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When economists compare apples with pears

The South African publication ITI News recently sent me a newsletter which started like this:

Tonight I have decided to republish an excellent article by J.P. Landman of the BOE Investment Research Team titled "Is the bad mood justified?"

Of course, I was immediately interested to see what it was about. Not only because JP Landman today is a high-profile economist in SA, after studying law (with great success) and working as a labour law expert (as far as I know successfully) and as editor of a financial magazine (not sure on that score).

His article was a nice read, but that's all. To policymakers it was potentially dangerous.

J.P. Landman started off like this:

"The mood in the country, certainly amongst white people, is quite depressed. An annual opinion poll on how optimistic South Africans are, found that in February 2008 60% of South Africans felt positive.

That was down from an average of mid-sixties in previous years. The real outliers were whites; only 31% were optimistic, down from the mid-forties in previous years."

Then Landman said the same survey showed blacks to be very optimistic and went on to ask:

"Why such a bad mood (among whites)?"

(Landman didn't mention whose research he was quoting and I couldn't find it on the Internet. So, I assume he meant among whites. After all, blacks were 'very optimistic').

He went on:

"In my opinion three factors have contributed (to the mood slide): politics, economics and Eskom."

So far, so good. But, then he introduces the concept of "per capita income", without saying a word about the sister concepts "income distribution" and "income inequality". These terms are very topical in the era of globalization (that's now) and the post-apartheid SA (that's also now).

Globalization is topical for the unequal way it distributes wealth between nations and within nations. And in the post-apartheid SA it is topical, because of the government policies aimed at "repairing the damage of the past".

Important to note: Presently, per capita income as a measure is very "slippery" and getting ever more so. But, it already is "slippery" enough, not to be used unqualified.

But, Landman simply says:

"The basics have not changed. For me the most important pre-condition of progress is sustained rising per capita incomes. Regular readers will know that I have punted this view for years.

"Thus, an article in a recent The Economist that we should measure per capita income growth, rather than just economic (or GDP) growth, was music to my ears.

"Rising incomes mean resources to tackle problems, create jobs, fight poverty and build infrastructure. To paraphrase Bill Clinton, it is about per capita incomes, stupid.

"Even if we accept lower economic growth over the next few years, say 4% rather than the 5% we enjoyed the last few years, the beauty of SA is that per capita incomes will still rise and at an accelerating rate.

"In the fourteen years since democracy, per capita incomes have increased by 26%. At 4% growth for the next seven years to 2014, per capita incomes can again increase by ….26%!! Consider what has happened in the last fourteen years, it can happen again over the next seven."

In short, Landman asked whether the bad mood (among whites) were justified, then answered it in the negative (no, it wasn't justified). Why? Because per capita incomes have risen since 1994 and will continue to rise up to (at least) 2014.

Now, now. That's a very shaky statement. In South Africa new income created is not (and has never been) distributed equally in the population. In fact, it is distributed very unequally. Among the races, on the one hand. And among the social classes within every race, on the other hand.

In the new SA the "previously disadvantaged groups" benefit most from every new rand of wealth created. Broadly stated: new wealth distribution is skewed in favour of the "previously disadvantaged".

As such, I have no problem with it. But, to use the "national numbers" for explaining why the bad mood among whites are not justified, is somewhat lazy.

To wipe the question raised in the headline of his story off the table with the per capita income argument, Landman needs per capita income statistics for the different races in SA. And these statistics are (as far as I know) not available.

Without these statistics, Landman is simply "throwing apples at pears", to coin a new idiom.

My take on the question "Is the bad mood justified", is the following: Yes, the bad mood (among whites) is not only justified, but also rational. Remembering that about 1 million whites have left the country* since 1994, I guess the per capita income of the remaining whites have dropped consistently since 1994 (and not the other way around) and that these whites expect this trend to continue into the future.

In other words, all is very rational. And understandable. And dangerous. And worth keeping an eye on (for politicians and policymakers).

The only thing it doesn't need, is to be trivialised, or ignored.

But, I'm just guessing. It would be very helpful if experts like development economist prof. Servaas van den Berg could come up with numbers for the per capita income of the different races in SA since 1994.

That would be a very interesting piece of information - to me and (I assume) to J.P. Landman.

Such a statistic could even be included in Trevor's annual budget, as a measure of...well, I don't know as a measure of what. But, it's such an important statistic, that it should be on the people's minds all the time.

* Assuming that every time a skilled, high-paid white leaves the country the average income of the remaining whites is lowered.
8.5.08 15:20


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The sooner, the better (for SA)

The Armchair economist got support for his call that Mbeki must go as soon as possible from an unexpected source yesterday, namely Helen Zille and the DA.

