is the B/W IQ gap in SA?

What evidence is there that African Africans are less economically productive than western euro caucasions?

maguro May 2, 2012 at 12:29 pm

Ever been to East St Louis?

TallDave May 2, 2012 at 11:43 am

My favorite story illustrating social capital was told to me a year or so ago by a South African friend of a friend who worked in the Philippines, who I’ll call Alfred, because I think that was his name.

His first week there, he’s driving in the apocalyptically awful Manila traffic, and he’s stopped by the cops, who demand a bribe (the country is rife with this sort of thing and nearly everyone just goes along). Now, Alfred is rather tall and imposing, not easily intimidated. He says “No.” The cops are taken aback. Other cops arrive. They tell Alfred they will take him to jail. He says fine, take me to jail, I’m not paying. More cops arrive. They tell him how horrible the jail is, that terrible things may happen to him there. He says he doesn’t care, he is not going to pay. Finally, they give up and let him go.

The Philippines desperately needs the culture of Alfred. But it’s very hard to get there.

Rahul May 2, 2012 at 12:02 pm

The irony is that in spite of all this, Phillipines is still relatively on the upswing whereas S. Africa not so much.

Also, I wonder how Alfred’s rock solid social capital was compatible with decades of apartheid.

TallDave May 2, 2012 at 12:16 pm

Yes, the Philippines is much poorer than SA (PPP GDP per capita), but I think the difference was larger in years past.

78 South Africa 10,973 2011
126 Philippines 4,073 2011

It’s hard to look at apartheid and not find it morally repugnant, but at the same time S African institutions may not be strong enough to assimilate nonWesterners into a Western culture that eschews rentseeking. It’s a terribly difficult thing to accomplish under any circumstances.

Anti-Gnostic May 2, 2012 at 12:09 pm

Dare I say, if you want the culture of Alfred, then you need to have more Alfreds.

Rahul May 2, 2012 at 1:01 pm

How? Cloning? Or if merely targeting a relative metric, genocide?

Anti-Gnostic May 2, 2012 at 1:25 pm

(You have to explain this sort of thing to spergs, because when you say “more Alfreds” they immediately start spluttering about cloning! genocide!).

Here’s how it works:

Alfred and his family and friends marry members of the opposite sex and have sexual intercourse and lots of little Alfreds and Alfredettes result. Other family and friends of Alfred administer the territory for the benefit of people like Alfred instead of for the benefit of some gnostic ideal. Immigration is considered ‘sojourning,’ and is generally restricted to people deemed compatible with Alfred and the culture that his family and friends are building. Over a number of generations, the Alfred culture acquires a national character in its geographic redoubt. (Different nations have different characters, and often employ this difference to comparative advantage). When one nation crosses the border of another nation, it’s known as “conquest,” because the nation of Alfred knows its cultural and territorial integrity depend on borders which delineate their nation from all the others.

Rahul May 2, 2012 at 2:10 pm

What happens to the non-Alfred’s?

Anti-Gnostic May 2, 2012 at 2:51 pm

They live in their own nations, like Czechs and Slovaks, Croatians and Serbians, Turks and Armenians, Israelis and Syrians, French and Germans, Poles and Russians.

Historically, everybody’s a lot happier that way.

Matt May 2, 2012 at 2:56 pm

I believe what Rahul means is that any large population is going to be pretty diverse. Alfreds may make up 80% of the population, but that means 20% of the population are not Alfreds, and if we expect Alfreds to congregate together then we would expect non-Alfreds to congregate as well. Which would mean you have something like the US today, where there is a broad swath of what is derisively referred to as ‘white bread middle America’ and pockets interspersed here and there of something else entirely. Are the non-Alfreds expected to emigrate, and does that mean that immigration is ‘open’ for Alfreds of whatever race/creed/etc? Our main problem here seems to be that this does not scale, it works in tiny nations of 1 million but not in gargantuan conglomerates of 300 million.

Anti-Gnostic May 2, 2012 at 3:08 pm

Societies are not infinitely scaleable. The USA is an empire of constituent nations. Like all other empires, it will eventually devolve into its constituent nations. Recent examples include the USSR and the UK.

msgkings May 2, 2012 at 3:29 pm

A-G confidently typing things that won’t happen.

