What can be done now to ameliorate poverty, unemployment and inequality?
Bruce Baigrie, Maxine Bezuidenhout, Jonathan Cannard, Jaco Oelofson, Jeff Rudin and Keamogetswe Seipato* | Daily Maverick |29 July 2021
*The authors work at the Alternative Information & Development Centre
Suggestions of what can be done at national, continental and worldwide levels, including how to finance some of them.
“What are the status quo limits to what can be done about poverty, unemployment and inequality?”
This sentence, buried deep in a recent Daily Maverick article by one of us, evoked a sizable response, some sympathetic, others hostile. The already very long article was not the place in which to flesh out what some eagerly sought, and others presented as the rantings of an armchair Utopian. As it happens, we, the writers of this current piece, all attempt to provide some of the answers as part of our daily work at the Alternative Information & Development Centre.
Amelioration of the tragic trilogy of poverty, unemployment and inequality that recently rocked South Africa is the most that can be expected if, like us, they are seen as endemic to the economic system straddling the world, as underscored by the Covid-19-induced recognition of global inequality. Noting that:
“In a system, all the parts are ordered and integrated in ways that are determined by the other components. For this reason, a system is always more than the sum of its parts.”
If we are right about this deeply systemic nature of the problem, this does not mean that nothing can be done. We offer some suggestions of what could be done now at national, continental, and worldwide levels, including how to finance some of them. We begin with South Africa, and with the increasing calls for a Basic Income Grant, as an urgent hearing of the hunger behind our recent food riots.
THE NATIONAL LEVEL
The Basic Income Grant (BIG)
The newness of the BIG measure is the level and spread of the support it now attracts. Only the size of the grant is still in contention, with the government seeking the lowest possible amount. The consensus view is that our current financial crisis should determine the reasonableness of its size.
We challenge this view because what is considered reasonable is ultimately a profoundly political decision. Support for making BIG small reflects the interests of the already privileged, not the poor and is blind to the injustices of our world-beating inequality.
We already have a non-contested though often neglected view of what is reasonable: our rightly, much-praised Constitution. Costing the 25-year-old socioeconomic Constitutional guarantees provides a solid basis for quantifying the proper size of BIG. The government would claim to be sympathetic to this approach – it could hardly not be – but would then plead poverty. Our audience, however, should not immediately be the government. If the government were to agree with us, this would confirm we were saying the wrong things. Our audience should instead be our “our people” in whose name everyone claims to speak: the workers, the unemployed, the otherwise excluded.
The guarantees of our Constitution must, by law, be reasonable. It’s our task to remind – or, more likely, inform – the poor of this.
Although we sometimes forget, we do have at least one cause for celebration: our democracy. A BIG big enough to do justice to our Constitution ought not to be open to soft compromises. Nothing could be more realistic.
Our elected representatives will assuredly be among the first to dismiss this as Utopian. They might be right in terms of the full costings of everyone’s right to basic education, health, housing, water, food, a safe and sustainable environment, along with dignity; all of which are no more unreasonable than our Constitution that has done so well to protect us from the ravages of many of those who will be shouting the loudest about affordability. We should dismiss all government assessments of what is affordable until significant cuts are made to the pay packages of all Cabinet Ministers, MPs, MPLs and councillors.
How to pay for BIG
The cost of BIG depends on two very contested variables: Who gets the grant, and how much should it be worth? This gives us a range of possible costs, summarised below:
Source: Institute for Economic Justice, Introducing a Basic Income Guarantee For South Africa, (2021)
Given the options on the table, the question to ask is rather: What can the government afford? If you listen to the Ramaphosa technocracy and Treasury, the answer is less than nothing. South Africa sits with an unsustainable debt burden, a narrow tax base, and a dismal growth outlook; austerity cuts are the only option.
However, there are sources of finance that the state continues to ignore, apart from the recognition now occasionally given to the Public Investment Corporation (PIC) and the Government Employees’ Pension Fund (GEPF).
