With the ability to explain complex formulas in simple language and the rare gift of being able to confront the unspeakable as elegantly as Nelson Mandela did, Thomas Piketty has a Madiba-like charisma and a similar outlook. His Nelson Mandela lecture came at the right time in South Africa's reconstruction.
In an event the late Nelson Mandela would likely have loved to attend, this year’s 13th Nelson Mandela Annual Lecture was the most popular in a lecture circuit which saw Mohamed ElBaradei delivering the sixth Thabo Mbeki lecture this year – much to my shock as ElBaradei was instrumental in overthrowing the democratically elected Morsi government in Egypt a few years ago. ElBaradei argued that “poverty and hunger persist at horrific levels; conflicts have left to fester for generations”.
The Nelson Mandela Foundation invited Professor Thomas Piketty, an intellectual, and social commentator as well as a global media phenomenon to deliver a lecture on inequality, a subject dear to Madiba’s heart. In Soweto, Piketty said the sort of things that landed Mandela in prison, about inequality and the oppression of the working class and in particular Africans. Listening to Piketty was like listening to Mandela himself, it was all too familiar. There is nothing that came out of his mouth that Mandela wouldn’t have said. Like Mandela, Piketty has the ability to denounce and prosecute crass capitalism without coming across as loony.
Superpowers have over decades shown an unrivaled ability to export and globalise their anxieties, debts, greed, inflation, diseases and destruction of local knowledge. Most of all, superpowers have left their dominions with frightening levels of classism where small elite minorities selfishly control wealth and wealth-generating commodities. This reality gave birth to the global inequalities we still see today. The elite in the world have institutionalised inequality with legal structures and instruments including multilateral organisations like the United Nations and its financial organs established under the Bretton Woods system.
Through the Bretton Woods system, Japan, the US, Canada, Western Europe and Australasia formed an elite group of countries that set up international monetary rules the entire world was compelled to follow or else be declared an enemy and cut off. This monetary system has seen the widening of the inequality gap and has linked rich nations’ consumer price inflation to poor nations.
The principal part of the Bretton Woods system was the monetary policy accord which required member states to tie their currencies to the set price of gold. The gold standard was seen as the best way to manage inequalities between and within nations. On 15 August 1971, in a shock announcement, US president Richard Nixon announced that the US was exiting the monetary system of pegging currencies to gold, causing chaos around the world and even raising fears of World War III. This effectively ended Bretton Woods and removed key tools for reversing reverse global inequality among nations.
Locally, the value of the rand value began a period of decline from a 30 cent differential to multiple rands.
Since 1971, inequality has become a part of the world order, of the way things should be. Humans coexisted with hunger as a normal circumstance, even a nuisance. They instituted bylaws that imprisoned poor people for being poor. The world was solely focused on the choice between capitalism and communism. This focus did not consider the realities of the lives of people in the third world.
In 1992, Francis Fukuyama published The End of History, predicting that the coming decades would be defined by the triumphant capitalist world and its markets. Fukuyama was correct and we have seen capitalism spreading throughout the world at a rapid pace, and inequality has been intense or widespread. Capitalists were overjoyed over the fall of the Soviet Union. The end of the Cold War meant an orgy of global capitalist expansion, with increased debt levels. It also meant the beginning of another struggle for equality amongst nations. Apartheid too was falling. When institutions fall, they live behind entrenched legacies.
Apartheid divided South Africa and caused deep inequities. Some citizens enjoy a high standard of living while many do not have even the basics such as homes, jobs, land, medical care and education.
Apartheid was about instilling inequality and creating a slave class to tend to the upper classes, mainly whites and Indians. Most whites live in fully developed suburbs while most blacks live in poorly developed labour townships and shacks. Townships like Soweto or Gugulethu were designed to be a cheap labour reservoir no too far from industry and kitchens but not too close for security and comfort. To keep blacks as a reservoir for cheap labour, they had to be deliberately made incapable by the system, and knowledge and education had to be legally taken away from them. Dumb robotic beings were created and they gave birth to more of their kind. It is for this reason that on 16 June 1976 student marches surprised the apartheid authorities. How could the Bantu realise what the sociopolitical meaning of their languages suppression meant?
