SA’s lesson from the US

MUST BE NIMBLE TO REACT TO ECONOMIC UNCERTAINTIES, EXTERNAL CHANGES

long-term economic weakness in the form of collapse and job losses. In the face of a weakening economy and advancing technology, one simply cannot afford to have all one’s eggs in one basket.

Only Ford and General Motors are left in Detroit – and the latter, like many manufacturers, has adopted automation, resulting in fewer human workers in its plants.

As jobs disappeared in the automobile industry and that city’s economy ground to a halt, people left Detroit. Its population went from over 1.2 million to 690 000 in less than three years. There are abandoned and derelict buildings all over.

In 2013, the city filed for bankruptcy – poor political decisions and corruption of officials being the main catalysts. The economic and political crises have resulted in persistently high unemployment, rising crime and a weak education system.

Despite efforts to revive Detroit, including using tax cuts and other incentives to lure companies back, business has remained unconvinced by public policy.

The lesson is that it takes both business and government to make an economy work in good as well as bad times. To government, the lesson is that without clear business-friendly policy, there will be no real incentive to create jobs.

In Las Vegas, by contrast, after experiencing the impact of the 2009 crisis, government immediately came up with strategies to diversify its economy, moving away from its dependency on gambling, tourism and hospitality to attracting and courting tech start-ups and already established tech companies.

The American lesson for SA should be obvious by now: states and cities are not waiting for consensus or delaying work.

Las Vegas public policy enabled the city to adapt to external changes and transform its long-term economic prospects positively. That is a lesson for South Africa.