For one, the growing demand for BIG is a moment to fully recognise South Africa’s inequality. While the top 1% of South Africans have an average net wealth of R17,830,000, the bottom 50% have an average net wealth of -R16,000, meaning they are in debt. A modest wealth tax of 3% to 7% on the wealthiest individuals would bring in R160-billion alone. Similarly, restoring the top income tax rates to pre-2000 levels, when brackets were adjusted in a way that resulted in a tax cut to the ultra-rich, could bring in from R145-billion to R160-billion. Given the present circumstances, these relatively modest measures ought to be practically obligatory.
Measures to curb corporate corruption also have the potential to free up billions in revenue. South Africa’s private sector is one of the most corrupt in the world. According to various sources, South Africa loses up to 8% of its GDP to illicit financial outflows (a staggering R400-billion) each year, much of which is linked with cross-border tax dodging and money laundering, as the case of Samancor Chrome has demonstrated. The state could undertake a number of domestic reforms to curb these outflows, in addition to participating in the growing movement for progressive international tax system reform.
We also ought to ask a question often ignored: What is the economic cost of not implementing BIG? BIG would massively stimulate the domestic economy, as many of the poorest would be granted the ability to purchase the basic necessities of life, while others would be able to switch their mode of living from survival to a form of stability, allowing them to engage in more creative and productive pursuits. In the end, this would form a multiplier effect, resulting in job creation and economic growth. Finally, there is also the cynical calculation underlying some of the business world’s recent BIG flip-flopping: Perhaps BIG’s amelioration of extreme poverty might avoid ultimately more costly unrest (the recent riots have been estimated to cost around R50-billion).
The right to say no
President Cyril Ramaphosa, in his letter to the nation of 5 July, welcomed both the global demand for commodities and their high prices. What he sees as being good for our economy, we see as another blow to most South Africans, particularly those affected by extractivism – export prioritised mining as the basis for economic development. Extractivism is key to the economy and certainly keeps the giant, transnational mining corporations happy. But at what expense to mining-affected communities, to say nothing about climate change?
It is here that the right to say no, based on the principles of free prior and informed consent (FPIC), enters the fray. We work with mining-affected communities, particularly the women who reside there, and who additionally bear the brunt of the state’s gross underspending and austerity budget cuts to basic services.
This, coupled with devastation to the environment directly attributed to mining activities, is a driving force destroying livelihoods. Many of the communities want mining to stop and if there are plans for mining to begin, they don’t want it. In other instances, communities are saying we want to be at the forefront of making decisions about “development” in our locales, on our land, on our terms and for our and society’s benefit. Despite them saying no to mining and therefore no to extractivism, the state continues to bulldoze ahead with granting mining licences and permits.
The state must respect a community’s right to consent and therefore their right to say no. The emphasis is on communities being able to say no when the project is most likely going to lead to chaos for them and the environment. The state must do so by adhering to and upholding the principles of FPIC throughout the statutory processes for extractivist project applications. Traditional custodians of communal land must act in the best interests of those they have been entrusted with serving. This means protecting the rights to consent, tenure security and livelihoods of communal land dwellers. If they don’t do this, the people have every right to have them removed. Similarly, proposed projects must be stopped when not following agreed laws and regulations.
The concept of the right to say no is not far-fetched. The recently amended Environmental Impact Assessment (EIA) regulations require applications for land owned by others to have their written consent before seeking environmental authorisation. Other legislation or regulations bolstering the right to say no includes the Interim Protection of Informal Land Rights Act (IPLRA), which was used to strengthen a community’s right to say no in the remote area of uMgungundlovu (the Amadiba community) in the Eastern Cape.
At the international level, civil society organisations (CSOs) and grassroots organisations are demanding that the United Nations adopt a treaty governing the global activities of transnational corporations. Such a treaty, enshrining the right to say no, would ensure that affected people are at the centre of making decisions about their land and future. Without it, transnational corporations forge forward with impunity while people, the environment and the oceans continue to be exploited, abused and destroyed.
