Talking sharing at Davos to safeguard the Bastille

SOMETHING unusual happened at Davos this year. The elites started talking about sharing. Not actually sharing, but talking about it.

The annual World Economic Forum in Switzerland is an irony built on an irony. There was a time when global elites really did think it was they who would solve the world’s problems. That was back when people did as they were told.

Nowadays the noble idea that an exchange of ideas — which is what Davos is all about — will better humanity is wearing a bit thin. The elites are increasingly seen as being out of touch. It’s out of their hands now as ordinary people challenge the status quo.

As recently as five years ago, openly discussing sharing wealth would have been seen as sedition.

The redistribution suggestion came from no less a luminary than International Monetary Fund head Christine Lagarde.

Had Lagarde taken Thomas Piketty’s Capital in the Twenty-First Century with her on her December holidays? Had she had an attack of conscience? Maybe she was telling the elites that sharing is about selfpreservation. It would have been good advice 230 years ago to King Louis XVI in her homeland, France.

The only reason the elites are prepared to think differently about the inequality gap is that middle classes in richer countries are starting to storm the Bastille. They are getting poorer in real terms.

The shift towards populism and breaking with the established order is evidenced most noticeably in the election of US President Donald Trump and British Prime Minister Theresa May’s decision this week to execute the full Brexit mandate.

Lagarde told a panel discussion: “It needs to be granular, it needs to be regional, it needs to be focused on what will people get out of it and it probably means more redistribution than we have in place at the moment.” She pointed to the fact that excessive inequality hinders sustainable growth.

South Africa faces tough choices. Oxfam this week claimed that three individuals, Stephen Saad of Aspen, Ivan Glasenberg of Glencore and billionaire Christo Wiese, harboured as much between them as the entire bottom half of South Africa’s population. You can argue about the methodology used by Oxfam, you can point out that the social grant system introduced after 1994 has reduced absolute poverty, but it’s hard to deny that we have a problem.

Redistribution in South Africa has seen pockets of success but the democracy dividend has not broadly translated into economic opportunity. It’s created a new elite and the middle class has grown, but it has failed to lift the very poor out of the desperate circumstances in which too many still live.

Higher- income earners in South Africa will argue there already is an effective redistribution mechanism with our progressive tax system and growing body of wealth taxes, with everything from capital gains to death duties and a marginal rate of 41% that is likely to be moved higher this year.

But if you are sitting in an informal settlement without basic infrastructure and your children have only a 50% chance of sitting for a matric exam that recent evidence shows half will fail, what good has this done you?

Watch Finland’s experiment with a universal basic income grant. It’s paid to everyone. It is not enough to discourage hard work, but is enough to exist on. Everyone gets it. It’s simple to administer. There is no means test. The wealthy are taxed on it as it’s added to their income and the money goes back into the system in a virtuous circle. The poor, many of whom are failed by the current system, get some income.

Higher-income earners would subsidise the poor through paying more tax. The grant would have the effect of bolstering demand and stimulating the economy. It serves the purpose of being redistributive and gives everyone a stake in the economy. It has to be worth a shot.

Before shots are fired at South Africa’s own Bastille.

Whitfield is a public speaker on the political economy and an awardwinning financial journalist and broadcaster