Monday, July 12, 2010

DA Newsletter 12 July 2010

Welcome to the latest edition of SA Today, the weekly newsletter from the Leader of the Democratic Alliance, Helen Zille.

SA Today
Helen Zille, DA Leader

Tackling the wealth gap must be our common goal

Although the final whistle is still some hours away, we can safely say that the success of the World Cup is something all South Africans can be proud of. We have shown we have what it takes to pull off a world class mega-event, contrary to the predictions of the doom-merchants who wanted to see us fail.

But, apart from giving us a glimpse of what we can achieve through aligned, deadline-driven delivery, the World Cup has also underscored the extent of socio-economic inequality in our country.

It is an opportune time to reflect on these issues. It is appropriate to ask ourselves: How can a country that could produce world class infrastructure and stadiums in time for the tournament also harbour such poverty and inequality? And, more importantly: What can we do about it? How best can we bridge the wealth gap in a way that expands the pool of prosperity rather than poverty?

There are no easy or quick answers to these questions. So what I would like to do in this newsletter is debunk a common misconception made by many who write on social inequality in South Africa and elsewhere.

The assumption embedded in much of the analyses is that ‘haves’ only benefit at the expense of the ‘have-nots’. This analysis is based on the flawed premise that societal relations are a zero-sum game: if one person advances, someone else must be losing out. As one commentator said recently: “Around us we see the theft of opportunity from the poor to benefit those who have ample.”

This analysis is as simplistic as it is dangerous.

It is simplistic because it fails to grasp basic economics. Economic opportunities are not finite – one person’s opportunity is not dependent on denying another that opportunity. On the contrary, an opportunity well-used, usually multiplies opportunity. If this were not the case, an economy could never grow. It is possible for everyone to prosper.

The notion that one person’s success depends on another’s failure is dangerous because it turns people into victims, stripping them of personal agency and self-reliance. It sets them up in conflict with those who they believe have benefited at their expense. And it targets people who have used their opportunities to improve their lives, casting them as villains, who could only have advanced at the expense of others.

We have to move away from this fallacious analysis and find ways to beat poverty and inequality that do not involve turning successful people into scapegoats. It is possible to extend opportunities to the poor without blaming and alienating those who are not. In fact, doing so ultimately reduces, instead of expands, opportunities for the poor. South Africa can only succeed if we retain and grow our pool of skills and capital. Without a strong (and growing) tax base, no developing country can survive – particularly one with an extensive welfare system such as ours.

According to a recent study by the South African Institute of Race Relations, there are 12.3 million social grant recipients in South Africa supported by 5.3 million individual income taxpayers. Commenting on the ratio of social grant recipients to every taxpayer, economist Mike Schussler told a post-Budget breakfast in February: “Look at South Africa’s dependency ratio – it is three people to one taxpayer and it is unsustainable.”

Reversing the present dependency ratio must be the goal of every policy-maker. If we are to survive and prosper, we must increase the number of taxpayers relative to grant recipients through a single-minded approach to job creation. I agree with those who argue that this must be our over-riding national priority, and that all policy choices must be measured against it. This is the only way, over time, that we will narrow the wealth gap.

The DA has a comprehensive job-creation policy which includes far-reaching proposals to expand skills training, encourage entrepreneurship and introduce more flexible labour legislation. It also proposes subsidising businesses that employ young, first-time job-seekers. It was heartening to hear President Zuma announce in his State of the Nation Address earlier this year that government would be implementing such a wage subsidy, despite protestations from the ANC’s ally Cosatu.

Six months on, there is every indication that the wage subsidy – which Finance Minister Pravin Gordhan estimates would create 500 000 new youth jobs by 2013 – is still-born because of politicking within the tripartite alliance. This is a great tragedy – not only for the 3.1 million unemployed young South Africans – but for everybody who is serious about reducing poverty and inequality.

I am currently reading Greg Mills’ excellent new book Why Africa is Poor – and what Africans can do about it. He argues that Africa is not poor because the recipe for economic growth is magical or elusive – in fact, there are countless global success stories from which African countries can learn. Neither is Africa poor because it is cut off from world markets or because its people do not work hard or because it lacks natural resources.

Instead, he argues, Africa remains poor as a result of bad policy choices “because better choices in the broad public interest were in very many cases not in the leaders’ personal and often financial self-interest.” And, as we know, when people don’t punish their leaders at the polls for corruption, or self-enriching policy choices, their leaders punish them. As Mills writes:

“That African leaders were permitted to get away with ruinous, self-interested decisions can be attributed in large part to a relative lack of democracy (or to single party dominance) in Africa. There has been little bottom-up pressure on leadership to make better choices.”

Reducing poverty and inequality in South Africa will take a concerted effort from all of us – rich and poor, black and white. Indeed, it is in everybody’s interest that we do so. But it won’t happen if we treat economic opportunities as a zero-sum game or if we continue to allow vested political interests to maintain the status quo.

It’s time for a fresh approach to growing the economy and shrinking the wealth gap.

Signed Helen Zille

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