Posted: 2006-10-20 23:59 SA faces danger of unemployment  Presenter: Lindsay Williams Guest(s): Prof Robert Pollin The South African economic boom continues, inflation is at manageable levels, money is flowing in and there's billions being spent on infrastructure - yet high unemployment threatens everything. Classic Business Day gets United Nations (UN) author Professor Robert Pollin on the line about his cure for unemployment LINDSAY WILLIAMS: Unemployment is a social and economic problem, and it’s a problem that cannot persist at the current level around 27% in South Africa. Robert, you say unemployment threatens to unravel all the gains South Africa has made in its first decade of democracy - a very simple but broad question is how can the government stop the rot? PROF ROBERT POLLIN: I want to emphasise the point that this is an absolutely fundamental question - that all the positive achievements over the last decade that are real could indeed become unraveled, unless government and the policy makers and the populace see this as a fundamental problem and attack it as a fundamental problem. The issue in a short answer is that the government is also committed to maintaining the inflation targeting range between 3% and 5% - I’m not opposed to that in and of itself, but the tool that they use to maintain inflation at such a low level is high interest rates. High interest rates prevents businesses from expanding, and new businesses from starting - so what we propose is that the government looks at a much lower interest rate level, and in addition to that the government undertakes a very large subsidised credit program that would put cheap money in the hands of small businesses, some large businesses - businesses that are going to create a lot of jobs. LINDSAY WILLIAMS: The factors you cite as being solutions to the problem - the first one being lower interest rates really bothers me. On their own lower interest rates don’t necessarily boost employment - they may boost the economy, but lower interest rates may boost sectors of the economy that don’t actually create employment. Is that a fair argument? PROF ROBERT POLLIN: I agree with you - lower interest rates in and of themselves do not necessarily mean expansion or job creation. That’s why we want to complement that with very targeted credit programs giving credit to businesses that can demonstrate their ability to create jobs. We don’t necessarily just mean businesses that themselves employ a lot of workers - for example an agricultural processing firm may be very capital intensive, but it’s going to buy products from farmers in South Africa and that itself would create a lot of jobs - so that’s the kind of structure we have in mind. LINDSAY WILLIAMS: The other thing that’s up for debate is “more labour-intensive public investments.” Does that mean instead of buying a machine to dig a ditch you’re going to get ten people to go and dig that ditch? Isn’t that a very short-term answer? Could you expand on that? PROF ROBERT POLLIN: There are ways to dig ditches - or build and repair roads or bridges that are comparable in terms of their productivity level with more capital-intensive methods. This has been demonstrated in pioneering work by Professor Robert McCutcheon here at Wits University - his work on labour-intensive methods in public works is well-known throughout the world. I think that number one provides a basis for expanding infrastructure in important areas, and number two doing it in ways that will expand employment. So those are two things and you need both - you need higher productivity through better infrastructure, and you need more jobs. LINDSAY WILLIAMS: What about social welfare? You say more social welfare - I can’t quite see the link between more social welfare and creating jobs. Maybe you could explain? PROF ROBERT POLLIN: Even in the government’s most optimistic scenario of cutting unemployment in half by 2014 you’re still going to have roughly 15% of the population that wants jobs, and is not getting them. That’s why if you want to reduce poverty and create people that have skills and have opportunities then social welfare spending should complement a jobs program. LINDSAY WILLIAMS: Where we can get your book An Employment-targeted Economic Program for South Africa”? PROF ROBERT POLLIN: The book is actually being distributed for free. Type in the title An Employment-targeted Economic Program for South Africa on Google (or use the link at the end of this transcript - ed) and that will get you to the download. LINDSAY WILLIAMS: You’re not going to make any money out of this? PROF ROBERT POLLIN: The UN has paid me - not a lot, but this is not the kind of book you get rich off. Cut and paste these links to your web browser: www.undp-povertycentre.org/newsletters/CountryStudy01.pdf www.undp.org http://www.businessday.co.za/articles/BookReview.aspx?ID=BD4A275636 ds/met Comments Related to this transcript: Comment on this transcript... Name : Email : Comments :