In all aspects of South Africa’s life there were great inequalities – in healthcare, education, welfare, transport, housing and employment. Many of these persist. Some people have all they need while many have nothing at all. We are one of the most unequal countries in the world – shamefully, we are in the top five worst nations with close to 70% of the economic wealth owned by 10%, and 97% of economic control in white hands, although whites make up only 8% of the total population of 55-million people. Over 90% of whites votes for the main opposition the Democratic Alliance which opposes redress and affirmative action while only 5% of whites are unemployed and there is 0% unemployment for educated whites.
South Africa has long know it has an economy that has benefitted a minority and that very large white dominated companies control most of it. The African National Congress’s (ANC’s) Reconstruction and Development Programme (RDP), a Mandela policy of 1994, stated that South Africa was on the verge of imploding due to severe inequality.
In my last column, I argued that South African industry has not invested enough money back into the economy and is on an apparent investment strike. There is less money injected back into research, development and training. Industry hoards way too much cash and does not invest it in better pay for its workers so they are failing to meet the needs of the people and are unable to survive in world markets. In this column I suggested the ANC discusses instituting cash-hoarding tax to encourage industry to spend and have the cash circulating to assist economic growth and ease inequality.
Mandela’s RDP is best illustrated by Thomas Piketty’s Capital in the Twenty-First Century. His main thesis is that economic inequality is the inevitable collateral effect of capitalism. Piketty argues that state actors must look at corrective measures in higher taxes on wealth and incomes. In his formula, Piketty says inequality grows when the rate of return on capital (r) is larger than the rate of growth in the economy (g); or, in his already well-known formulation, inequality grows when r > g.
The book is essentially in the category of books that the apartheid government would have censored and banned. Part one specifically deals with the scandalous Marikana massacre where 44 people died during an industrial strike for better wages.
In what could be seen as a gift to the ANC, Piketty’s formula speaks to the most of its policies and comes on the eve of the ANC’s national general council, a congress for party policy reformation and ‘auditing’. Piketty’s rich research takes the wind out of the sails of the Democratic Alliance and others in stating that there has been no great change in black lives and that the apartheid legacy is still well entrenched and will take several decades more to fix. Piketty dispels the narrative that inequality is worse now than during apartheid, attributing the numbers to population growth and expanding globalisation.
Piketty says in his thesis that the wealthy must pay tax and the oppressors must be made to pay reparations.
In Stellenbosch in 2011, Archbishop Emeritus Desmond Tutu proposed a tax on white South Africans, a reparations tax to further reconciliation and address the inequality gap caused by apartheid. The toxic nature of the South African inequality is that it is racially based while also classist. This tax can be achieved through a higher estate tax on whites, meaning it will only affect the wealthy and those who did not work for their fortunes anyway. Whites can have a special dispensation on their wealth transfers.
One other key takeaway from the Piketty lecture concerns a subject I have also covered in my column, a national minimum wage. Policy makers must move more quickly in legislating a national minimum wage which has seen many industrialised nations have higher productivity.
As r > g persists, the wealthy becomes even wealthier, (‘r’ represents the white race). As higher growth was experienced and enjoyed by a few during the mid 2000’s, the poor were left behind as the focus became growth not social progress.
The root thesis of the Freedom Charter is about inequality and how to eradicate it. As the charter proclaims, the country should belong to all who live in it not just the affluent and powerful.
While Piketty calls for a global tax of the rich, a very complex idea, I believe changing the international monetary system away from the unipolar US dollar hegemony to a multi-currency and special drawing rights system is the best approach.
The soon-to-be elected US speaker of Congress must be heavily lobbied to prioritise getting Congress to pass the law which will enable the International Monetary Fund (IMF) to implement its decisions. The changes do not erase the US’s veto power in the IMF but Congress has been frustrating the passage of the Bill. The adoption of these 2010 reforms by Congress is long overdue and further explains the US drag on the world as inequality and poverty persist globally.
As Piketty indicted commercial liberalism, with the crowd in agreement, it’s now up to policy makers to do what is right. The crowd loved Piketty most when he declared that for as long as property ownership favours whites, who are in minority, inequality and stagnant growth will remain. It is time to tax the rich and save the poor. DM
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