Lovin’ Can’t Pay My Bills

Here in South Africa we supposedly have lots of problems. We have the problem of AIDS and the problem of Satanism. We have the crisis of a totally incompetent government, and the fact that the next man in line to run the country is worse. (How can you be more than totally incompetent? Oh, we also have the problem of people making stupid statements and preventing anyone from challenging them.) We have the problem of moral decline and of the need for the privatisation of all major industries. We have a lack of commitment to revolutionary praxis, and of the failure of muscular liberals to meet the high, demanding standards of Peter Marais. We have a high crime rate (though, to be fair, they have arrested the chief of police, which surely shows progress). Oh, and Afrikaners are oppressed, terribly, too. Not to mention a brain drain, a grain strain, and a plain blame game.

No, we won’t mention those things, or any others either, because those things are trivial in themselves. They are symptoms of the disease. Often they are symptoms because they are presented, deliberately, by people trying to promote the disease, to distract and fool us from dealing with the disease. What is the disease?

Money.

The love of money is the root of all evil. If this is true (and who would deny it?) then capitalists are demonic and should be exorcised. No, discussion won’t get very far when based on particularly shallow platitudes. Let us seek slightly more profound platitudes.

There is a thing called the GINI coefficient, which supposedly measures how unequal wealth distribution in a society is. It is based upon the assumption that such things are measurable, and indeed that they are accurately measured, which they are not. GINI leaves out vast amounts of important things which makes it a very poor gauge of equality. However, just like Gross Domestic Product, which is an extraordinarily dim way of measuring such things but is the only one taken seriously by anybody, GINI is the best available tool. Like having to dig a trench with a tuning-fork, but there you are.

Well, according to the figures, South Africa’s GINI coefficient is about 0,66. 0 is the best equality, 1 is the worst inequality, in terms of which one person has all the wealth and everybody else staggers about with no clothes on. 0,66 is pretty high. It is apparently one of the highest measured, and we are up there with Brazil and Guatemala.

Does that tell us anything?

Yes and no. Yes, it is blindingly obvious that the inequality of our society’s wealth distribution — or, more accurately, the cause of that inequality — is responsible for a huge variety of social ills — the obvious ills of poverty and malnutrition and unemployment, the less obvious ones of crime and the collapse of social cohesion and civic responsibility. No, it tells us nothing, because the people who are most involved in that inequality are not prepared to listen, or if they listen, they hire people to tell us that the inequality is the fault of someone else.

How bad is it? This year the country is expected to generate about R1,5 trillion. We have about 50 million people. Working the math, that divides up to about R30 000 a head. If you are getting less than R30 000 out of the system this year, counting everything, and remembering that you are probably part of a family in which not everybody is earning, then you are losing out.

A lot of people are earning a lot more than that. There are people who earn R100 million in a year. Tens of millions are pretty standard fare for chief executive officers of companies. Such people are earning several thousand times the average. Sleazebags.

To free up money for this elite, we have an unemployment rate of — duh. The actual unemployment rate is unknown. The figures are routinely fiddled. However, let’s take 30% for argument’s sake. 30% of those people who could be employed are not being employed, are not earning anything at all from their labours. A substantial number of these are on subsistence farms in Limpopo, the Eastern Cape and a few other areas, basically outside the money economy altogether. Others are crowded into shanty-towns or mud-hut villages.

But of those actually earning money, a lot don’t earn very much. The minimum wage about which rich people complain so much is way below the average (meaning, of course, that it should not discourage employment, although rich people hire economists to pretend that it does). People selling little bags of mouldy tomatoes on the sidewalks of small rural towns are self-employed entrepreneurs and thus don’t count as unemployed, but how much do you think they are getting?

Meanwhile the people going on strike last year, whose struggles were defended by the media as opposed to the evil rich politicians who were oppressing them, the nurses and teachers and so on — they earn several times the average. Their strike was to demand that they should earn a good deal more than the average instead of just a little bit more. You can, if you like, argue that they are entitled to this (although the performance of our schools and hospitals suggests otherwise) but you can’t deny that they are an elite, and increasing their salary increases the GINI coefficient instead of reducing it. (This is probably why the media was so enthusiastic, given that the media loves elites.)

Wow. So the people whom we consider workers are not necessarily good guys, and the people whom we consider wealth creators are not either. OK. Who are the bad guys? The government, right? Everybody agrees that this is all their fault. They’re in charge, aren’t they? Why don’t they make it all better?

They can, of course. They can send in the police and the army to confiscate all wealth above R30 000 and hand it around. The confiscation part is easy. The handing around is more difficult, as was discovered in Cambodia under the benevolent rule of Angka Loew in the 1970s. This kind of policy is tacitly advocated by some left-wingers (usually ones living in agreeable houses a long way from where any problems might arose) but generally it will not work and nobody knows how to make it work.

