Thinking leftfield to solve democracy dissatisfaction
Mining has a key role to play in helping to ease unemployment among the youth in Africa
Youth unemployment is a significant global concern. It is especially concerning across African economies, given relatively high fertility rates alongside declining employment prospects. According to the United Nations, Africa will be home to four billion people by 2100. The global population will by then total 11 billion people. Africa will be the only continent with positive fertility.
The reason this matters is that high-quality jobs provide dignity; the absence thereof is likely to worsen dynamics that undermine security and wellbeing. Job income is also a means to an end. Such income, broadly distributed, tends to produce social and political stability through creating a broad-based middle class.
In the absence of such access to income, political stability weakens, populist leaders gain traction and appetite for democracy diminishes. In South Africa, 72% of respondents polled in the latest Afrobarometer survey indicated that they would be willing to forego the right to vote if it meant greater economic opportunity and stability.
A recent article by economist Daron Acemoglu notes that since the end of the Cold War, people around the world are increasingly dissatisfied with democracy. The Economist makes a similar case. Concerningly, this trend is particularly strong among young people, who “report a growing preference for left-wing or right-wing authoritarian regimes”.
“On both sides of the Atlantic, it is now common to hear arguments advocating new forms of socialism or a move away from economic growth altogether,” writes Acemoglu.
Appetite for democracy among citizens in African countries appears to remain strong, although many African countries have backslid in terms of democratic health rankings, according to the latest Economist Intelligence Unit’s Democracy Index.
The data is surprisingly clear, as are the econometric regression results, that democracies retain significant advantages over non-democracies in both economic growth and in the provision of public goods. Even in instances where democratic governance is sub-optimal, the presence of democratic mechanisms allows citizens to credibly threaten elites with the loss of power if they extract an unacceptably high level of unproductive rents from the system.
There is also strong empirical evidence to suggest that across the developing world, the political incentives for expanding the provision of basic public goods such as electricity, especially to highly populated areas, are also higher in democracies than in autocracies at similar development levels.
The gradual shifting of cultural preferences away from democracy and towards some kind of autocracy is a problem. Autocracies, regardless of their ideological leanings, have strong incentives to narrowly serve the ruling elite at the expense of citizens.
Correctly identifying the source of democratic dissatisfaction is critical if confidence in liberal democracy as the most effective political system, when measured in terms of the broad-based distribution of public goods, is to be restored.
This brings us back to the question of employment. The growing dissatisfaction with democracy was not born in a vacuum. Part of the challenge is that even though they have tended to outperform autocratic counterparts, the economic growth models pursued in liberal democracies have not created evenly distributed benefits. This is especially the case in places such as South Africa.
Productivity growth should translate into wage growth, according to standard classical models, but this has not happened because productivity growth has largely been driven by technological progress at the expense of lower-skilled labour. More gains have also accrued to the owners of technology, undermining the bargaining power of workers that had originally been institutionalised under the early waves of democratisation.
As Acemoglu put it: “Shared prosperity thus depends not only on productivity growth but also on the right composition of technology, institutions, and norms … The necessity of markets for driving innovation does not make them sufficient for producing social benefits.”
Notwithstanding some of the challenges to shared prosperity created by technological innovation, a standard precept within the economics literature remains that , at least historically,
industrialisation has been the dominant channel through which job growth has occurred. In particular, it has been a conduit through which low-skilled workers have been absorbed into the economy.
But in many African countries manufacturing growth has slowed, limiting this channel for employment growth. This is especially the case in the Southern African Development Community economies. The process of premature deindustrialisation may also have weakened citizens’ ability to hold their governments accountable.
The conditions for shared prosperity appear to be optimal when governments are effective at distributing public goods efficiently, and when citizens are simultaneously able to demand transparency and accountability. These are two mutually reinforcing vectors of healthy democracies, which create an enabling environment for economic dynamism that distributes its gains relatively evenly.
Given that it was ultimately the bargain between organised labour and elites that gave rise to modern democracy, the absence of a strong organised labour presence through a weak manufacturing sector in
African countries does not bode well for the consolidation of democracies and the governance benefits associated with it.
Paradoxically, given that mineral and hydrocarbon rents appear to be making industrialisation more difficult, mining still presents opportunities for African economies to pursue a trajectory that creates high-quality jobs.
Mining is an increasingly important flywheel for industrialisation across African economies, a potential catalyst for manufacturing value addition if it becomes an integral part of development planning and its rents are well governed. The world is in a transition towards an environmentally cleaner future, which means that a growing quantity of minerals and metals will be required, many of which are located in Africa. It is critical that the exploitation of these form part of smart industrialisation strategies that tap into global value chain opportunities.
In the coming commodities boom, African countries will have to be institutionally prepared to ensure that they don’t continue to simply export raw materials, which are highbulk, low-value, and then import high-value products made with that same raw material. I am not advocating unthinking downstream beneficiation, but I am advocating value addition, either through upstream manufacturing to feed mining endeavours, or side-stream research and development into cutting-edge technologies that can both make mining more efficient and spawn their own industries.
Mining will contribute increasingly fewer direct jobs to any economy because of capital-deepening (automation technology replacing labour), but it will nonetheless generate wealth that creates opportunities for employment in connected spheres. These opportunities will be foregone unless the right institutional and planning structures are in place.
Mining companies have an opportunity to invest in this direction — to modify corporate social responsibility spend into something more connected to institutional capacity building, which will remain long after any given mine is gone. If we get this right, the future will look significantly brighter.
Mining still presents opportunities for African economies to pursue a trajectory that creates high-quality jobs