South Africa – an inconvenient truth

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By Cees Bruggemans, Chief Economist of FNB.

Regarding the public sector strike currently fully underway, a few inconvenient truths may perhaps have escaped the general notice.

I am being nearly daily asked about the impact of this strike. After thinking about it carefully, I would like to share with my readers the following.

The main impact for the electorate is one of disruptive inconvenience, to the point of heartache (one thinks of the terminally ill in hospitals and nail-biting matriculants, but reality goes well beyond them alone).

But beyond such tragedies the picture changes rather drastically, even if some imagination is required.

For GDP growth purposes, the statistical authorities worldwide have long ago given up trying to measure the work productivity and changes therein of public sector workers.

They therefore merely take into account the actual number of civil servants employed and being paid a salary. What these servants may be up to isn’t taken into account.

So whether they work or strike, it doesn’t make the least difference to GDP or its growth. After all, it is all paid for, by you the taxpayer and electorate. A sunk cost, so to speak, so why worry measuring anything?

Nice to know, where trivia is concerned, not so?

But it gets better. For the rest of us get enormously inconvenienced by the disrupted public services. Not a few of us will have made futile journeys trying to get something done in vain as a direct consequence of this strike. Or we succeed in getting something done, but by proactively seeking alternatives compared to depending on some servant.

In the process we may be using our cars, consuming petrol, trying to get a service done by a private entity.

How much more private schooling, private hospital care, private security, getting more people to help out socially, stocking up on water, making that decision to go solar, too many instances to think of and mention here, but prompted by absentee servants.

In all these instances we would be engaged in ADDITIONAL economic activity. This stuff wouldn’t be happening if it wasn’t for the public sector strike.

All of which leads to the strangest kinds of sensations.

For this strike could well be ADDING to GDP growth at present rather than deducting from it.

It would also be adding to the tax revenue stream, presumably just what the country needs in this dire hour of budgetary need.

Imagine government advisors suggesting that the public sector should strike more, and if possible for longer, indeed go on permanent holiday, for consider the extra GDP growth the country could be enjoying, the extra work that would be created by desperate taxpayers and voters trying to keep their lives together, and the additional tax revenue the government could be collecting this way.

Indeed, what’s striking is that no other country has tried this formula for more job creation and tax collection more fully before.

They say always something new out of Africa. This time we could really surprise the world if we tried hard enough. But I suppose that’s our real Achilles heel.

We never really seem to try hard enough.

Source: Cees Bruggemans, First National Bank, August 27, 2010.

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