Vol.2 No.7, 18 March 2002

Developing the Big Idea

Currently there is a major drive under way pushing for the implementation of a Basic Income Grant (BIG) to provide a safety net for millions of unemployed and destitute people in South Africa. The movement is supported by a coalition of organisations spearheaded by COSATU.

There is no simple single formula for implementing and financing the BIG and a range of ideas and research projects are under consideration. The Economic Policy Research Institute (EPRI.2000) under the guidance of Professor Michael Samson has carried out research to show that the South Africa economy can afford to pay a BIG of R100 (see SANE Views #19, 2001). Professor Pieter le Roux (2001) of the Institute of Social Development (ISD) at the University of the Western Cape has also published a major research publication on the topic: Poverty and the Basic Income Grant in which he demonstrates that the best progressive tax for paying the BIG is a VAT type tax.

Both these research papers are based on quantitative considerations of tax structures and income distribution. Both present calculations based on a zero-sum, win-lose analysis. They pay little attention to considerations as to how a BIG can affect the performance of the economy as a whole through indirect multiplier effects, and on win-win, or even lose-lose possibilities.

In SANE Views #3 of last year the possibility of paying a BIG in complementary local currencies rather than in rands was explored. This opens up the possibility - if the BIG is managed effectively - of achieving greater local circulation of this currency, resulting in a multiplier effect not gained by paying the BIG in terms of the national currency.

Norman Reynolds, formerly chief development economist in Zimbabwe, has proposed a BIG for Zimbabwe and has also written up some case histories of the funding of local development projects in which the human factors of enthusiasm, initiative and trust have played vital roles. A summary of a particular case will be presented in a forthcoming issue of SANE Views. Some of his other ideas have already been distributed (see e.g. SANE Views #10, 2001).

Paul Malherbe, author of a book on 'The Creation of Value, Enrichment and Prosperity' points out dangers similar to those experienced with the dole of socialist regimes associated with the BIG. He refers to books by Peruvian Hernando De Soto: The Mystery of Capitalism, and by Prof Themba Sono: From Poverty to Property. Both of these books point in directions very different from that of a BIG. We do not necessarily support that view but it must be heard.

All these ideas must be explored and debated fully in order to find the right way for finding a way out of the poverty trap that South Africa has fallen into. This is too serious a reality to become the plaything for different ideologies and academic theories. It is also far too serious a matter to leave in the grip of the neo-liberal ideology of the GEAR programme.

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