Escape from inequality

INEQUALITY, especially social and economic inequality, was put squarely on the international agenda when French economist Thomas Piketty last year published his best-seller, Capital in the 21st Century.

But actually, there was another economist whose research is much more profound than Piketty’s – and this man just won the Nobel Prize for Economics. He is Professor Angus Deaton, a born Scotsman who now teaches at Princeton University.

According to really intelligent people, Deaton won international acclaim for his research into devising new ways of measuring household consumption, living standards and inequality. Not being an economist, I did not even try to understand the technical aspects of his research and why it was important.

Nevertheless, while reading numerous accolades and analyses of his work, some aspects did intrigue me (being blessed – I hope – with some common sense). In his work, especially in his seminal book The Great Escape: Health, Wealth, and the Origins of Inequality (2013), he analyses some of the causes of inequality which are relevant to South Africa’s present socio-economic and political situation.

As a point of departure, Deaton is not blind to the dangers of too much inequality. For instance, he says that “the political equality that is required by democracy is always under threat from economic inequality, and the more extreme the economic inequality, the greater the threat to democracy”.

Translated into our present-day South Africa, which is one of the most unequal countries in the world, this means that we should be very worried indeed.

Instead of diminishing the social and economic inequality inherited from apartheid times, the ANC government has presided over the growth of a figuratively speaking incestuous, relatively small super-rich and politically connected black class. This is accompanied by a growing middle class, which, however, balances precariously between comfortable survival and plunging back into the abyss of poverty.

And then there is the large, growing mass of poor people, untrained and uneducated, without any prospect of improving their lot, except perhaps through crime.

The second point that struck me was the nuanced way he thinks about inequality, compared to Piketty, who takes a really old-fashioned socialist view which might have been mainstream in the 1950s or 1960s.

Success also breeds inequality

While acknowledging the downside to inequality, Deaton notes that it can also be the result of success, for example as the result of successful entrepreneurship: “Success breeds inequality, and you don’t want to choke off success.”

The implication is simply that there is a practical and theoretical contradiction between freedom and equality. The more freedom you have, the more the rich and strong will abuse it to suppress the poor. At the same time, as people are not equal to one another (one is a good athlete, the other not), equality can only be enforced – which means that freedom suffers.

In the real world, one has to find a middle way, for which there is no GPS to guide us. Thus, while too much inequality may be a threat to our democratic freedom, enforcing too much equality may have a similar effect.

The third thing that struck me was the emphasis he places on the relationship between politics and economics. One of the major causes of poverty, especially in the Third World, he says, is bad governance:

“In much of Africa and Asia, states lack the capacity to raise taxes or deliver services. The contract between government and governed –  imperfect in rich countries – is often altogether absent in poor countries…. The absence of state capacity – that is, of the services and protections that people in rich countries take for granted – is one of the major causes of poverty and deprivation around the world. Without effective states working with active and involved citizens, there is little chance for the growth that is needed to abolish global poverty.”

I am afraid that we in South Africa are moving in this direction. Since 1994 things have gone from bad to worse. Corruption – which is actually stealing from the poor – is endemic. And how could it be otherwise, with a president suspected of many counts of dishonesty and corruption, but who successfully evades all attempts to call him to account?

Also, all the protests about lack of delivery are not the result of a third force, as the ANC would have us believe. Certainly, the Economic Freedom Fighters and like-minded groups exploit the anger, but the anger already has to exist in order to be exploited.

And all of that is the result of a pervasive ANC culture of self-enrichment and contempt for the ordinary people.

Let Deaton’s ideas ring loudly in our ears. He is not saying anything new. He is, in fact, repeating old truths: ANC, please get your house in order, stop governing to line your own pockets and govern in the interest of the country!