Dearth of wealth data hampers the inequality debate
Thomas Piketty, presenting the Nelson Mandela Annual Lecture in 2015, identified a gap in the knowledge of SA’s social system that has yet to be cleared up.
As a scholar who spent decades studying wealth in many countries, he complained that there is “so little information about wealth” in SA. This is partly because “access to estate tax data is extremely difficult ... so it’s extremely difficult to show how many taxpayers transmitted wealth”.
But it is more important to know about the wealth of the living than wealth at death. Piketty therefore proposed a very low annual tax on individual wealth, not for the funds it would produce but because it would reveal “who owns what”.
But why should we bother if it does not deliver a large sum to the fiscus ? The answer lies in the generally accepted view that SA is one of the world’s most unequal countries, if not the most unequal.
This judgment is based on only half of the available information — data on incomes (derived from tax data), not wealth. Yet, it is now understood that inequality of wealth is greater than inequality of incomes. So, we really need to know what is the true state of inequality based on incomes as well as wealth.
A serious effort to clear this up was made by Anna Orthofer in her PhD thesis at Stellenbosch University in 2016.
She confirmed that wealth inequality is greater than income inequality — 10% of the population own at least 90%95% of all assets, in contrast to their earning 55%-60% of all income. What makes the research more difficult is some of the wealthy avoid income through salaries, interest, dividends, rents or capital gains, since it is taxable, and try to conceal their wealth. They may bequeath assets to their children, but then estate duty comes into play. But this does not reveal the whole picture.
Is all this attention to wealth necessary ? It would seem so since Christine Lagarde, MD of the IMF, raised the issue of rising inequality globally in 2013 and again in 2017. Pointing out that it leads to nationalism and populism, she advocated “more redistribution”.
In a report to the World Economic Forum, 750 experts stated that rising income and wealth inequality were the most important trends determining developments in the next decade.
In his book Capital, Piketty observes that there are periods in the history of individual countries when inequality rises and periods when there is a decline, generally as a result of popular resistance. What is the condition of SA today?
On the face of it, inequality is rising fast as evidenced by business executives’ salaries and bonuses of various kinds and by abundant spending on properties and luxury goods.
The e-mails about the Gupta family indicate not only crass corruption, but also that it is associated with enormous greed. There is a hunger for wealth that indicates a morbid fascination with the trappings of the rich.
We also get a sense of what is going on from the work of Who Owns Whom, which produces information about incomes and ownership derived from data extracted from reporting to the JSE.
In its Rich List its showed that in 2015, the top 10 earners received R292m in salaries, but R339m in bonuses, totalling R631m. Based on this limited source, Christo Wiese was said to be worth R81bn. Despite these occasional details, we know very little about wealth in SA. Academic research on wealth has focused almost exclusively on the poor and how some provision can be made to reduce the extreme hardship faced by millions of poor South Africans. This is a worthy exercise, but does little to reduce inequality.
For instance, the proposals for a national minimum wage will no doubt bring benefits to many sectors of the workforce. It may even inject increased demand for goods and services.
But given the huge disparities in incomes and wealth, it will do little to reduce public disquiet about SA’s inequalities. We therefore want to encourage universities and government agencies to begin to map how wealth is held and distributed throughout SA.
Piketty has shown in Capital that it is possible to do this by rigorously going after the necessary data.
We are also providing an opportunity to discuss this at our conference on Confronting Inequality, where some of the best experts in the field will report on work in this area. It will be held at the Sandton Holiday Inn on September 28.