By Paul T. Shipale
A keynote address by Joel Netshitenzhe, Executive Director of the Mapungubwe Institute for Strategic Reflection (MISTRA), delivered on 25 November 2013 to the concerned Africans Forum in Johannesburg, answer the above mentioned question.
Indeed, common sense has it that inequality is bad for social cohesion. Extreme inequality is morally reprehensible. But it goes far beyond issues of taste sensibility and morality. Wilkinson and Pickett (2010) demonstrate the impact of inequality on various measures of human development and wellbeing. They come to the startling conclusion that: the relationships between inequality and poor health and social problems are too strong to be attributed to chance, they occur independently in both our test–beds, those between inequality and both violence and health have been demonstrated a larger number of times in quite different sources (Wilkinson and Pickett, 2010:190).
Moreover, they showed that it was people at almost all income levels, not just the poor, who do worse in more unequal societies. Even when you compare groups of people with the same income, you find that those in more unequal societies do worse than those on the same income in more equal societies (Ibid: 192). Beyond social indicators, inequality can also constrain economic growth. Many of even the poorest countries have succeeded in initiating growth at high rates for few years. What is rarer is the ability to sustain growth. The question then becomes, what determines the length of growth spells, and what is the role of income inequality in duration?
Amartya Sen., “Endemic insecurity and deprivation” 2002, says poverty and inequality cannot be measured merely by income. Thus, any interrogation of inequality should also assess the provision of a ‘social wage’. How does our country fare in this? To begin with income distribution: besides progressive taxation, the government has massively expanded access to social grants. Assistance to the poorest households has included reprioritisation of educational expenditure, such as the introduction of no-fee-paying schools, including a basic minimum of water and electricity free of charge, and free access to public health facilities. The dynamics outlined above, already suggest the variety of interventions required to deal with inequality. A few are listed below, as indications of the combination of measures that would start to address the challenge.
Addressing inequality does not suggest an equal sharing of poverty. It needs to be tackled with high rates of sustainable economic growth, but the issue is what kind of growth, and how the benefits are shared while improving productivity. As the World Bank study argues, it is possible to achieve pro-poor growth and pro-growth poverty reduction. This should entail a focus on economic sectors in which a country has comparative advantages, but with emphasis on labour–intensive sectors that are able to absorb the mass of the unemployed in the short- to medium-term. There may be instances where short-term pro-growth policies have a negative impact on the poor – in such cases, there should be direct assistance to the poor and SMEs. Fiscal measures such as unemployment incentive and business set-asides for youth and women can help launch the marginalised into meaningful economic activity. Education and skills training are among the most effective measures to tackle inequality. However, as the global phenomenon of youth marginalisation shows, such interventions should be combined with other policies to ensure economic growth and the opening of economic activities. Improving quality in the areas of most need – among the poor – should be emphasised. This should be combined with vocational guidance and improved formal and informal education networks (social capital), which are critical for accessing opportunities. This will help break the cycle in which the poor experience lower, late and uncertain returns on education.
Given that one of the critical drivers of inequality across the globe is the “trickle-up effect” of executive remuneration, the issue of incomes policy and minimum wages has to be addressed, either through appropriate regulations or taxation or both, in a manner that does not undermine incentivisation for management performance. With regard to the taxation, the legitimacy of the state –informed by its efficiency and ethical conduct – is critical. A national wage policy should seek to regulate the gaps between ordinary workers and the middle strata on the one hand and senior executives on the other hand. It should include a liveable minimum wage, as distinct from sectoral wage determinations. While there may be instances where mass absorption of the marginalised may dictate lower entry thresholds, such interventions should be temporary. Research has shown that reasonable increases to the minimum wage do not necessarily lead to job losses, but that compliance in vulnerable sectors is often poor (Bhorat and Mayet, 2013).
The issue of reducing the cost of living of the poor is fundamentally important. The important inflation rate experienced by workers and the poor is often much higher and move volatile than that of the rich. This applies to such basic needs as food, transport and administered prices (example electricity, water, municipal rates, education and health care) on which the poor spend the bulk of their income. Changing the spatial settlement patterns is also fundamental to reducing the cost of transport for the poor. Added to these measures should be the panoply of social wage interventions identified above, with the necessary quality and efficiency. Society should also raise its level of policy and political discourse, and ensure that it takes place around matters of substance rather than a huckster’s paradise where obfuscation – whether thinly veiled attempts to defend the status quo or shadow–boxing with leftist slogans – confounds the real issues. Template-based economic responses to the global economic crisis demand a coherent articulation of alternatives. The role of the media in this is also quite critical.
Finally, dealing with inequality is a responsibility of the political leadership through public policy, but it also a task that requires the involvement of all sector of society. Government, business, labour and civil society, as well as all leaders need strategic acumen to identify the common goal for mutually beneficial economic programmes and humane social relations. More importantly, we should ask the question to find out, what does it mean to be pro-poor in our current environment? Also addressing the fact that poverty and inequality are not the same thing, and addressing poverty does not mean addressing inequality. Therefore, defining the progressive agenda as it exists today is important. Working-class organisations do not necessarily represent the poor, but rather their interests in relation to policy decisions. Our style of politics, let alone the values in our politics, has given way to populism, where argumentation, substance, values and context mean very little. We can talk about the social structure and how it has evolved over the last two decades, but more importantly, the question is; where do we go from here? What does social democracy look like and what is our immediate vision and the basic things we need to do strategically and tactically to broker that vision? Are we administering late capitalism and desperately trying to de-racialise it? At least, are we succeeding even in that limited sense?
Thus, the key issue we need to address is the economic issue. We need to define the nature of the political economy, the mixed economy, the state and its role. We have not yet established an economic force, which can drive our economy around the common objectives of a mixed economy. Surely, our statics look good, as we are mesmerised by fiscal austerity but the whole idea of a paradigm shift or “second phase of the struggle” has been left by the wayside. In other countries such as in Western Europe, a developmental agenda was constructed within the framework of the democratic discourse. Can we at least pull together or have enough common ground to think along the lines of a minimum programme that would force us to define how the interests of different sectors of society could be satiated by this minimum programme? We should also ask if it is possible to develop a new minimum programme in the public sector. The developmental states in Asia were politically driven, but they also had a degree of authoritarianism. In conclusion, we need a coherent theory to take us into the future. For instance, what does it mean to be in power? Do we have a theory of the incumbency? With political office come opportunities for patronage and ego-stroking that challenge human frailties, let alone ideological ones. How does one provide the right incentives and disincentives to encourage leaders to remain moral? All these challenges should be addressed in relation to contemporary politics and not just articulated in general terms.
Disclaimer: The opinions expressed here do not necessarily reflect those of my employer and this newspaper, but solely reflect my personal views as a citizen.South African