Reforming trade agreements
South African poverty, unemployment, and inequality are largely products of our position in the global economy. To affect these crises, the very terms of our integration into increasingly interconnected economic and political systems must be reformulated. Recent years have rekindled popular political interest in rejecting or reforming the World Trade Organization (WTO) and the multitude of bilateral and plurilateral agreements that constitute the global trade regime. South Africa should take a lead in these political currents aimed at rejecting the global sovereignty-reducing, market-determined trade policies. There are urgent interventions that can be affected immediately to address the crises of inequality and climate change.
Numerous activists and scholars have advocated a temporary waiver of certain of the WTO’s Trips provisions to allow for flexibility in intellectual property rights and an attendant increase of global Covid vaccine manufacturing. This questioning of the hoarding of life-saving technology by a few publicly funded private corporations is welcome amidst the ongoing and increasingly geographically unequal bloodbath of the pandemic. But what is truly needed, and attainable, is a wholesale repudiation of the very concept of “intellectual property”. Technology, especially components necessary for human survival, cannot remain inaccessible to the world’s majority. The leverage of organised labour and activism can force intellectual property into a global commons, allowing universal access to crucial technologies such as vaccines and renewable energy.
As South Africa’s own Washington Consensus-oriented economist Trevor Manuel noted:
“The problem is not that international trade is inherently opposed to the needs and interests of the poor, but that the rules that govern it are rigged in favour of the rich.”
Providing for the needs of all requires trade for resources to be shared. Trade rules regulate not only intellectual property rights and tariffs, but also subsidies, local content requirements, state-owned enterprises, and foreign direct investment policy.
Freed from some of the chains of trade agreements, South Africa could produce (and exercise some sovereignty over) its own Covid-19 vaccines. The same applies to the local manufacture of renewable energy components. Both require many jobs and employment is the most sustainable way to reduce poverty and lower inequality.
Raging fires in some of the coldest parts of the world have become an annual occurrence as we careen ever deeper into the climate crisis. Floods have devastated two of the most powerful and advanced economies, yet global carbon emissions are set “for their second-biggest increase in history”. The roll-out of vaccines offers a chilling parallel to our inability to halt climate change.
Despite the devastation of Covid-19, to people and economies, and despite available technology in vaccines to halt the virus, just 14% of the population has been vaccinated. In our current system, the power of pharmaceutical profits trumps saving lives and preventing new variants. This remains the outlook for the climate. The power of fossil capital remains too strong, and our supposed deliverance in “green” capital is tied to guaranteed profitability for a totally unprofitable venture – a global transition to net-zero emissions. The only way out is to declare war on climate change and raise the war-time levels of public investment required to meet the challenge. As it happens, such an unprecedented response would simultaneously make significant reductions to the blight of poverty, unemployment and inequality.
An adequate transition to a low-carbon economy will entail many things, but ultimately there will be a massive build-out of new infrastructure that both produces, and is based on, clean energy. It is in this infrastructure, in its manufacture, construction and operation, that millions of jobs can be produced. Further, this infrastructure has to deliver, among others, proper public transport, retrofitted housing, sanitation and a zero-emission solid waste system.
In broad terms, these are the reforms scientists have been calling for globally. They are new only to the extent that scientists are making them in increasing numbers and with a growing sense of desperation. Our political leaders seek to assure us they have now embraced the message. So, too, do business leaders. Measured by their actions, however, they are clearly deaf to what they say. System limits to their reforms can’t be established until the reforms begin to match the stated recognition of the climate emergency.
A presidential provocative
In his national address of 25 July, Ramaphosa hailed his temporary reintroduction of the Covid-19 emergency grant of R350 per month as a measure of “our country’s ability to demonstrate its care for those who live in poverty”. This is a measure inviting outrage.
The poverty of his humanity leaves people hungry in their millions for want of money in an economic system indifferent to human needs unless driven by the smell of lucrative profit. Just imagine: R350 a month, but only for those able to prove their destitution. R350 presented by the president as a measure of “our country’s ability” to “demonstrate” ubuntu for “those who live in poverty”.
We recognise the severe limits of a profit-maximising system to reform, but even we say this is shameless.