Redistribution the only way to stop the downward spiral – Business Day 21.01.2015

Business Day 21.01.2015This week on Business Day, South Africa’s leading business newspaper, GovInn director Lorenzo Fioramonti -drawing conclusions on Piketty’s research – discusses why redistribution is the only way to tackle inequalities in South Africa and worldwide: will the WEF listen?

“One does not need a doctorate in economics to recognise that SA is one of the most unequal societies in the world. We see it every day, when we drive through our cities and across the country, when we go shopping or take our kids to school.

While inequality is a fact of life (we are different people, with different capacities, interests and aspirations), it becomes a social malaise if it exceeds certain levels. And each society should democratically decide which degrees of inequality are acceptable.”

“Such a level of inequality also reinforces violence, frustration and crime.

In SA and elsewhere, economic growth has been employed as a magic wand to avoid a serious debate on inequality. The belief that the economy can grow infinitely and at a sustained pace has been comforting to the ruling elites, as this means the pie will continue expanding without the need to redistribute its shares.

Indeed, allowing the rich to become richer has been often presented as a precondition for the economy to excel for the benefit of all.

Nowhere has this been as evident as in the justification of the stellar salaries of top managers of private and public corporations.

The reality, however, is that this “trickle-down” vision of economic development is largely a dogma, as Piketty has now confirmed with his data.
Moreover, he finds no correlation between the pay cheques of “super managers” and the performance of the companies they lead.
In his view, the only thing that explains these skyrocketing salaries is the fact that managers can easily influence the scale of their remuneration, often with the support of complacent boards of directors, while common workers cannot.

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