The rich build their fortune by shrewd financial manipulation
- Ben Turok
- 22 Aug 2017 12:03 (South Africa)
Some researchers are sensible. They choose a fairly conventional topic, use standard orthodox research methods and slowly build a solid reputation. Not me – when I get to work on something, sooner or later some quirky idea enters my head and I am driven to pursue it come what may.
This is what happened with the inequality conference. When the Netherlands Embassy offered to fund a conference I immediately thought of inequality, an area which has global significance, where even the IMF and World Bank have expressed concern, where a great deal of solid research has been done on income inequality, and which offered scope for interesting debate.
But then I made the “mistake” of going back to Thomas Piketty and was reminded that his concern is as much with wealth as with income. So I began to ask some nasty questions about wealth in South Africa, only to draw an almost blank wall. I spoke to the top people in the field of tax analysis, to academics working in the field of inequality, and others, and was told that we know little about wealth, that the data is inadequate and very hard to get.
I even asked a very rich person what I would have to do if I wanted to get rich quickly, but his answer was quite conventional.
And yet, digging deeper, it has become very clear that rich people know what to do.
First, you avoid income, because it has to be declared and you have to pay taxes.
Second, you put your money in a variety of instruments that are not taxed and do not really account to anyone, such as trusts, and you build your fortune by shrewd financial manipulation.
So, while we certainly need much more data, we also need insights into the range of mechanisms the wealthy use to hold and invest their assets. That is as far as I have got.
All this has got me into a dilemma. I am the convenor of the “Confronting Inequality” conference next month. It is about inequality in all its aspects, not wealth inequality specifically, and I am duty bound to encourage broad debate around the whole issue. I must not, and shall not, focus on wealth.
But I have a sneaking feeling that wealth will not be a Cinderalla. You see, the Gini for income inequality stands at 0.65, but the wealth Gini is about 0.93. So when people say that South Africa is one of the most unequal countries in the world based on income data, it may be a gross understatement. Oh dear. DM
Confronting Inequality takes place at the Sandton Holiday Inn, Johannesburg on Thursday, 28 September 2017, starting at 09:00.