THERE are many reasons economic debate in SA is frequently so heated.
Protagonists lack common histories or yardsticks against which to judge each other's arguments. In such circumstances, real debate and agreement are impossible.
Ideological differences are another important cause of division. They result in completely different perceptions of the way economies work, as well as the nature and purpose of current economic activity.
This leads to very different expectations of policy outcomes.
One side believes economies are dynamic, often fragile organisms.
Occasionally they grow very rapidly, but most often economies grow more slowly than we would like. When economies grow they can "lift all ships".
But when bad policies are implemented growth is slow. Economies may even shrink, with extraordinarily painful social consequences.
In this view, policy can encourage or reward certain hoped-for outcomes, but it cannot dictate them.
The other side of the policy debate views economies as being essentially fixed in size. Policy outcomes are a zero-sum game. When one group gains, another loses. The rich get richer because the poor get poorer. If profits rise, wages must have fallen. Economies are seen as things to be controlled.
If overall welfare is to improve, policies must, in this view, force necessary changes in economic outcomes. Policy makers can only adjust the sizes of the slices of an existing pie. There is no thought that such efforts might result in a smaller pie.
This view of economics is emotionally very powerful when there is huge inequality in wealth and income, as in SA.
The claimed benefits of redistributing an existing pie seem much more immediate and therefore more politically appealing than the benefits of growth, which often take time to materialise.
The current fight about the youth wage subsidy illustrates the division between those who view the economy as dynamic and those who see it as static. The Treasury and other supporters of the subsidy believe it will lower the cost to firms of hiring workers and so increase the number of jobs for young people. Although such jobs may initially be temporary because of the fixed term of the subsidy, they will provide young first-time job seekers with the work experience that is critical to maintain long-term employment.
Opponents of the youth wage subsidy, led by the Congress of South African Trade Unions, believe a fixed number of jobs produce the current level of output. This number is unaffected by the wage rate. They believe employers will use a wage subsidy to boost profits by replacing older workers with subsidised young workers. The number of jobs will remain unchanged.
One way of finding out which side is right would be to test the proposal. If the government provides a youth wage subsidy that is initially limited to particular industries or regions, then it will be possible to measure whether the number of jobs increases. If existing workers are simply displaced by younger workers, this will be measurable and the subsidy can be stopped.
This is what is happening in the textile industry, where unions and employers agreed to a cut in the minimum wage for a limited time. If the number of jobs in the industry rises, the agreement will be renewed. If not, it will be cancelled.
Unfortunately the chance to test the efficacy of the youth wage subsidy seems to have been sacrificed on the altar of political expediency. The recent ANC conference agreed to drop the youth wage subsidy in favour of a grant to job-seekers.
The assumption here is that jobs for young people already exist. Young work-seekers simply lack the resources to find them. There is no evidence to support this claim. Other than for certain skills that are in short supply, there are no job vacancies that cannot be filled. Young people cannot find jobs that do not exist. New jobs have to be created for youth unemployment to decline.
The proposed grant to young job-seekers therefore risks becoming just an extension of the current child support grant into early adulthood. Given SA's acute levels of poverty, such assistance would not be a bad thing - subject to affordability. But it is disingenuous to pretend it will help solve the problem of youth unemployment.
The apparent shelving of the youth wage subsidy is a warning that economic policy in SA is losing focus on the critical goal of growth, which occurs only when appropriate policies nurture it and channel its benefits appropriately. When this happens, the benefits for material living standards are dramatic. The 2008 Growth Report of the World Bank noted that "growth is not an end in itself. But it makes it possible to achieve other objectives of individuals and societies. It can spare people en masse from poverty and drudgery. Nothing else ever has."
Rapid economic growth does not happen easily or automatically. It requires leadership, policy consistency and a willingness to plan for the long term.
SA needs to recapture such focus. The social, economic and political costs of not doing so will be very high.
• Gavin Keeton is with the economics department at Rhodes University. This article appeared on Business Day.