Vol.1 No.19, 29 November 2001
A BIG Idea for South Africa
By Margaret Legum
Leadership sometimes comes from the unlikeliest places. It was Andrew Carnegie who said 'pioneering doesn't pay' - and proceeded to pioneer America's railway age. And which of the world's stock exchanges would you think did best for its investors during the past three 'unregulated' decades? New York? Hong Kong? No, it was socialist Sweden!
Who would have thought that out of the cesspool of Robben Island would come some of the greatest political leadership our age has known. Now we have the chance to pioneer in practice a new idea that is engaging the attention of economists world-wide - including the right-wing Milton Friedman. The Canadian government is seriously considering it - but no government so far has actually introduced it.
That idea is a Basic Income Grant (BIG), given to all citizens from cradle to grave, without means test or condition other than citizenship. It has the virtue of solving at one stroke three major modern problems.
The first is the fact that technology now inevitably loses more jobs than it creates. All governments suspect, but none can publicly admit, that full employment is a condition of the past. It will never return. In a market economy - and there are no others that work - enterprise must adopt state of the art technology in order to compete. And that means shedding labour.
There are no exceptions to this fact. 'Becoming more competitive' is no solution: it simply shifts the problem elsewhere - to where people have less advantage in terms of technology. Small businesses usually fail; and where they succeed they are gobbled up by larger business, and so on until corporations merge and acquire each other at the top. And each process loses jobs. It is reckoned that by the year 2020 only 20% of the world's people will have jobs in the way we know them now.
So the problem is distributing the income that is needed to buy the product of the 20% employed. The problem is purchasing power. Machines don't go shopping for what they produce. The service industries are no answer, because machines operate there too. And the top people - the very rich - already have so much money they cannot spend it. So they gamble with it in the world's speculative money markets. That is like hoarding. It does not provide employment.
A BIG provides everyone with the basic means to survive by buying the product of modern economies.
The second problem it solves is the bureaucracy needed to implement the ghastly means test if the grant is given only to the indigent. Even sophisticated public services in Europe fail to mitigate the humiliation and delay inherent in applying the rules for qualification. Means tests discourage income earning, encourage cheating and corruption, and create poverty traps. A BIG is distributed directly to everyone like a pension - via bank accounts, post offices and so on - on production of proof of identity only. Hardly any bureaucracy.
Third, a BIG renews a sense of equitable citizenship, overcoming the alienation inherent in the underclass. Currently we expect people to make a livelihood by finding a job - though we know full well there are no jobs for them. Internationally, as in South Africa, there are unemployed graduates. What hope for illiterate and unskilled people? We nevertheless expect everyone to respect laws, refrain from begging and wait patiently for solutions - meanwhile starving. A BIG would diminish crime, end destitution and give incentives to poor people to develop local livelihoods.
An extra advantage in the South African context is to address the issue of vulnerable, including AIDS, children. Clearly, abandoned or neglected children are best cared for in their communities, many of which are too poor for the scale needed. If vulnerable children brought a BIG to their new home, care is made possible.
The South African government is seriously considering a BIG as part of its review of the welfare system. Minister Skweyiya was horrified, on taking office, to discover the depth of personal and community degradation which extreme poverty has wreaked in rural and peri-urban areas: illiterate, cashless, helpless, hopeless people, dying unnoticed amid growing women and child abuse. The possibility of a BIG is a clear answer as a first step. It behoves the rest of us to support it.
How to finance a BIG is usually the first question people ask. I do not believe it is the most serious issue. First, we live in times when stimulating economies is at last being seen as not only OK, but essential. Keynes is back in favour. Trevor Manuel has reserves he has been hoarding: now is the time to use them. Second, although the grant would be universal, it can be clawed back via income tax for the middle and top income earners - just as the British government added the child allowance to the tax of well-off people.
Third, South Africa is not heavily taxed, relative to countries of comparable development, contrary to what we are told. Higher VAT on luxury and expensive imports is an obvious source. Fourth, there are ways we could raise new 'green' taxes, which would benefit our environment as well as raising funds.
I fear, however, that the argument over finance conceals objections stemming from ideologies about human nature. For instance, we should not 'encourage dependence'. The fact is that unemployed poor people are already totally dependent: they are excluded from legitimate ways to make a living. What they need is a BIG to begin to reduce their dependence.
For instance, 'people should not get something for nothing'. Many of we White people have received plenty for nothing, including our education and various forms of start-up support. Isn't that why we object to death duties as interfering with the sacred right of parents to work for the next generation - the right to bequeath to them 'something for nothing'? Why is it OK for rich people to get something for nothing - including wonderful diplomatic functions and corporate hospitality - but not for poor people to enable them to survive? Pulease!
For instance, 'they will never work again, and only use it for drink and drugs'. This assumes destitute people are a different species from ourselves - who are ambitious, hard-working and sober. Of course some people have already been so demoralised, even dehumanised, that they may drink the BIG and fail to seek work. So? Are we short of labour? Do we want people like that in the labour force?
Why not, in other words, show the world that South Africa is a truly civilised country in the sense that it supports its weakest members and uses compassion as a criterion for policy. By doing so, we will also give a lead in regenerating our own economy in an unstable global market.
© South African New Economics Network 2007. Page generated at 09:20; 22 September 2007