Maverick Citizen

Maverick Citizen Editorial

Screw the poor? How deep is our commitment to equality?

Photo: EPA

In recent weeks President Cyril Ramaphosa has made two speeches in which he has made far-reaching promises and stated plainly his commitment to use the crisis to rapidly accelerate efforts to build an equal and fair society out of the ruins of the economy left by Covid-19 and the lockdown.

President Cyril Ramaphosa has asked “whether we have the ability to turn this crisis into an opportunity to invest in a new society, a new consciousness and a new economy”.

On his 21 April 2020 televised address to the nation he said:

“We will forge a compact for radical economic transformation that ensures that advances the economic position of women, youth and persons with disabilities, and that makes our cities, towns, villages and rural areas vibrant centres of economic activity.

“Our new economy must be founded on fairness, empowerment, justice and equality.

“It must use every resource, every capability and every innovation we have in the service of the people of this country.

“Our new economy must open new horizons and offer new opportunities.”

Then, in another televised address on Freedom Day, he went even further, saying:

“We must make real the right of all our people to healthcare, food, shelter, water, social security and land.

“In this final decade of the National Development Plan, we must change the pace of social and economic transformation.

“As a country, we are more than capable of building a more equal society where these rights are realised.

“For as long as this is delayed, freedom for some is freedom for none.”

How do we interpret these public ruminations?

We are getting used to witnessing a new (ab)normal: snaking lines of people queuing for food parcels. Images like this on Freedom Day were an accusing irony, because, let’s be clear, Covid-19 has only exacerbated and made visible a pre-existing epidemic of hunger. So, we are duty-bound to ask the president whether he is serious, or whether this is just sweet-sounding talk to placate a craving for sweet-tasting food?

Sadly, the food queues suggest it may be the latter.

The inconvenient truth is that the poor have been made the beasts of burden for the economic lockdown. It is the poor who have been made to sacrifice meagre and inadequate jobs; children of the poor who have given up opportunities for education; the poor who must withstand the brutality of rogue elements in the police and army; the poor whose hunger must stretch a little deeper into their bellies.

Yes, a far-reaching R500-billion relief package was announced by President Ramaphosa on 21 April, a relief package he told us was

“as much about narrowing the gulf of inequality as they are about supporting vulnerable citizens through this trying time”.

But was it enough? Or was it another example of what UN Special Rapporteur on Human Rights and Extreme Poverty, Philip Alston, has recently called: “a social Darwinism philosophy that prioritises the economic interests of the wealthiest, while doing little for those who are hard at work providing essential services or unable to support themselves”.

On the night that President Ramaphosa announced social relief measures, where they could, a hungry nation crowded around televisions sets. As the commitments were rolled out, the relief was palpable. While I watched Ramaphosa on TV, there was a simultaneous feed taking place on the WhatsApp groups of the C-19 People’s Coalition. Most of it was jubilant and trusting.

There were bound to be nay-sayers and I wanted a reason to discount them. However, as the dust settled and the numbers were crunched by independent economists like Gilad Isaacs from the Institute for Economic Justice, it began to become clear that it was not actually as generous as its big-sounding numbers and the gravitas and trust a presidential speech automatically generates (unless you are Trump or Jacob Zuma).

  • The top-up to the Child Support Grant turned out to be per adult beneficiary, not per child beneficiary (if you look at the president’s language it was left ambiguous here; it took Minister of Social Development Lindiwe Zulu to wield the axe). By doing this, the state saved itself R13-billion according to an influential coalition of children’s advocates.
  • The R350 “Special Covid-19 Social Relief of Distress grant” is for South African “individuals” only; it excludes refugees, asylum seekers and undocumented migrants who could number more than a million people; people who some may wish away or pretend they don’t belong here, but they are here, they are part of our social fibre, we share our country with them.

Making these criticisms is not to make light of the government’s achievements or difficulties. We know public finances are hugely constrained by corruption, mismanagement and recession. The tables below are pages 33 and 34 of a presentation to Parliament’s Standing Committee on Finance and Appropriations given by the Treasury on 30th April. The first illustrates where the R500 billion is destined to go — only 10% is going to the most vulnerable. 

