So Why are you Unemployed?

So why are you Unemployed?

When I left university in Australia  forty years ago with a degree in Economics I had nine job offers within the first week. Fast forward  to Gaborone today while you are definitely more likely to get a job with a degree than without, there are now some 5,000 graduates waiting for internship with the Ministry of Labour. Different country and a vastly different time you say. While most university graduates still eventually get jobs, where I work we have an increasing flow of very bright and intelligent young Batswana university graduates who come to work on internships, often for as long as two years for nothing more than P1,300 per month.

I really began to panic early last year when a young and very enthusiastic Motswana with a degree in mining engineering from Queens University in Canada came to work for us. Queens has one of the best engineering and mining schools in North America. So when someone with a good degree from an excellent university comes home because he wants to serve his country and not stay in Canada but has to take an internship then we have real reason to fear and be concerned with what is happening to the country. Eventually the young man got a good job with BCL and I have no doubt will make an excellent contribution to the nation’s development. But equally I have many bright young UB graduates who I have trained on this program who  after two years have found no job and have had no choice to go back to the cattle post in Shakawe and Bobonong. These are deeply embittered young people who feel that life and  government has failed them.

So what changed ?

Not only the Kalahari and the Indian Ocean, but a whole lifetime stands between my experience of looking for a job in Australia in the 1970’s and that of the current generation of Batswana university graduates. The easy answer to explaining the difference is that, that was Australia and this is Botswana but that answer is just completely wrong because in 1974 as Africa was freeing itself from the shackles of colonialism there were still many good jobs for university graduates. But many if not all those jobs were in government as new ministries opened up, young people who could perform, and many who could not, got jobs for life in the new post-independence public service. There were not enough people to fill these vacancies. What has really changed is not the place but the passage of time- that cruel and insensitive monster that eventually kills us all.  

The post-independence African model of development that emerged in so many countries, including Botswana, was based on extractive industries. Foreign investors would develop mines or agriculture, the government would tax them and the revenues would be used to hire university graduates. Of course this model was limited by how much natural resources you had and  how much your government officials stole from the revenue. Botswana was blessed in that at the beginning it had one of the richest resources in Africa i.e. the diamond mines, a good  share of the revenue from De Beers and a post independence government that did not plunder its people. It is for this reason that the government has until very recently remained one of the most important employers of university graduates. But as government revenues stagnate then this model is failing and we will replicate what happened to the rest of Africa much earlier.

In comes Reagan and Thatcher

When I arrived in Tanzania in 1979 to teach Economics at the University of Dar Es Salaam the strains of the old African development model were starting to show. Following Tanzania’s horrendously expensive invasion of Uganda to oust, the dictator Idi Amin the government of Tanzania began to run out of foreign exchange. The state owned factories that had been established under ‘Ujamaa socialism’ by President Julius Nyerere collapsed and there was nothing in the shops – no sugar, no bread, no maize and painfully, no beer. Tanzania soon collapsed into what we called a ‘hunter- gatherer society’ where everyone spent their time hunting for food and basics and not doing their job.

The same  free market ideology that brought Margret Thatcher and Ronald Reagan to power in the UK and the USA in 1979/80 began to affect Africa directly through the complete domination of the free market, trickle down thinking in the World Bank and the International Monetary Fund at around the same time.   No need for government intervention, the market would solve the problem. Cut government spending, open up markets to international trade get rid of marketing bodies and all would be well. According to this economic philosophy the private sector would step in and do the job that government could not do effectively but it didn’t. This was the so-called ‘Washington consensus’ that dominated what passed for economic thinking for nearly 30 years.  Tanzania  implemented just such a set of reforms in the 1980’s and a whole generation of young graduates that had previously been assured government jobs for life soon  found themselves selling second hand clothes  in the market.

