Inequality has some hard lessons to teach, and few are better to dish those out than South Africans. In that spirit, here are a few words of wisdom for UK's Prime Minister David Cameron.
Dear Mr Cameron,
I suppose I need to begin with congratulations. You surprised the world and your own financial markets fabled for their foresight. Fair play, sir. I am tempted to further congratulate you on digging your country out of the macro-economic hole you inherited, but history tells us this would be premature. Falling unemployment, some industrial output growth and expanding retail sales are necessary but insufficient to ensuring a prosperous and stable economy, so time will tell.
In a recent column in our local business daily, Phakamisa Ndzamela, waxed lyrical on the things we in South Arica could learn from London, testimony to the fact that your world class capital remains exactly that. In the spirit of reciprocity that has long defined the relationship between our two countries, I feel obliged to offer you some advice in return: keep going with your economic renewal, and yes, capital cities need to offer a high-end quality of life, even a degree of opulence to attract professionals and investment, but but don’t take your eye off inequality.
The United Nations uses a measure called the Gini coefficient to report the extent of inequality in a country, city or region. They caution that any Gini above 0.4 represents a society in a “hazard zone”. Your country’s Gini is currently at 0.38. Here in South Africa the number is contested but sits in the region of 0.65 – i.e. hideously unequal. It is a geometric scale, so there is a reasonable difference between 0.38 and 0.65, but don’t worry too much about the maths. The economics I was taught – also not too far from your country home – suggested that high inequality is bad for the economy because of what it does to the ratio of imports and exports and the balance of payments. Domestic economies grow off the back of money spent by wage earners at the lower end of the income spectrum. A super-affluent elite tends to spend more of its money on imports, assets and overseas holidays, which hemorrhages money from the local economy devalues the exchange rate and pushes up the price of basic commodities, including food and oil, on which the super-poor depend. Given this, we were taught that inequality can be self-perpetuating and bad for economic growth.
What South Africa can teach you and your new cabinet is that the macro-economic implications are not the half of it. On the contrary, when you let inequality rise, and all indications are that the UK will crash the UN’s hazard line with your prescribed model of economic recovery, you unleash a special brand of crazy resentment that is systemically damaging and from which even your celebrated British institutions will not be insulated. Let me be more specific: in our lowest moment since democracy national police shot 34 miners, ostensibly in deference of shareholder value while the miners themselves set out to kill in pursuit of a living wage, distinguishing cause and culprits has proven difficult and already taken two years. In the last few months here in South Africa there has been an outpouring of sympathy for a duly sacked student leader who persistently broadcast his admiration for Hitler’s leadership style (a black man no less…you Brits will enjoy the irony).
We have seen national acclaim given to a property and insurance tycoon who is building a walled city some 50 kilometers from Johannesburg that the rich will never have to leave. The scheme is celebrated for it “developmental” ambition, but represents a fiscal burden for the real city and a catastrophe for South Africa’s ongoing integration efforts. Ironically (that theme again) the city of Johannesburg is undergoing an authentic and colourful regeneration of its own. We have also seen a groundswell of support for a charismatic populist leader masquerading as a representative of the workers while simultaneously gilding himself with imported bling, failing to pay tax and holidaying in island resorts. Perhaps most sinister of all, we have seen the increasing use of the intelligence agency (former liberation militia) in the silencing of people seeking to challenge the hegemony of the very party that liberated us from Apartheid tyranny. This all while the party leader, our president, loots the public purse to build his private palace, but continues to receive support from people as an example of how it possible to escape poverty.
When a society becomes economically disparate the centre cannot hold, the notions of reasonableness and reasonable debate have no traction due to their inherent subjectivity, a subjectivity that is exposed by inequality. The poor feel legitimised in their “means justifies the ends” approach to getting ahead by the wealth gap and the elite’s self-defense becomes increasingly hypocritical and militant especially where, once poor, they have now convinced themselves that their own accrual is a necessary part of addressing historic inequality, regardless of the public cost.
And that is the point. When you let your Gini slip, David, the yawning gap between the haves and have-nots becomes fertile grounds for opportunists promising transformation but only as a guise for fundamentalism, bigotry and totalitarianism. Everything and nothing is defensible against the backdrop of the two extremes. Symbolism becomes the lived reality of those without hope as the injustice of the socio-economic architecture becomes the basis from which tear at anything.
You will no doubt balk at the comparison between an African country and your mature democracy (of sorts). But be warned. Rising inequality is, for the most part, invisible until it manifests in violence, destitution and the collapse of public institutions (such as the revenue services, the judiciary and parliament) that become untenable in the face of criticism from both the rich and the poor and a culture of impunity driven by desperation on the one side and the desperate justification of conspicuous wealth on the other – two perspectives that will never be reconciled.
Getting your country out of its economic hole is an important, no doubt pre-occupying, goal for you and your friends. But so was the provision of housing, water and electricity post-1994 democracy in this country. In the process we did not think enough about how we were going about addressing the goal, about winners and losers and who we were leaving behind, nor the consequences for the politically reconciled rainbow nation and our shiny new state institutions. If it can happen here then no society is immune.
So spare a thought, David, if you will, for the Gini coefficient, as you go about reforming your health services, your social housing policy, your transport system and perhaps most importantly your famous finance sector. The implications in Britain would of course be very different to those we experienced here, but you really don’t want any form of the special brand of crazy that gets unleashed when you choose to ignore inequality. DM
Anton Cartwright is the green economy Mistra Urban Futures Researcher at the African Centre Cities. Previoulsy he convened the City of Cape Town's climate change think tank. His work focuses on the application of economics to Africa's urban transition, environmental degradation and poverty alleviation and the implication of these issues for the discipline of economics itself. He holds two post graduate degrees in Environmental Change and Management and Economics for Development from Oxford University, where he was a Rhodes Scholar. He is an associate of the Stockholm Environment Institute and the Cambridge Programme for Sustainability Leadership. He has completed assignments for the World Bank, The European Union, The Food and Agriculture Organization, DfID, WWF, IIED the Fairtrade Foundation and a range of local and international companies, NGOs and government departments. He is also a founding Director of the not for profit organization Promoting Access to Carbon Equity (PACE) and chairman of the board of iKhaya le Themba, an aftercare centre for children in Imizamo Yethu.
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