The Original D May 2, 2012 at 4:57 pm

A-G reminds me of the Dunning–Kruger effect.

farmer May 2, 2012 at 11:49 am

a big part is mechanization of primary industry. ZA has huge farming and mining sectors which require many fewer workers than they have in the past.
To get a sense of the scale of farming in ZA you’d really have to see it, but there’s 50,000 acre farms (!!!). In 1912, that would require a small army but with Round Up, satellite guided tractors etc there’re pretty significantly smaller. ZMP certainly *does* apply to farming

happyjuggler0 May 2, 2012 at 7:45 pm

Replacing low skill labor with machinery is endogenous with respect to minimum wage laws, unionization (especially when militant), and laws against firing workers.

Rahul May 2, 2012 at 11:57 am

One of S. Africa’s problems seems that large swathes of it are in reality a third world society but forced to conform to first-world rules. e.g. Minimum Wage Enforcement.

anne May 2, 2012 at 2:45 pm

Wow these are some pretty complicated reasons; maybe we can go with Occam’s razor and say that since South Africa has been controlled by Africans it has started to become like pretty much every other African nation: a hellhole of corruption, crime, disease, and poverty.

affenkopf May 2, 2012 at 4:42 pm

Botswana is also controlled by Africans and seems to do much better.

Tito May 2, 2012 at 5:02 pm

Botswana is actually controlled by DeBeers (see most other post below)

farmer May 2, 2012 at 2:50 pm

a problem as well for ZA is zim has utterly collapsed, making for massive in-migration of ZIMs worst-off economic refugees flooding ZA. See: “District 9″

Tito May 2, 2012 at 4:42 pm

There are around 3 dozen sub-Saharan countires. They are all economic disasters except for Botswana. All the countries experienced overall economic decline after decolonization. Botswana did not experience decline because it is de facto still a colony (of DeBeers). So, given this abundant data, what did you expect to happen in South Africa after apartheid? The fact that people waste even a single braincell on “what is wrong with the South African economy….” is just depressing.

anne May 2, 2012 at 5:07 pm

Agree. Additionally, a large number of farmers who used to live in Rhodesia and suddenly found themselves sporting the wrong skin color moved into Botswana, where I understand they were welcomed rather more warmly.

Gareth May 2, 2012 at 4:54 pm

Thanks for this Tyler. As an aspiring South African labour economist I will argue that the root cause of all these points is that the majority of the people here were promised a better life. That better life is not found working in a sweatshop or working hard as a teacher trying to make up for those before. Unfortunately the current system is probably the most stable.

anne May 2, 2012 at 5:19 pm

“Unfortunately the current system is probably the most stable.” Really? A system in which productive citizens can only create businesses (and therefore wealth) through a byzantine legal code requiring crushing paperwork, fraudulent front men, and kickbacks to those in charge, where gang rapes, carjackings, murder, and HIV are so commonplace as to be taken for granted? That’s stable?

Randy McDonald May 2, 2012 at 9:40 pm

Inasmuch as the apartheid government’s reaction to the tuberculosis epidemic in the townships in the 1970s and 1980s revolved around the belief that blacks were just genetically susceptible to the illness and nothing else needed to be done, I can only imagine what its policy towards AIDS would have been like.

So, yes. Things could be so much worse.

anne May 3, 2012 at 10:03 am

Would their policy have been officially denying that HIV causes AIDS and doing nothing to combat the horrific practice of raping little girls because having sex with a virgin is rumored to cure the disease? No, Randy, I don’t think that things could have been much worse.

Rahul May 2, 2012 at 8:30 pm

The politically incorrect question to ask then is, “Were the majority of people better during apartheid than they are now?”

Ideology asides, what do the hard economic metrics show? Mortality, health, education, real wages etc.?

Ranjit Suresh May 2, 2012 at 8:46 pm

Well, ideology matters if a majority of a country prefers the current political system. We can argue “What’s the matter with South Africa” and accuse them of false consciousness until we’re blue in the face, but there it is: people tend to favor democracy over racially based oligarchies.

Anonymous coward May 3, 2012 at 3:07 am

I don’t know about economic metrics, but at least the majority killed, and was killed, far less frequently. I cite data in a comment above.

Mark May 4, 2012 at 8:54 am

The most basic metric is average life expectancy. It would be hard to argue that a nation is better off when people there aren’t living as long. Mandela was released from prison and apartheid began to be dismantled around 1990. The average South African life expectancy has dropped from 62 to 50 since then.

Rahul May 4, 2012 at 2:46 pm

Most of that is HIV though isn’t it? Unless one argues the epidemic’s course might have been very different had apartheid still existed.

Anti-Gnostic May 4, 2012 at 5:01 pm

HIV/AIDS is spread by exponential levels of anal intercourse and rape which, call me old-fashioned, are high time-preference activities. So I think you’ve confirmed the conclusion everybody’s doing backflips to avoid.

