Super-rich thwart fight against inequality
LATE last month, world leaders adopted the 2030 Agenda for Sustainable Development, which includes 17 sustainable development goals (SDGs) to “end poverty, fight inequality and injustice, and tackle climate change by 2030”. Goal 17, entitled “Partnership for the Goals”, centres on building the environment necessary effectively to implement the goals. Yet, the goal does not touch on the question of increasing financial transparency and the question of regulating financial flows to enable governments to collect what is due and necessary to deliver on development objectives.
From strengthening domestic resource mobilisation to ensuring long-term debt sustainability for developing countries, all of these objectives are important, but governments face a more complicated reality — the super-rich have literally become ungovernable and untaxable.
Lack of transparency on wealth and financial flows is allowing a small class to determine the terms of how it gives back. They decide for themselves when and how they will “give back”, as though tax is a favour to society and not an obligation. They can place their passion projects and personal missions on the agendas of elected leaders, often overriding nations’ right to selfdetermination. These well-networked people make decisions that affect the rest of citizens. The super-rich have become global citizens, able to quickly move their wealth to more favourable conditions to avoid taxation. Illicit financial flows from developing countries have increased steadily, robbing nations of revenue. This is bad for democracy and general stability. In the long run, it is also a risk to the super-rich.
French economist Thomas Piketty said a good deal in his Nelson Mandela Lecture on Saturday. He reiterated a central point made in his book, Capital in the Twenty-First Century, that marketled growth deepens inequality and that, historically, violent shocks put strong pressures on the elite in western countries and led to the acceptance of redistributive reforms such social policies, welfare state policies and progressive taxation. Growth has never been enough.
On inequality in SA, Piketty observed far higher levels of concentration of wealth in SA than comparable countries with similar levels of unemployment, suggesting that our standard chorus that reducing unemployment will curb inequality is insufficient. He attributed some of the country’s inequality to financial deregulation without proper regulation regarding taxation, while pointing out that endogenous factors and some key decisions are as much to blame.
The most controversial suggestion was that of increased transparency about wealth and about who owns what in SA. Piketty suggested that, even with relatively low tax rates, the big advantage of an annual tax on wealth is that it would produce transparency about wealth, which is necessary for us to understand who is benefiting or not from growth and development. Arguably, the most important thing he said was that “issues of inequality, income, wealth, capital, public debt are not technical issues — these are issues on which everybody must have an opinion because they are what determine political change”.
Inequality is the biggest threat to democracy. It creates antidemocratic states and concentrates power among a few, making it difficult for states to collect the resources to deliver on ambitious goals. It is all good and well to set goals for social sectors and growth for nations but in a world in which there is a decoupling of the fortunes of multinationals and individuals from those of the nations in which they earn those fortunes, the sovereign state as we know it is no longer enough. World leaders must work together to deal with lost and decreasing earnings by regulating wealth and financial flows. It is either that or bank on an inevitable crisis to close the equality gap.
Ndlovu works at the National Planning Commission Secretariat and writes in her personal capacity.