How The Rich Get Richer

Also from The Mail and Guardian, South Africa - This is an excerpt from Lost in ­Transformation: South ­Africa's Search for a New Future since 1986 by Stampie Terreblanche, which has recently been published in South Africa. The previously posted article here quotes from the book.

Rich get richer through unfettered capitalism, not own devices

03 Aug 2012 02:00 - Sampie Terreblanche

The ANC has used power allotted to it to create a black elite by implementing affirmative action in rather doubtful ways, writes Sampie Terreblanche.

The rich and the poor are two sides of the same systemic coin. Nothing explains this better than the situation in South Africa in the first 70 years of the 20th century when whites constituted 20% of the total population, yet received more than 70% of the total income. Africans constituted almost 70% of the population, but received less than 20% of the total income. This can be ascribed to the politico-economic system of white political dominance and racial capitalism-corporatism in South Africa in that period. The system enriched whites and impoverished blacks undeservedly.

In neoliberal countries where the capitalist-corporatist sector is dominant, this close relationship between the rich and the poor is particularly evident. In all neoliberal capitalist countries the poor have got poorer since the early 1980s and the rich have got richer. When social-democratic capitalism was in place in Western countries in the third quarter of the 20th century, democratic governments were powerful enough to tame the capitalist-corporatist sector and bring about an equalisation of income. But when social democracy was replaced by neoliberal capitalism in the early 1980s, income became much more unequally distributed in all Western countries.

In South Africa, before and after 1994, the capitalist-corporatist sector has always dominated the political sector. Such systems were in place from 1894 until 1994, institutionalised by the British empire and supported by Western governments and corporations on behalf of the two white settler groups. The elite compromise – or the elite conspiracy – reached between the corporate sector and a leadership core of the ANC before 1994 exonerated white corporations and citizens from the part they played in the exploitation and deprivation of blacks. It also enabled whites to transfer almost all their accumulated wealth almost intact to the new South Africa.

After agreement was reached on the elite compromise, the ANC leadership core was, admittedly, able to implement a policy of black elite formation, but it was deprived of the power to hold white corporations and citizens accountable for the systemic exploitation and deprivation of black people during the "century of injustice" (1894-1994).

The ANC government has used the power allotted to it to create a black elite by implementing black empowerment and affirmative action in rather doubtful and myopic ways and plundering the budget recklessly. The perpetuation of white elitism and white corporatism after 1994 and the creation of black elitism over the past 18 years, to the detriment of the poor and unemployed, is the main reason why income has become increasingly unequal since 1994. The richest 10-million South Africans received almost 75% of total income in 2008, whereas the poorest 25-million received less than 8%.

Neoliberal transition
South Africa has never had a politico-economic system in which the political side was powerful enough to tame the capitalist side.

Instead of social democracy and an equalisation of income since 1994, South Africa has, over the past 18 years, experienced a United States-led neoliberal transition that has enabled the capitalist-corporatist side to orchestrate even greater inequality in domestic income.

Indian economist Amyarta Sen argues that market prices and the distribution of income always depend on the enabling conditions - social, economic and political. The enabling conditions of capitalism are always such that the prices of goods in factor markets can easily be twisted in favour of those in power, those with large amounts of marketable assets and those with access to the instruments of political power and propaganda.

Sen's argument is that income always becomes less equally distributed if capitalism is left to its own devices. Capitalists can exploit the asymmetric property and power relations for their own enrichment: it is thus always necessary for ­governments to implement comprehensive redistribution policies in capitalist countries.

When government policy is friendly towards the capitalist elite, income becomes more unequally distributed. When government policy pursues the welfare of society at large, income becomes more equally distributed.

According to British journalist George Monbiot, writing in The Guardian, the rich are always inclined towards the self-attribution fallacy. That is, they are always inclined to credit themselves with outcomes for which they were not responsible: "Many of those that are rich today got there because they were able to capture certain jobs. This capture owes less to talent and intelligence than to a combination of the ruthless exploitation of others and accidents of birth, as such jobs are taken disproportionally by people born in certain places and into certain classes."

In the South African case, both rich whites and rich blacks are guilty of the self-attribution fallacy. Perhaps we need a justice and reconciliation commission to examine power relations over the past 120 years to infuse the necessary degree of humility among both the old white elite and the new black elite. It is important that the rich in South Africa should be informed about the central role that skewed political and corporate power played in creating their opulence.

Solomon Johannes (Sampie) ­Terreblanche is emeritus ­professor of economics at Stellenbosch ­University and the author of The History of Inequality in South Africa, 1652- 2002. This is an edited extract from Lost in ­Transformation: South ­Africa's Search for a New Future since 1986, published by the KMM Review Publishing Company

http://mg.co.za/article/2012-08-03-00-rich-get-richer-through-unfettered-capitalism-not-own-devices

Inequality Is The Problem

From The Mail and Guardian in South Africa -

Ramphele: Poverty is not the problem, inequality is

07 Sep 2012 02:08 - Mamphela Ramphele: COMMENT

It is unusual to be given three opportunities to address one of the most crucial issues facing humanity - the uprooting of poverty and inequality.

South Africa is a very privileged society to have had three such opportunities.

I am privileged to have been associated with both the second and now the evolving third inquiry, known as Carnegie III. Thanks to Professor Francis Wilson and the University of Cape Town, this has been made possible.

