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Inequality and the rise of populism

With the release of Oxfam's inequality report and more news from financial risk agencies on the brink of South Africa's VAT hike, Mphuthumi Ntabeni considers the world's current financial trajectory – where the rich get richer and the poor are left behind – and looks to Catholic Social Teaching for a way forward.

Moody’s, the global financial credit ratings agent, decided to keep South Africa as a Baa3 credit risk destination, which is just one notch above the junk status. Countries who are rated Baa3, like Indonesia and Romania are at “moderate credit risk”. They are considered medium grade and as such may possess certain speculative characteristics.

Junk status was imposed on South Africa by other agencies when it entered a recession in late 2016. However, economic growth has gone up a percentage since to 1.4% over the last consecutive financial quarters. This and political stability brought by the removal of Jacob Zuma as our president has bolstered SA’s reputation. Hence, the Moody’s decision will be reviewed again later this year.

Financial agent ratings though are not a best barometer of a country’s wellbeing. They only measure the risk factor for the benefit of investors and not the country’s citizens. They’re more concerned with the returns on investments made on the country.

As such, countries they rate higher are usually those who maintain good fiscal health, which usually translates to withholding spending (investment) on their citizens to keep the national balance sheet in the green – something that is commonly known as austerity measures. The major problem with rating agencies is that they are run by people of one economic school of thought, the neoclassical cartels. A result of their one-dimensional approach has seen most Scandinavian and Nordic progressive countries as well as BRICS nations begin to ignore these agencies and are agitating to establish new ratings that are based on balanced and prior agreed precepts.

The best way to measure any society is how the poor are doing. There’s been a consensus from the chattering class that the country’s last budget was an attack on the citizens, particularly the poor, to impress the financial markets. So Moody’s decision comes as no surprise. As such, as of 1 April South Africans will be paying, effectively, about 7,14% more due to the VAT increase that goes up by one percentage point. Many media outlets have calculated how this, and the rise in fuel levy, will translate into hikes on food prices, services and all. In turn, this adversely affect our national inflation and because the South African Reserve Bank targets an inflation band of 3%-6% inflation, an increase in inflation means higher rates, which translates to paying more for home mortgage bonds, car finance and bank loans. It all comes down to exacerbating South Africa’s current major problem: inequality.

The Oxfam 2018 Report, Reward Work Not Wealth; has mentioned South Africa for the fourth consecutive year as having world’s worst (highest) income inequality country. In addition, the report also highlighted that:

  • Last year (2017) saw the biggest increase in global billionaires in history (one more every two days);
  • The rich 1% grabbed 82% of all wealth created in 2017, seeing their wealth rise by $762 billion in 12 months, which could end global poverty seven times over;
  • The bottom 50% saw no increase in wealth;
  • The wealth growth is supported by dangerous, poorly paid workers, with women being disproportionately the most poorly paid.

The Oxfam report advises that if we want to heal our chronically unequal, fractured and unstable world we need to change course very fast by rebalancing the tables, defending the rights of the poor and re-establishing fair societies. It indicates that we have entered a dangerous era of an inequality crisis that will foster not just socio-economic upheavals, but will soon also make the global economy falter.

It says the myths of globalisation and egalitarian distribution of wealth have collapsed, causing loss of credibility on political institutions. And that this is at the centre of the rise of populism world-wide, as seen in the election of moronic presidents like Donald Trump. The consequences in our own country might be the election of militant organisations like the EFF.

The current tendency of regarding the EFF as the harbingers of populism is myopic and self-serving to avoid real issues at hand. All the EFF is doing is harvesting the growing discontent of the poor and lending it the voice of militant radicalism. Were the EFF not there as an organisation something else would have filled the void, because nature abhors the vacuum.

Worse still, this growing discontent would be amorphous without an organised centre. With EFF in the picture, we are still able to name it – some call it fascist – meaning there’s still hope to contain it. But the solutions for containment are not in demonising the EFF who are just the manifestation of the beast’s head.

There’s no shortage of solutions which most countries, including our own, through things like the United Nations Sustainable Development Goals which is supported by mouth but not action. Furthermore, Oxfam and Development Finance International compiled a detailed index of 152 government actions to tackle inequality. The majority of the countries, including our own, are shamefully failing to do nearly enough to implement these towards closing the gap of inequality.

As faith groups and civic organisations we should be taking our governments to task about this, especially the Justice and Peace wing of our Catholic Church, but we are not. Our silence and complacency is part of the reason our governments fail the poor people with impunity.

The Oxfam 10 000 people survey, done over ten countries, including South Africa, found out that governments in these countries, which includes the US and UK, rather than act in reduction of wealth concentration in the hands of the few and fight inequality, they’re instead choosing to suppress democracy and freedom to demand a fairer society. Only Nordic/Scandinavian countries have taken this challenge serious enough to act positively. That does not bode well for the future of our world.

The Oxfam report recommends that governments;

  • Set concrete, time bound targets and action plans to reduce inequality;
  • End extreme wealth through taxation, regulation and limiting money influence on policy making;
  • Work together to achieve a revolution in inequality data;
  • Implement policies that tackle gender discrimination and promote positive social norms;
  • Reverse all legislation that closes space for citizen activism and freedom;
  • Incentivise business models that priorotise fairer returns;
  • Commit to achieving universal free public service and social protection;
  • Regulate to penalise corporate dividends that doesn’t pay a living wage, reduce pay rate ratio and share profits with poorest workers – the best start for this in our country would be with retail shops, especially Checker/Shoprite and Woolworths who also still use labour brokers to avoid paying labour law obligation to workers.

All this, of course, is not new to Catholic Social Teaching, which adopted the ideas of Ordoliberals – a group of thinkers and political actors who sparked the German post-war economic miracle, by setting up a social market economy. We should have followed this model post 1994.

Catholic Social Teaching has always maintained that uncontrolled competition has self-liquidating tendencies; that the free market economy needs a firm moral, political and institutional framework to guide its business ethics. It requires sensibly policing and a strong state to legislate well weighed laws appropriate to the free economic system and that, unless this happens, market competition will itself fail and destroy the whole society in permitting the rule of unbridled vested interest. The teaching has also maintained that this rule of unbridled vested interest subverts democracy into plutocracy. Oxfam says we have now reached that stage.

Catholic Social Teaching has always understood well that competition itself is a dispensation – by no means harmless from a moral and sociological point of view – hence it must be kept within bounds and watched if it is not to poison the body politic. If we don’t vigorously act on this understanding we shall all perish like fools.

Image: ByronV2

* The opinions expressed here by Spotlight.Africa contributors and editors are their own and not official statements of the Society of Jesus in South Africa or of the Catholic Church unless explicitly stated.


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Mphuthumi Ntabeni
Mphuthumi Ntabeni lives in Cape Town where he is a political commentator and writer. He writers for the Southern Cross and his book, The Broken River Tent is published by Black Back Book, an imprint of Jacana Books, in early 2018.

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