Recent theoretical work hypothesizes that a polarized society like South Africa will suffer a legacy of ineffective social capital and blocked pathways of upward mobility that leaves large numbers of people trapped in poverty. To explore these ideas, this paper employs a mix of quantitative and qualitative methods. Novel econometric analysis of asset dynamics over the 1993 to 1998 period identifies a dynamic asset poverty threshold that signals that large numbers of South African are indeed trapped without a pathway out of poverty. Qualitative analysis of the 1998 to 2001 confirms the continuation of this pattern of limited upward mobility and a low level poverty trap. In addition, the qualitative data permit a closer look at the specific role played by social capital and social relationships. While finding ample evidence of active social capital and networks, these are more helpful for non-poor households. For the poor, social capital at best help stabilize livelihoods at low levels and do little to promo te upward mobility. While there is thus some economic sense to sociability in South Africa, elimination of the polarized
economic legacy of apartheid will ultimately require more proactive efforts to assure that households have access to a minimum bundle of assets and to the markets needed to effectively build on those assets over time.
To no oneвЂ™s surprise, South Africa in the immediate post-apartheid period was characterized by high economic inequality and levels of poverty not usually found in an upper middle income country. In the Poverty and Inequality Report (PIR) prepared for then Deputy-President Thabo Mbeki, May et al (2001) capture this distributional reality most succinctly when they calculated that South Africa was economically two worlds: one, populated by black South Africans where the HDI was the equivalent to the HDI of Zimbabwe or Swaziland. The other, was the world of white South Africa in which the HDI rested comfortably between that of Israel
- Rethinking the Washington Consensus in Polarized Societies
More surprising, however, has been the further deepening of inequality, and poverty, in the post-apartheid period2. While it is always possible to argue that these trends are the temporary aberrations of structural adjustment, this paper explores the idea that they represent a deeper and more systemic component of the South African social and economic reality. In particular, this paper explores the idea that the apartheid pattern of socio-economic polarizationвЂ”in which class and color were almost perfectly correlatedвЂ”created a world in which conventional avenues of upward mobility were cut short, and that highly segmented, and ultimately ineffective patterns of social capital accumulation play a role in the persistence of this constrained mobility3. While social capital has been identified in the literature as an important avenue of upward mobility for poorer people (see the comprehensive, though often critical review in Durlauf and Fafchamps, forthcoming), this paper explores whether a legacy of apartheid is an economy in which social exclusion and poverty continue to interact in a mutually self-sustaining fashion.
This question, or legacy hypothesis, has particular salience given the general tenor of economic policy making in South Africa over the last decade. National economic policy in the first post-apartheid government adopted the liberal stance of the so-called Washington Consensus with the adoption of the GEAR (Growth, Employment and Redistribution) program in 1996. Its name not withstanding, GEAR displaced the emphasis that the ANC and its allies in the trade unions and NGO sector had initially given to direct government responsibility for meeting basic human needs. With its emphasis on fiscal discipline and incentives for private
investment, South Africa under the GEAR was clearly betting that time would prove to be an ally of the poor on the playing field of an expanding free market economy.
In retrospect, this confidence in time as an ally appears to have been misplaced. As May, et al. (2004) document, despite the fact that macroeconomic policy met its targets and conformed closely to the discipline of the Washington Consensus, time and the South African economy have proven to be rather feeble allies in the fight against poverty, generating neither sufficient growth, nor improvements in income distribution and poverty measures. The recent South African Human Development Report (UNDP, 2004) goes further and argues that the employment elasticity of growth actually declined during the implementation of GEAR, while inappropriately targeted fiscal discipline and a preoccupation with cost recovery undermined advances in the delivery of social services.
It seems that the current South African government is recognizing the need for alternatives. In the September 2003 issue of its popular periodical Finance & Development, the International Monetary Fund published a set of papers that revisit the wisdom of the Washington Consensus. Included among them is a piece by South African finance minister, Trevor Manuel, the architect of the GEAR (Manuel, 2003). Manuel argues that government needs to take a more pro-active stance than foreseen in the Washington Consensus, and must now take affirmative steps to ensure that citizens are positioned to be able to respond to the new opportunities provided by the liberalized, post-apartheid economy. In the same issue of Finance & Development, John Williamson (who coined the term Washington Consensus in 1990) more pointedly says that governments must assure that citizens have the minimum asset base and market access required to save, accumulate and succeed in a market economy (Williamson, 2003).
The failure of time and the Washington Consensus suggests the existence of a persistent, time-resistant poverty that is not easily eliminated. Section II begins this paperвЂ™s analysis with a brief review of polarization and exclusion, providing a foundation for the legacy hypothesis. Section III develops some of the analytical tools needed to investigate the structural poverty dynamics suggested by this hypothesis. Section IV then implements an analysis of structural dynamics using the 1993-1998 KIDS panel data set and finds that South Africa over that time period was indeed characterized by the sort of low level structural poverty trap suggested by the legacy hypothesis. Section V then deepens the analysis, drawing on qualitative data gathered from a subset of 50 KIDS households that was undertaken in 2001. This later data confirms the general patterns of immobility found in the quantitative data, and explores the factors that constrain or enable mobility. It also provides some insight into what social capital does (help less well-off households stabilize their level of well-being) versus what it does not do (help less well-off households move ahead over time). Section VI concludes the paper with some reflections on economic policy and income distribution dynamics in polarized societies.
- We thank the MacArthur Foundation for financial support under a Collaborative Research Grant. We would also like to thank Phakama Mhlongo, Francie Lund, Sibongile Maimane, Mamazi Mkhize and Zweni Sibiya for their important contributions to the collection of the qualitative data, and Jaqui Goldin and Chantal Munthree for additional data assistance.
- See the studies of Hoogeven and Ozler (2004), van der Ruit and May (2003); Meth and Diaz (2004); Van den
Berg and Louw (2003). In addition, using several national surveys undertaken subsequent to the 1993 survey, Leibbrandt and Woolard (1999) calculate a suite of consumption-based poverty measures that confirm this racial distribution of poverty.
- Although debate still persists concerning the notion of social capital, this paper accepts that social networks of trust, support, cooperation and information are a form of capital that mediate economic transactions.