Take a slightly closer look at the problem. Where did it come from? There was (you may have heard) a little problem called colonialism a few years ago, and subsequently, a modest hassle arising out of that called apartheid. These were basically techniques for concentrating wealth in a few hands. You divide the country into two categories (don’t call them rich and poor, please) and ensure that one category has political power and the other not. Then you make the ones without the power work for the ones with it. Similar techniques were used in Ancient Rome and Classical Greece, with very excellent results if you weren’t a woman, a slave or a barbarian. It was very profitable for rich, powerful people for a long time — in fact, it still is.

That is where the inequality came from. However, it grew worse towards the end of apartheid, partly because of high-value, capital-intensive manufacturing. This meant that we didn’t need to make lots of cheap stuff to pay for the salaries of the elite. Instead we only had to make a small amount of expensive stuff. We didn’t need to hire so many labourers to keep the rich, rich. Hence the rich stayed rich, but the poor got poorer because more of them lost their jobs. This process continued from the last decades of apartheid until now. It’s not a process that is easy to reverse.

Meanwhile, if you are rich, you tend to want more. The rich really do get richer. They invent sophisticated ways of getting richer, like the futures market on the stock exchange. They have more political power than the poor, so the economy becomes ever more skewed in favour of the rich. They can also stop the poor from getting their own back. That’s why the inequality gets worse.

The government can do a number of things. It can tax the rich and hand the tax money over to the poor. In fact, that’s exactly what it does. Most government spending helps the middle class as well as the affluent class; a substantial chunk of government spending, such as social grants, goes directly to the poor. Spending on infrastructure promotes employment and is theoretically good for economic growth. In theory, spending on schools and hospitals also goes to the poor, though in practice so much of the money goes on salaries for middle-class government employees that this is moot.

It can persuade the rich to be nicer to the poor — no, it bloody well cannot. One of the dumbest policies of the present government has been the blind belief that the problem was that rich people are bad whiteys, and if only good darkies were in charge of all the money, the problem would disappear. The fact is that wealth overrides skin colour; if you are a rich black person you have immensely more in common with a rich white person than with a poor black person. Hence black economic empowerment has definitely not improved anybody’s lives; it has merely perpetuated the problem. (On the other hand, contrary to the ridiculous propaganda of rich white people, black economic empowerment has not made anything worse for the country as a whole; just because there are black sleazoids as well as white ones earning a hundred times more than they deserve, does not change anything.)

It can prevent the rich from sending their money out of the country, through what’s called exchange controls. This seems smart. If you can’t get your money out, you might as well invest it. Maybe some of that investment will be productive and lead to someone getting hired. (Alternatively you might put all your money into derivatives on the stock market, meaning that it does nothing useful to anyone except you and your financial consultants.) So it’s not a reliable way of solving the problem — although lifting exchange controls was one of the dumbest things the ANC has done in its terms of office.

It can prevent the rich from wasting their money on imported goods, forcing them to buy locally manufactured goods instead. This is the best possible solution. If things are locally made, someone locally has to make them, has to hire people to make them, has to obtain resources locally, and so on. This is brilliant. The only problem is the first sentence in this paragraph. It isn’t true. The World Trade Organisation prohibits governments from making decisions of this kind. You are not allowed to slap tariffs on imported goods, nor are you allowed to hand subsidies to domestic goods. Why do they do this? The World Trade Organisation is run by rich people — go figure.

So what can the government do to make things more equal? The answer invariably given by economists working for rich people (that is, virtually every economist alive and quite a lot of dead ones) is, promote economic growth. A little bit of economic growth, say between 3% and 4% a year, does not encourage equality. This they say, and we know it is true, because we had that kind of growth all the time when inequality was increasing. So instead they say that what we need is economic growth of 6% and then inequality will decrease.

There is absolutely no evidence for this. It is, however, an argument endlessly made, because the rich are in a position to get a better share of economic growth than the poor. In other words when the economy grows faster, the rich get richer, faster. However, the poor also get a little bit richer, because employment goes up and sometimes wages rise faster than inflation. Therefore, for the poor, the extra crumbs falling from the table feels like manna from heaven. It’s easy to persuade them that this is a sign of equality growing, and to tell them that this is because the rich are doing such a splendid job, unlike the government, which is always doing a bad job.

So, basically, economic growth is a snow-job (at least as a means of wealth redistribution, which is not to say that economic growth is a Bad Thing). This helps to confirm that the rich are not interested in wealth redistribution. They could do it, but they don’t want it. The poor are interested, but they don’t have the power. The government has the power and might have the will (although they are easy to bribe or fool) but what are they supposed to do to solve the problem?

Anybody got any ideas?

 

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