Piketty In Africa: Heat, Buzz And Heterodox Economics

October 16, 2015 Nemes Random

French socialist and financial expert Thomas Piketty remained in Johannesburg recently to provide the 13th Annual Nelson Mandela Lecture. While it’s now a big clich to describe him as the ‘rockstar economist’, there is no rejecting Piketty’s arrival produced a flurry of buzz amongst sages and dilettantes alike– unified in the reality that few of them had actually read his magnum opus Capital, pretty much like the other famous Kapital *.

Piketty was gotten in Africa as if the Pope or MJ remained in town. Participating in the lecture at the University of Johannesburg’s Soweto school required dealing with an epic traffic congestion in the blistering heat, fending off maniacal minibus taxi driverscabby and lines around the block. Piketty’s Capital in the Twenty-First Century topped the New York Times Bestseller list for nonfiction and is Harvard University Press’ bestselling imprint ever at around 2 million copies. Not bad for a 700-page tome on economics.

But is the hype justified? And why has no-one noted the paradox of a book on the topic of inequality priced at $15?

The popularity of Piketty’s deal with inequality is partly due to its prompt coincidence in the wake of the Occupy campaign and anti-austerity motions. But on this occasion, it may have been the simple poignancy of the world’s professional on inequality offeringlecturing in the most unequal nation on the planet that drew the crowds. South Africa’s Gini co-efficient, a procedure of income inequality, is at an embarrassingly high 0.7.

Piketty, a seasoned traveller who arrived a day late in South Africa due to not having a blank area in his passport, seemed almost relocated to splits by it all. “Firstly, excuse my English, which sounds a lot like French”, he stated. “But to be right here at the Nelson Mandela Foundation is so very special– the fall of apartheid and the fall of the Berlin Wall specified my politics as I came of age.”

A native of Paris, the precocious Piketty completed his doctorate on wealth and redistribution at the age of 22 and later on went on to encourage among the bright stars of the French gauche delicacy scene, S golène Royal, throughout her campaign for the presidency. It was just recently announced that he will also be encouraging the newly-elected UK Labour leader Jeremy Corbyn.

The central thesis of Capital may be summed up as r gt; g, which suggestsmeanings that that go back to capital goes beyond economic development. Unless intervened upon, he asserts, this leads to aggravating inequality.

Orthodox economics will point out that some inequality is needed to develop incentives and competitors, and Piketty does not avoid this. However the issue arises when inequality ends up being sticky and systemic, as it has in South Africa.

In fact, Capital starts with a recounting of South Africa’s own Marikana disaster of 2012 when over 30 objecting miners were shot dead by authorities in the worst state violence of the nation’s democratic age. “This episode reminds us that the concern of exactly what share of output should go to salaries and exactly what share to revenue– simply puts, how should the earnings from production be divided in between labour and capital?– has actually always been at the heart of distributional conflict,” composes Piketty.

South Africa is a book case highlighting the dangerous belief in GDP growth as an indicator of development. It also presents important lessons for the rest of Africa, where current strides in economic advancement have not usually been accompanied by inclusive development and meaningful advances in human advancement.

The case of South Africa is further terrible due to the fact that political liberation given that 1994 has actually not been accompanied by economic liberation, and racialised inequality has by some procedures become more noticable. As the Nelson Mandela Structure notes, “intergenerational inequality is growing in the post-apartheid era, putting the imagine liberty and success out of reach for many South Africans”.

Asked why he believed this was the case, Piketty told African Arguments, “the rise in neoliberal financial policy and the pattern to financial deregulation basically coincided with the fall in apartheid”.

It is a well-known story of South Africa’s recent economic history that Nelson Mandela had to make several compromises with the ANC’s social democrat program to keep South Africa’s worldwide investors delighted. This, in part, resulted in the over-financialisation southern African economy and is now a hallmark of Mandela’s economic heritage.

South Africa’s relative inequality and jobless growth rather supports the r gt; g thesis. Exacerbating this is the amplification effect wherein some economists think that inequality also restrains development. This is apparently borne out in the reality that economic growth in South Africa has actually slowed down to less than 2 % of GDP per year from highs of around 5 % in the early-2000s when the country seemed to be benefiting from ‘the Mandela dividend’.

As if this were insufficient, inequality can also contribute significantly to the unravelling of social cohesion and an increase in social violence and violent labour relations. Socio-economic inequality was cited by score agency Moody’s as an essential motorist in its rationale for South Africa’s credit downgrade soon after Marikana. The scores downgrade has slowed down international direct investment in the productive economy and has likewise decreased growth.

The violence saw at Marikana and South Africa’s rate of 49 murders each day plainly reveals growing inequality’s effects on political stability and democracy. Piketty stated that he did not have a “really excellentexcellent response” about why South Africa is so much more violent than its neighbouring Namibia and Botswana which show likewise high levels of inequality, however that he did “understand that individuals get violent when they become really disappointed and if something is refrained from doing this will just intensify”.

However, Piketty did have some direct suggestions for the big monsters of land reform, a nationwide minimum wage, illegal monetary flows to tax sanctuaries, and black economic empowerment. He also did not avoid suggesting a low-rate wealth tax on South Africa’s 1-5 % people who possess around 65 % of the nation’s wealth and of whom 80 % are white, making racialised inequality stubbornly structural.

Piketty asserts the wealth tax he proposes at the same time would likewise promote transparency in the reporting of estates. He thinks this is important because information on the possessions of the rich in South Africa is presently so bad. And while South Africa’s companymagnate might not be in favour of his position on tax, his views are finding sympathy from the ANC economic improvement committee.

Occasionally it takes an outsider to mention the elephants sitting in plain sight: “Normally speaking, I would state … equality in formal rights are not adequate to reach genuine equality … I would say that we now require to believe harder about the best ways to protect effective rights, consisting of the right to work for a decent wage, the right to excellent quality education, the right to have access to property, and lastly, and perhaps most importantly, the right to actual economic and political democracy including sharing of financial power in business and participatory governance in the public and privateeconomic sector”, he stated.

Dr Desn Masie is a geopolitical economic expert with certain interests in financialisation and African Affairs. * She has just read picked chapters of Marx’s Das Kapital and Piketty’s Capital.

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