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Publication Details

Reference
Frye, Isobel  (2006) The “Second Economy”; Short hand, underhand or sleight of hand?.  Centre for Civil Society Colloquium on the Economy, Society and Nature: 1-19.

Summary
South Africa is an upper middle country, and yet as a result of a deeply skewed allocation of income and resources2, many millions of peoplelive in chronic poverty. The eradication of poverty remains the official priority of the state and the ruling party, but we have seen levels of unemployment almost double since 1994, and he broad consensus is that levels of poverty and inequality have correspondingly risen. All of this in spite of the fact that the country has experienced a steady rate of economic growth and development since 1995, with GDP growth in 2004 being at its highest since 1984.

Poor people are beginning to run out of patience waiting for the promised delivery of government services, houses, jobs and a better life for all, as is evidenced by the increasing number of demonstrations in poor communities, and an increase in both sectoral and national strikes, and yet government appears to continue to flounder about for any definitive reasons for these continuing trends of poverty and unemployment. For many others however the rise in levels of unemployment and poverty and the low levels of state capacity to deliver can be directly traced to the impact of the conservative macroeconomic policies adopted by the state under the GEAR5 between 1996 and 2000.

Despite the fact that the GEAR failed to meet its targets on most of its goals, including increased levels of local and foreign investment, as well as employment creation, government for its part continues to hail the success of GEAR based solely on the attainment of two indicators, namely the reduction of the budget deficit, and the reduction in inflation.

We believe that this myopia is symptomatic of an inability or unwillingness by the state to view the economy as a unitary system. In this paper we argue that the continued use of the phrases “first” and “second” economies are informed by the same inability or unwillingness. The Presidency has said that this phrase could be seen as a metaphor, a short hand, for all of those who do not fall into the formal economy of South Africa. Policies should not be built on metaphors. Is it a conjuror’s sleight of hand, an attempt to persuade people both internally and internationally that we have contained and isolated the causes of poverty in society, or should the continued use of this phrase be seen as a deliberate and underhand attempt to deny the true roots of the crisis at hand, which is that the processes that pauperise and impoverish are the same that enrich the formal economy and encourage increased investment; that the process of marginalisation of many millions of people is an integral part of the equation that has and continues to drive formal economic growth.

The ubiquitous use by policy makers of the “two economies” divide we see as reflecting a perceived need by the state to accommodate both the demand of Business for a non-interventionalist6 state with the clear need for state led intervention to address the growing needs of the poor and unemployed. The result is the sleight of hand of the “first” and “second” parallel economies theory.

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 Relevant Publications
 The Accumulation of Capital. Chapter 27: THE STRUGGLE AGAINST NATURAL ECONOMY: Rosa Luxemburg 
 Capitalism & cheap labour power in South Africa: Harold Wolpe 
 Labour Market Discrimination and its Aftermath in Southern Africa Guy Mhone 



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