Homo Davos

Fast forward to today and the ‘masters of the universe’ met last week  in Davos, Switzerland as they do every winter to sip champagne and discuss how to get even richer and also, amongst other subjects,  how it is that everywhere you look in the world  income distribution has shifted so much in favour of the rich and against the poor.  Davos has become a magnet for international organisations desperate to attract the attention of the masters of the universe According to Oxfam the top 1% of the world’s population  owned 44%  of the world’s wealth (e.g. houses, shares and other assets) in 2009 to 48% in 2014, while the least well-off 80% currently own just 5.5%. Oxfam suggested that on current trends the richest 1% would own more than 50% of the world’s wealth by 2016.. The International Labour Orgaisation  also published a report showing that global unemployment is now at 200 million and will  continue to rise to 212 million to 2020. The ILO has also predicted that income ( ie. what you earn every year) inequality will also continue to widen and that globally the richest 10% earn 30-40% of total income while the poorest 10% earn around 2% of total income.

The answer as to why this happened lies very much in the world many of these very same people at Davos shaped over the last three decades. When one listens to their debates and discussions on inequality one would think that they were on another planet when all this was happening rather than at the very forefront of the rising inequality.

Part of the reason why the rich get richer is the same reason why I have so many unemployed graduates. The world moved on, we implemented a globalization where trade would occur not in nation states but along global value chains where production was located in the lowest cost locations. The old unionised automobile workers in Canada and the US who in the 1970’s had two cars, a comfortable home for their families as well as a cottage by the lake seems like  a remote memory of a now distant and almost extinct world. Those jobs have moved on to Asia and Latin America, real wages in North America have been pushed downwards and those workers in Asia certainly became better off but those in North America have generally not become much better off and many became much worse off falling into low paid jobs in the service sector ie. KFC. It is these people which are called ‘the middle class’ in America that paid for the uplifting  of Asian workers. The wealth trickled down but mostly it trickled up to  those who owned the factories who became so much richer because of globalization and their ability to make use of much cheaper Asian labour.

But to blame trade liberalization and globalization is not quite right. Of the nine jobs I was offered at least three that I can think of disappeared eventually because of the new information technology. Most disappeared because the jobs went to Asia. The flexible job market combined with the rapid advance of robotics  and advanced computers will in the coming years mean that some 48% of existing professions can be eliminated with the existing state of technology. And that capacity only increases every year Computers now do everything from driving  giant driverless trucks,  at Australian mines, to   drones which will shortly eliminate delivery trucks. And what is the response of the most economists is … get an education, work   hard, train to be an IT and robotics specialist and there will be plenty of jobs. This rings hollow to the otherwise unemployed IT graduates working here on internships We may one day soon have the chance to ask the unemployed truck drivers from Orapa and Jwaneng what they think of this and whether they can retrain as IT specialists?

19^th Century Ideas in the 21^st.

Global inequality between the rich and poor has increased substantially over the last 40 years to the point where even those in power know they have succeeded beyond their wildest expectations in creating Ronald Reagan’s nightmarish Dickensian world where the rich have amassed vast fortunes and little has trickled down to the poor, at least not those in their own countries. What has certainly changed is that globalization and technical change has created a middle class in China, India and the other developing countries. But those who paid for this middle class are the segments of the American and European working classes ie the ones they call the middle class that is increasingly on the endangered species list.

We need to rethink our 19^th century economics for a new world where the power of computers, robotics and information technology are so great that an ever increasing number of people, including university graduates, will not have anything resembling long term meaningful jobs. And while great wealth will be created from this, an unsustainable misery is now emerging  amongst young people all over the world who are bearing the brunt of this 19^th century social experiment. If humanity does not find a better way to give peoples’ lives meaning and share this great wealth that technology and globalization are creating then it will end badly for us, as we now possess the technology of destruction needed to make the 20^th century fascist wars  and communist revolutions look like rather tepid affairs.

 

These are the views of Professor Roman Grynberg and not necessarily those of any institution with which he is affiliated.