IT IS a matter of time before the work of French economist Thomas Piketty begins to influence debates about wealth and redistribution in SA. For those who have spent the past three months living in a box, Piketty’s 700-page tome, Capital in the Twenty-First Century, is a runaway bestseller that has changed what the world talks about when it talks about inequality.
In the mid-1970s, developed countries in the West started becoming more unequal and have been becoming more so ever since. Public debate about this issue has on the whole been concerned with the huge increases in salaries and bonuses accrued by top earners, while the wages of the average employee stagnate.
Piketty says we have been barking up the wrong tree. It is not divergent incomes that are driving increasing inequality, he argues, but the unequal distribution of assets.
His thesis is disarmingly simple. When the rate of return on stocks, bonds, real estate and other assets is higher than economic growth, wealth will concentrate and societies will grow increasingly unequal. And, with the exception of the period between 1930 and 1975, capitalism has indeed, over the long run, rewarded assets at a higher rate than economic growth. From this, Piketty draws the explosive conclusion that has made him famous. Capitalism’s tendency is to make those whose forebears were rich and powerful even richer and more powerful. "The past," he writes, "devours the future."
It doesn’t take much imagination to see the incendiary uses to which this argument might be put in SA. I don’t know of any work that has shown the return on capital to be higher than economic growth here, but a quick glance at trends since the early 1970s on the JSE, and in real estate and bond markets, would suggest that this is surely so.
One of the great questions of modern SA is why our middle classes have not come to resemble the happy beer advertisements of the early 1990s, where everyone tells the same jokes and black and white are merely different shades of the same. We wonder why, 20 years into democracy, almost all white people vote for the official opposition while only a minority of black people do.
It’s easy to see how Piketty might be used to provide an answer. Beneath the common term, "middle class", is a wealth of difference, and the difference is inherited wealth. The game is fixed for black people to lose, simply because they arrived late. And you have to be black to really know it — a life of debt, of salaries never rising high enough to meet costs, a life of forever catching up.
The story gets worse. Black people are, of course, now acquiring assets. They are buying houses in the suburbs. Black economic empowerment is dispersing equity to the well connected. State tender policies are creating black businesses. But most of these assets are acquired slowly, over a lifetime, on credit. And who are the creditors? Well, those with assets, of course — financial institutions still largely owned by white people. It is a case of reverse reparations.
Those denied wealth in the past because they were black are now buying their wealth from those who have always had it because they were white.
Someone will soon give Economic Freedom Fighters leader Julius Malema a copy of Piketty’s book; Malema was born to use it to good effect. Piketty has advocated a global tax on wealth at 25% a year and an income tax of 80% on the highest earners. Malema may well argue that, in SA, wealthy white people, and not wealthy people in general, ought to pay punitive taxes. It is just the sort of provocation Malema needs to distinguish himself from other MPs. And it powerfully restates his argument that the African National Congress licks the backsides of white people to get a slice of their riches.
It is sure to garner support, for it speaks to the hearts of those who voted for Malema and his party — people battling for a foothold in the middle class.
If Piketty’s book is indeed used in this manner in SA, we should know that it is a red herring. There are undoubtedly scores to settle between SA’s black and white middle classes, but the debate over inequality should not be used to settle them.
To the extent that SA has done anything meaningful about inequality in the past 20 years, it has been through redistribution, not least the redistribution of assets. The government has given away the title deeds to 3-million houses.
Its welfare transfers have stimulated the formation of small businesses in the remotest villages. It has been creating asset ownership on a large scale among people too poor to risk voting for Malema. And yet we are growing more unequal.
To tackle inequality, we need to add to welfare transfers rapid, job-creating growth. That, after all, is precisely what was happening in the West during the period when inequality there declined.
• Steinberg teaches African Studies and Criminology at Oxford University.