Zuma is no one's dream alternative, but next to Mbeki, he's a star. Just how bad Mbeki has been for SA, will be clear once he's gone. In fact, Mbeki was for SA like Bush was for the USA - a disaster.

Here the article. It was published by the Sowetan.

Mbeki must go now, says DA

13 May 2008
Ido Lekota

The DA yesterday added its voice to calls for President Thabo Mbeki to step down.

“The ANC and its allies might be undecided on whether Mbeki should step down, but for the DA the correct course of action is obvious,” DA leader Helen Zille said in a statement. “Mbeki must go and he must go now.”

Her call comes amid reports that both the SACP and Cosatu have called on Mbeki to step down, accusing him of mishandling the current energy problems, the Zimbabwe crisis and the SABC saga .

A motion presented at the three-day alliance summit calling for Mbeki’s removal did not pass.

It is reported that supporting the call was businessman and ANC national executive member Tokyo Sexwale.

Sexwale was expressing concern about an unworkable transition in which Mbeki remained the country’s president even after losing the party’s leadership to Jacob Zuma in Polokwane.

Yesterday Zille said Mbeki had interfered in key institutions that should be independent from the ruling party, such as the SABC and the National Prosecuting Authority, for his own political purposes.

“He is ultimately responsible for the power crisis that threatens to bring our economy to its knees; he has consistently denied the gravity of national crises such as HIV-Aids and crime; and he has allowed President Robert Mugabe to repeatedly steal elections in Zimbabwe.”

Zille called for the immediate dissolution of Parliament and the holding of new elections.

end of article.
13.5.08 08:47


For the record

It's interesting how people's views and assessments can differ. I read Deon Basson's latest blogs this morning and was surprised to learn he (and a number of other good journalists) thought Gert Marais was a good editor for F&T.

I always had a different opinion of Gert as F&T editor. I thought he was bad for F&T and the real reason for the unrest/instability/unhappiness in the magazine's editorial team over many years in the 90s.

Maybe my opinion was an "unfair" one, because I always compared him to the editor before him - Salie de Swardt - who was miles better than Gert. In fact, in a different league.

Be that as it may. Important thing is that the magazine seems to be doing well today (now called Finweek) and that the "unrest" of the 90s is no more. All in all, it seems to be a much better place now than it was under the big G.

Here the paragraphs from Deon's blog which I found interesting:

"In March 2001 Marais retired unexpectedly and prematurely. The editorial team was furious and ready to go to war. In a 2-page letter to Patricia Scholtemeyer, Media24’s chief executive: magazines, 14 members of the team didn’t mince their words when referring to the “incompetence and amateurish conduct” of the Naspers management.

"Among the signatories were Van der Kooy, Rikus Delport (who became editor four months later) and current editor Colleen Naudé. I didn’t sign the letter because I was not an employee at the time and merely held an agreement with the two magazines."
15.5.08 11:26


Staying alive (by staying positive)

The abduction at gunpoint and gang-raping of a well-known winemaking family's daughter in the parking lot of the Tygerberg Hospital, Cape Town by three men last Saturday will stretch the Boland community's "stay-positive-no-matter-what" attitude to living in the new South Africa to the limits in coming weeks.

The woman is a second-year medical student. The rest of the family is well-known in the community as successful sports people and winemakers.

The parking lot where she was abducted has been the scene of a bloody killing of a Tygerberg doctor in the 90s (he was walking to his car after a day's work).

The woman said in a statement released yesterday she is determined "to make something positive out of what had happened" to her.

That line reminded me of the depressing book titled Disgrace by Nobel Prize-winning author JM Coetzee (who was born and spent his childhood not far away from where the winemaking family lives today), in which a young woman decides to tell no-one that she was gang-raped and sees her secret as part of the price she has to pay for what had happened in SA before 1994.

The book was published in 1999. At the time, the book was discussed and criticized in parliament for the violent picture it draws of black people.

The parallels between that story and what happened last Saturday is, however, not to be denied.

Maybe it's time for the peace-loving part of the South African population to do more than just "stay positive". Maybe it's time for this part of the population to unite in peaceful protest against the criminals.
16.5.08 09:09


Thought for the day

From an article published on Reuters today: "An estimated 3 million Zimbabweans have fled to South Africa as a result of the economic crisis at home."

That is exactly how many white South Africans still live in South Africa.

(In 1994 there were between 4 and 5 million whites living in SA. Emigration since then is estimated at between 1 and 1,5 million, leaving a white population of about 3 million - the same number as Zim citizens today in SA.)

A second thought: Mbeki obviously didn't know 3 million Zim citizens are living in SA. If he did, he would not have said "there is no crisis in Zim", oder?
16.5.08 10:42


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