The second illustrates how our government has done an egg-dance with public finances: but it also tells us that most of the money it has found for social relief has come by re-prioritising existing expenditure and by borrowing (which, as pointed out by the Budget Justice Coalition, the poor will pay for later):

But most troubling for me is the presentation also reveals that the government has done next to nothing to draw on a massive reserve of privately held wealth to tackle the Covid-19-induced economic crisis. The shifting of some of the burden from the state into public donations made to the Solidarity Fund is heart-warming and commendable, but it is wholly insufficient. As will be explained below, the five to six billion rand garnered in private donations (if we include the Motsepe, Rupert and Oppenheimer donations) is but a drop in the ocean of the reserves of private wealth in South Africa.

In the days before Covid-19, trade unions, supported by academics like Patrick Bond, used to complain about an “investment strike” by South African capital, claiming that up to R1.4-trillion was being kept in banks and bonds rather than being invested productively.

This was disputed by business. But that this money exists — and could be the game-changer in ensuring an equitable and effective response to Covid-19 — is no figment of the imagination.

A recent article in New Frame, “SA’s richest 3,500 own more than the bottom 32 million”, has quantified it; articles in the business press have added up the sums of private wealth and identified some of the richest people who hold it. It is an inescapable fact and, in this regard, SA is just a microcosm of wealth inequality and hoarding in the world as a whole.

However, what’s important to appreciate here is that the truth is that there are more financial resources, wealth, that would allow us to respond adequately to Covid-19 and mitigate its harm to the most vulnerable — it’s just that they are not in public hands.

Taxing wealth

Part of me is hesitant to make the argument I am about to unfold.

I do not like the “quick-fix”, crude populism of either the left or the right; neither do I wish to invite the ultra-rich in SA to retreat into a laager, especially when — at the moment — a fraction of them seem to be going out of their way to assist the government.

Time will tell whether it is it to save their own skins or out of genuine patriotic and moral responsibility.

But the truth is that if progressive social democratic governments don’t take difficult decisions about taxing wealth now, a new wave of destructive populism will follow the Covid-19 crisis as sure as night follows day.

And before, dear reader, you stop reading, it should be noted that costed and reasoned proposals for wealth taxes are not just coming from people like Bernie Sanders, considered to be on the left. The International Monetary Fund (IMF) has flagged a wealth tax as one possible way of raising funds; in England one economist estimated that a wealth tax could raise up to £174-billion (almost R3.5-trillion) a year, pointing out the inconsistency that

“income had been taxed on average at 29.4% while wealth – generated mostly from rising house prices and the increased value of personal pensions – had been taxed at 3.4%”.

And, as Thomas Piketty has pointed out again recently, wealth taxes have been used throughout modern history to extricate societies’ from social conflagrations and debt crises — and have not led to the collapse of capitalism.

In fact, the opposite: it was the narrowing of inequality after World War II, in no small part due to fairer taxation, that gave much of the developed world an economic boom that lasted for nearly 30 years.

But should governments need persuasion, the truth is that much of this wealth was ill-gotten in one way or another. A large part of it is the fruits of decades of deregulation and de-taxation. The excessive salaries and wealth commandeered by some of South Africa’s captains of post-1994 corporations has not been just a due reward for their excessive cleverness (even if we accept that they may have been clever), but because of immoral systems that have concentrated wealth.

Thus, if Cyril Ramaphosa is going to prove true to his words, taxing some of this wealth at this moment of need is an issue on which the government needs to act and the rich need to acquiesce. And if you need a legal foundation, it can be found in our frayed and betrayed Constitution which promises a state founded on human rights and social justice and says that all citizens are “equally entitled to the rights, privileges and benefits of citizenship”.

What difference could this money make?

Making this argument is not intended to be ideological or divisive; I’m just saying the things that many people think, but some people say can’t or shouldn’t be said — especially at this moment.

Our state is desperately short of money.

It is not meeting its legal obligations to ensure “sufficient food” or social security for everyone.

It is not meeting its unqualified legal duty to ensure children have “basic nutrition” or “basic education” under the circumstances of the lockdown.

What this means in practice is the short-changing of grant beneficiaries and inadequate under-equipped health systems that now rely on charity to provide things like PPE. Even allowing for the money lost to corruption, often with the complicity of “enablers” from the private sector, like KPMG and McKinsey, there would not be enough money in state coffers at the moment to meet the emergency basic needs of the poor.

