ANTHONY BUTLER
No comfort in a Piketty glass house
FRENCH economist Thomas Piketty’s Capital in the Twenty-First Century is one of the most influential scholarly works in recent decades. His central argument is that capitalism systematically promotes unequal wealth distribution. Much-feted declines in inequality in advanced industrial and postindustrial societies in the 20th century were anomalies caused by singular events: violent shocks such as world wars, responses to the Great Depression and welfare-state and tax policies designed to pacify historically specific configurations of organised labour.
According to Piketty, the economically advanced world has now returned to the normal capitalist trajectory: wealth is once again concentrating in fewer and fewer hands. Fellow researchers working on developing countries argue that this pattern is being repeated across the global South.
Piketty’s theory remains controversial. Economists disagree about how to define and measure “capital”.
The data Piketty and his collaborators have mined may not be reliable, even for advanced industrial societies. For developing countries, sound, long-range data is virtually unobtainable. Even when critics agree that inequality has indeed grown within many countries, they claim this is the result of faulty policy choices, secular stagnation and historical contingencies, rather than of any supposedly inexorable process.
On his recent visit to SA, Piketty did not suggest much by way of new policy responses to inequality in SA. His advocacy of improved basic education, worker participation in company governance, minimum wage regulations and the closure of tax loopholes may nonetheless give fresh impetus to demands for such reforms.
Leftists have also picked up certain convenient themes from Piketty’s work and used them to bolster their own claims about the character of South African society.
For example, Neil Coleman of the Congress of South African Trade Unions has observed that SA’s “economic oligarchy” has consolidated its “power to extract and appropriate an evergrowing share of the national wealth”. This “parasitic accumulation of SA’s socially produced surplus, in particular by big capital, has taken place both inside and outside the country on a colossal scale over the last two decades”.
This is indeed broadly consistent with Piketty’s analysis. He certainly argued during his visit that the growing wealth of the top 1% in SA mirrors trends towards wealth concentration elsewhere. But what makes SA special, in Piketty’s view, is the relative privilege enjoyed by the top 10% of income earners rather than the top 1%. Using South African Revenue Service and household survey data, he showed that more than 60% of income goes to the top 10% of income earners in SA, compared with perhaps 50% in Brazil and only about 30% in Europe.
Piketty’s observation is important and plausible, but it is also uncomfortable for many vocal leftists in SA. It is not just the fact that, historically, this 10% group has been almost exclusively white, and that it is still predominantly white, that generates this discomfort.
If Piketty is correct, it is understandable that trade union leaders, left-leaning academics, analysts and numerous other activists who participate in public debate in SA target their venom so relentlessly at fat cats, “big capital” and other pseudo-Marxist bogeymen.
By bemoaning the unjust affluence of big business and the “top 1%” only, those railing against inequality in SA ignore the fact that they are themselves mostly members of Piketty’s affluent 10%. Can socialists condemn fat cats in good faith while they are living so comfortably off tax revenues from the capitalist economy and from profits generated by the institutional investors that manage their savings?