The first Carnegie inquiry was in the 1930s and was driven by the need to build white solidarity against the reality of appalling poverty, which then existed among Afrikaners and made their community with English-speaking South Africans impossible. Carnegie I was a resounding success in uprooting white Afrikaner poverty. The key success factor was the alignment between the political and economic interests of the power elites at the time.

The legacy of the alignment of elite interests between the British captains of industry and the Afrikaner political elites generated even more poverty among black South Africans through the institutionalisation of socioeconomic engineering that systematically excluded black people from wealth creation. Laws such as the Job Reservation Act of 1936 and the earlier Land Act attest to this.

The second Carnegie inquiry in the 1980s suffered from a lack of political will on the part of the apartheid government, as well as the failure of foresight, vision and leadership on the part of captains of industry: they could not see the long-term interests of their own companies as being better served by a more equal society. However good the analysis and the case studies presented were, progress in uprooting poverty and in-equality could not occur without the power elites in the public and private sectors playing a decisive role.

Growing inequality
Since 1994, successive post-apartheid governments and private sector players have failed to grasp the nettle of growing inequality – an inequality that is, in the words of the French philosopher Raymond Aron, making human community impossible. The recent events at Lonmin's Marikana shack settlement and other violent hot spots are a cruel expression of the urgent need to transform our social relations towards what Sampie Terreblanche, in his new book Lost in Transformation, calls "the desperately needed change of power that would change the nature of power itself".

The question Carnegie III faces is: What needs to be in place for South Africa to tackle successfully the inequality that prevents an unleashing of human capability and our capacity to become a prosperous democracy united in its diversity?

South Africa does not have a poverty problem. Poverty is a result of denialism of the way corruption taxes poor people, the inefficiencies that undermine poor people's opportunities and our refusal to admit that we are part of the problem. When we avert our eyes to these tyrannies of inequality, we become complicit in generating poverty from one generation to the next for the bottom 50% of the population.

I would like to suggest that, in the words of Richard Wilkinson and Kate Picket in The Spirit Level: Why Equality is Better for Everyone: "If we are to gain further improvements in the real quality of life, we need to shift attention from material standards and economic growth to improving the psychological and social wellbeing of whole societies.

"A proper understanding of what is going on could transform politics and the quality of life for all of us. It would change what we vote for and what we demand from politicians."

We have to be proud of our successes in setting the constitutional framework of our democracy and, thanks to Trevor Manuel's grounding of the finance department team, the stabilising of our macroeconomic foundations. We have to thank the national planning commission for the national development plan, which lays bare the systemic failures that need to be urgently addressed if we are to become the country of our dreams.

Reconstruction
We need to lay the foundation for "affective and spiritual reconstruction" – the "revolution of the spirit", as Nicaraguan psychologist Martha Cabrera calls it – to address the legacy of systematic humiliation and trauma that socially engineered wounds brought on. The exclusion of the violation of socioeconomic rights from the otherwise highly laudable work of the Truth and Reconciliation Commission robbed us of the opportunity to acknowledge our wounds as both black and white South Africans whose human connectedness was ruptured by the racist engineered inequalities of our society. We robbed ourselves of the opportunity for healing those wounds and freeing ourselves to work together as fellow citizens, black and white.

We need a new approach that binds citizens, the government and the private sector in a "walk together" approach to achieving a more equal society. Citizens must hold those in the government accountable at all levels, but many need to be enabled through vigorous civic education. The government must return to serving the public and not simply concentrate on feeding the greed that drives corruption and the failure to regulate and manage the socioeconomic system effectively and efficiently. The private sector must take a long-term view of its best interests and use its considerable skills and economic muscle to tackle the skills crisis that is robbing young people of hope in an inclusive future.

The success of Carnegie III will be measured by the success, or failure, of the attempt to root out the mind-set that tolerates inequalities at the many levels of our society where we, as citizens, have influence. It has to start with you and me committing to "the change in power that would change the nature of power itself".

South Africans have demonstrated that they have the ability to tackle similar daunting challenges. We can do it again. From this day forward, every day that you wake up with a fervent determination to change South Africa for the better will count. Indeed, those are the only days that will truly matter.

Mamphela Ramphele is a founder of the Citizens Movement. This is an edited version of a speech she made at the opening session of Towards the Third Carnegie Inquiry into ­Poverty And Inequality. For more on the process, go to carnegie3.org.za.

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The Carnegie Corporation’s legacy

In 1929 the Carnegie Corporation commissioned a study of poverty among white people in South Africa, especially failing farmers. It was published in five volumes in 1932 and contained some recommendations that HF Verwoerd used in planning apartheid and the economic empowerment of Afrikaners.

Carnegie president Alan Pifer initiated a new study in 1982, which ran for two years. University of Cape Town labour economist Francis Wilson led the study. The results were published as the book Uprooting Poverty: The South African Challenge, by Wilson and Mamphela Ramphele. It focused chiefly on the rural black poor and found that their situation was much worse than had previously been known.

The beginning of the third Carnegie inquiry into poverty in South Africa was launched in Cape Town this week.

The Carnegie Corporation was founded by industrial mogul Andrew Carnegie in 1911 to advance "knowledge and understanding". It has funded social and scientific research around the world, as well as institutes, libraries and a teachers' insurance scheme in the United States.

http://mg.co.za/article/2012-09-07-00-mamphela-ramphele-poverty-is-not-the-problem-inequality-is