Yes, the wretched legacy of State Capture and state failure is real. Yes, after this experience few of us trust the state or its officials. But that’s not an excuse for doing far less than we should.

And it could make a difference.

For example, a recent document submitted to the government by the Institute for Economic Justice (IEJ) calculates that a once-off 5% solidarity tax “on those earning above R1-million could raise R48-billion”.

In a similar vein, a cautious and carefully considered paper by former Treasury senior official, now Professor Michael Sachs, an honourable person driven out of the Treasury in protest at the capture project, argues that a “step in the right direction” to assist “redistribution from the affluent to the very poor”, “might be a temporary solidarity tax, which utilises existing tax-handles to draw in resources from the most affluent South Africans”.

Sachs argues that “thought should be given to how existing tax handles might more effectively target South Africa’s super-rich households in an equitable and law governed manner”.

Such a proposal is echoed by other right-honourables, such as judge Dennis Davis who, in an article on ‘finding the money to fight Covid-19, (and whose tax commission considered the issue of a wealth tax long before the days of Covid-19), argues:

“The wealthy also need to make a sacrifice. While there is presently no reliable information that could allow for the immediate introduction of a wealth tax, it would be possible to add a further tax bracket of, say, 50% for income above R1.5-million or R2-million. We could also increase dividend tax over a certain amount, or even resurrect the ‘loan levy system’ for companies, with staggered rates from R750,000.”

We can debate till the cows come home… or until the rebellion starts and the State Capturers spot their gaps (and believe me, they are circling again). But the bottom line is that a cash infusion of this sort would at the very least make it possible to pay the increased Child Support Grant to every child and the Special Covid-19 grant to be more than a measly R350.

And, for those readers still with me, my closing argument here is that it would be best if the super-rich — perhaps mediated through a vehicle like Business for South Africa, or respected business leaders like Wendy Appelbaum — came forward to recommend that government introduce such a tax, rather than having it forced upon them.

Ending the inequality games

Covid-19 has been an unpleasant wake-up call. As a result of this bad dream, across the world, across a broad political spectrum, people are pronouncing an end to the inequality games.

This is most welcome.

But the truth is that the inequality games won’t end if they are not forcibly closed down and made illegal. This will necessitate legal and constitutional action by democratic states. In fact, as Oxfam, senior officials and committees of the United Nations and others are warning, without such measures, taken within the framework of international law, poverty and inequality will grow dramatically as a result of Covid-19.

Further, as is being pointed out by economists like Yanis Varoufakis and Joseph Stiglitz, if we think we can revert to the old rules and priorities of the economy to try to extricate the world from this crisis we will fail. Or, in the words of Dennis Davis:

“As SA emerges from Covid-19, it is imperative that we reconfigure our economy in a focused, transformative manner in line with the Constitution. We dare not retreat to austerity at the expense of delivering basic goods and services… It can no longer be an optional extra.”

This is something that has been understood by a handful of government leaders, like New Zealand Prime Minister Jacinda Ardern. Some may criticise it as Utopian, but Utopian thinking should not just be dismissed.

Seventy years ago, Winston Churchill and Franklin D Roosevelt recognised how the financial and economic impasse that had given rise to World War II raised the need to birth a new world economic order. A few years later, Eleanor Roosevelt and others saw the need for a new social order based on a Universal Declaration of Human Rights.

We need to do the same now.

The problem is that there’s no visionary leadership among most of the world’s political leaders. There’s also a remarkable absence of co-ordination and joint planning, other than through the World Health Organisation, because the world’s democracies are presently in the hands of dangerous denialists and kleptocrats.

So, perhaps it’s up to people like Cyril Ramaphosa and Jacinda Ardern (if they mean what they say) to set an example and lead. Even if they fail, they would have failed through trying to do what is right.

But global leadership starts at home and at this moment the most pressing task is to bring real lasting relief to the hunger crisis facing the poor and — to be successful — this needs more than charity. President Ramaphosa is the most popular leader with private interests since Nelson Mandela; he has signalled a commitment to equality, but action speaks louder than words and action is what we need now. DM/MC

Mark Heywood is the editor of Maverick Citizen.

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