Cut the wealth gap

Pope Benedict XVI, in his encyclical Caritas in Veritate, says that political action is needed to ensure that wealth is distributed equitably. As the Church and civil society, he says, we must act to promote governance that treats the drive for social and economic justice seriously.

Traders on a stock exchange. In his column Mphutumi Ntabeni asks whether free markets can operate under defective competition conditions. (Photo: Paulo Whitaker, Reuters/CNS)

The Church’s social teaching puts heavy responsibilities on a person (or nation) that has a surplus where others lack the basic necessities.

Successive popes have made that point: Leo XIII in Rerum Novarum (1891), Pius XI?in Quadregesimo Anno (1931), St John XXIII in Mater et Magistra (1961), Paul VI in Populorum Progressio (1967), and so on.

The question for us South African Catholics is this: How seriously do we take the Church’s social teachings? Do we really use them as a measure to evaluate our government or the political parties we vote for?

For instance, have we thought hard  about our government’s plan towards 2030, the National Development Plan (NDP)? Whether it is going to change the gross situation of growing inequalities in our country by instilling better social and economic justice?

The NDP takes seriously the strategy of economic growth (interrogated in last month’s column). It also puts at the forefront agricultural development for the purposes of food security.

One would have thought that it would also seek to establish community gardens for commercial farming, also to promote inclusive economic participation. Perhaps it is mute on that point because it is trying to avoid the controversial question of land redistribution. (The governing party has tabled radical land reform proposals in parliament that, if enacted, would see farmers giving half their land, compensated by the state, to their long-term workers.)

I laud the NDP for undertaking to invest in the country’s infrastructure, but as any economist knows, governments do not produce an economy that creates jobs and raises living standards for all—that is the duty of the private sector.

Hence the government needs to issue penalties for domestic companies that sit on liquid cash above a certain percentage, and make it compulsory for all companies that do business in South Africa to invest a certain percentage of their revenue back into the country’s economy.

No country is ever developed by foreign investment. Projecting a country’s growth based on foreign investment is a fallacy. What is required is for government to put in place corrective measures for our free markets.

South Africa has one of the weakest cooperative laws in the world, and even those are not effectively implemented. That is why our CEOs can pay themselves obscene bonuses, and why big business collusion is common.

But the NDP does not talk about this, nor about the fact that the so-called free markets operate under defective competition conditions, for a start—a far cry from the ideal of “perfect” competition and “perfect” information. Can one then blame those who say the NDP promotes a neoliberal agenda?

The government, through the NDP, should not shy away from actively getting involved to correct market forces for the benefit of its citizens. Sadly, the NDP is silent on all of this.

As Joseph E Stiglitz, the Nobel Prize laureate for economics, puts it: “Progressive tax and expenditure policies”, which tax the rich more than the poor and provide systems of good social protection, “can limit the extent of inequality. By contrast, programmes that give away a country’s resources to the rich and well-connected can increase inequality.”

Prof Stiglitz concludes by saying: “Inequality is the result of political forces as much as of economic ones. In a modern economy government sets and enforces the rules of the game.” And that “government alters the dynamics of wealth by, for instance, taxing inheritances and providing free public education”.

If all that sounds too “socialist” or “interventionist”, consider Pope Benedict XVI who in Caritas in Veritate calls for the “regulation of the financial sector” by governments to safeguard vulnerable parties, such as the poor and the unemployed.

The market, Pope Benedict says, “needs to be directed towards the pursuit of the common good, for which the political community in particular must also take responsibility”.

Political action, he says, is needed to ensure that wealth is distributed equitably.

And that is the job we must look for the NDP to perform, and which civil society—a component which Pope Benedict stresses—must advocate for.

The NDP needs to pay more attention to the structural dislocations that exist in our economy and come up with better, more effective and responsible ways of mending them.