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INSIGHT | TIMES BOARD OF ADVISORS / J. EUGENE GRIGSBY

What S. Calif. Can Teach S. Africa--and Itself

June 15, 1997|J. EUGENE GRIGSBY

Recent articles in the national media have focused attention on economic development opportunities in Africa and on the attendant U.S. business and government strategies responding to them.

Coincidently, the Strategic Planning Institute--a nonpartisan and multidisciplinary research and training agency operating within the context of the Reconstruction and Development Program in South Africa--invited me to Durban to keynote their national conference on the "State of Transformation."

A key goal of the conference was to assess the progress, since the first free elections in 1994, toward the planned transformation of the country's economy. Participants were representatives from the public and private sectors, including Mangosuthu Buthelezi, minister of home affairs; Goodwill Zwelithini, the Zulu king; and Ben Ngubane, premier of KwaZulu-Natal province.

My hosts were particularly interested in how leaders in Southern California are addressing issues of economic and demographic restructuring and what lessons they might hold for South Africa.

In response, my presentation applied findings from a recent report that colleagues and I produced for the Haynes Foundation titled "Growing Together: Linking Regional and Community Development in a Changing Economy." This study documented three key points that seem pertinent to South Africa's experience.

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First, Southern California has undergone a major transformation from a manufacturing to a service economy. In the process, hundreds of thousands of jobs were lost, including a significant number of unionized jobs. At the same time, new job growth in Southern California's service sector doubled between 1972 and 1993. The average annual wage paid for most of these new jobs was less than $15,000. In a significant shift from growth in previous decades, it is notable that small (not large) companies are creating these jobs. Thus, while the region continues to grow overall, a major portion of the new jobs pay extremely low wages and often have few, if any, benefits. This change is occurring throughout major metropolitan areas of the world, a byproduct of the global economy. We learned that economic growth as measured by job creation must not be viewed in the aggregate but analyzed sector by sector to understand the full economic impact.

Second, occurring along with the economic restructuring has been demographic restructuring of Southern California. The most dramatic example is illustrated by census data that in 1970 indicated that only three of the 77 cities in Los Angeles County had populations with greater than 50% minority. By 1990, 40 of the county's 88 cities had populations that were greater than 50% minority. More than three-quarters of these new service-industry jobs are filled by minorities. We learned that Southern California's future labor base will increasingly be drawn from a multiethnic work force, concentrated in the lowest-wage jobs.

The final point was that in the context of this economic and demographic restructuring, there is a growing income disparity between the rich and poor in our region. To redress this, policymakers in Southern California have invested heavily in regional strategies (e.g., the Alameda Corridor, the Metropolitan Transportation Authority's Regional Mobility Plan, Southern California Assn. of Governments' Regional Comprehensive Plan, Calstart, the New Economy Project and the Los Angeles Community Development Bank). These initiatives aim to grow the regional economy with the tacit belief that if the economy as a whole grows, all areas--including low-income communities--will benefit. However, data in the Haynes study covering 74 metropolitan regions throughout the United States show rather dramatically that there is no necessary nexus between a growing regional economy and poverty reduction. In fact, just the opposite is true. We learned that without a conscious and deliberate strategy to tie regional economic growth to poverty reduction, there is little likelihood of reversing or slowing the income-inequality gap.

With South Africa's stated goals of a broad, diversified economic base, an effective multiethnic, inclusive work force and the reduction of poverty, there would seem to be some lessons to take from Southern California's experience. I suggested the following.

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Pursuit of regional development strategies, specific to the strengths and weaknesses of the nine provinces, is likely to be more effective than any "one-size-fits-all" national approach.

Second, strategies designed solely to attract new investment with the presumption that the resulting creation of jobs will contribute significantly to lowering the 40% unemployment rate among the nation's black population are not realistic, given the American experience. Specific strategies for growth in the different employment sectors are more likely to produce desired results.

Third, providing inducements for multinational firms to the detriment of small firms is a good way to create and constrict a large working-poor population, threatening economic and political stability.

Fourth, although a growing economy is a requisite to attack the entrenched problem of poverty, if there is not conscious effort on the part of public policymakers, in partnership with the private sector, to link regional growth strategies to low-income neighborhood development efforts, the likelihood for success is problematic.

Finally, I suggested that a key measure of the success of future development efforts in South Africa should be determined by the number of true multiethnic ventures that flourish--something we have yet to achieve in Southern California.

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