Mark May 4, 2012 at 5:30 pm

Currently 39 of the 40 countries with the lowest life expectancies in the world are former European colonies that were turned over to their black majorities to engage in the experiment of self-government. So far the experiment hasn’t been very successful.

jorod May 2, 2012 at 9:09 pm

Sounds like Chicago except Chicago has bribery too.

Anonymous coward May 3, 2012 at 3:09 am

> implying there’s no bribery in SA

Jeremy Clift May 2, 2012 at 9:21 pm

Slightly longer explanation here from the IMF’s Finance & Development magazine, which had a special series on African growth.
http://www.imf.org/external/pubs/ft/fandd/2011/12/selassie.htm

In the past few years, South Africa was hit by a string of shocks. The global financial crisis and subsequent worldwide economic slowdown was the third—and by far the most damaging—in a series of blows, but the other two were hardly trivial. The first of the adverse shocks was the electricity shortages that started in 2007. Around the time the electricity shortages began, global food and fuel prices surged, and inflation soared to well above the South African Reserve Bank’s inflation target range of 3–6 percent. To combat the increase in prices, the SARB raised its policy interest rate quite sharply—by some 5 percentage points between 2006 and 2008. This was a second factor that contributed to slow growth. The global financial crisis, the third and final shock to the economy, was particularly damaging to South Africa. You can read the reasons in the link above.

Sardonic_sob May 5, 2012 at 7:42 am

It isn’t really a “shock” when a mechanical system that needs maintenance and isn’t maintained fails. That’s more of a “consequence.”

Ryan Cooper May 2, 2012 at 9:33 pm

Say Tyler, thanks a lot! I thought my question had gotten lost. Looking forward to going through these comments.

TGGP May 2, 2012 at 10:30 pm

I’m a regular reader of Steve Sailer and I want to push back on the argument that IQ is a sufficient explanation of the unemployment rate. We expect IQ to be correlated with productivity and hence with wages. But a country full of very low IQ people doesn’t necessarily have a high unemployment rate. If you run the clock back to see the Flynn effect reversing, unemployment doesn’t rise although productivity declines. That’s because wages were also lower long ago. Thomas Sowell has pointed out that in after the civil war blacks in the U.S typically had the same unemployment rates as whites or even lower, although of course they had lower wages on average (and if a large employer like Ford was unable to wage-discriminate for the same job, they could give more unpleasant jobs to blacks). The deadweight loss of unemployment tends to indicate that something is preventing the market from clearing (even at a low wage). Minimum wage laws and labor cartels in the form of unions are such things. Combining high and low productivity populations with different norms about acceptable employment (sweatshops, for instance) is likely to produce unemployment.

James Robinson discussed “Why Nations Fail” with the specific example of South Africa turn toward inclusive political institutions in this video. I was disappointed that he didn’t present data on how South Africa’s economy has changed over that time period.

TGGP May 2, 2012 at 10:40 pm

If you check the slides linked above (actually in pdf format, thankfully) they compare the unemployment rates of different places. One bar in the chart is labeled “SSA”, which I assume indicates sub-saharan africa. It is much lower than South Africa’s (which is far higher than all the rest, with I think Poland coming in second).

dirk May 3, 2012 at 2:18 pm

I think your comment is the most relevant one. The idea that unemployment and economic development might be unrelated crossed my mind, but I didn’t have any data.

Steve Sailer May 5, 2012 at 4:12 am

The classic description of apartheid-era South Africa government was “Capitalism for the English, fascism for the blacks, and socialism for the Boers.”

South Africa is a country blessed with natural resources. It doesn’t really need everybody to work to not starve. Not surprisingly, it’s a country with a lot of enterprising politicians bickering over how to distribute the bounty that comes out of the ground.

Waldo May 3, 2012 at 2:24 am

If anyone is actually seriously interested in this question I would recommend reading some South African research. Have a look at Frederick Fourie’s Three discourses paper: http://www.saldru.uct.ac.za/home/index.php?/component/option,com_docman/Itemid,32/gid,397/task,doc_view/ It reviews many of the complexities of unemployment in South Africa.

Gareth May 3, 2012 at 3:37 pm

Agreed Waldo, it’s an excellent paper!

Floccina May 3, 2012 at 5:51 pm

In my experience many of the officially unemployed in the 3rd world country that I lived in worked each day in the informal sector.

Stefan Scheepers May 5, 2012 at 2:49 am

Hi, I am from South Africa. I think this is a beautiful country but are troubled by corruption of goverment officials. I also think it is wrong to give people houses. Rather create opportunities so that they can have money to buy or rent. This will create a better economy in all sectors.

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