Please note the closing remark..
LEVELS of income inequality are rapidly growing in SA. About 48% of the population earns less than R11 a day, while whites earn eight times more than Africans. A Gini coefficient of zero signifies perfect equality. The South African Gini coefficient is 0,69, while Brazil's is 0,56. This clearly shows S A is drifting towards perfect inequality. Surprisingly, the recent 5% salary increase for public representatives and judges, and textile union Sactwu's concession of a 30% wage cut for new labour entrants into the textile industry, did not attract much outrage from the left. Entrepreneurs produce for the market to earn a profit. South African entrepreneurs largely earn a profit by selling raw materials and some manufactured goods for export to developed and developing countries with lower production costs, such as China and India. In turn, we import machinery, semifinished and finished goods. The state generates revenue from taxation, part of which pays high salaries to politicians and bureaucrats. High-income inequality in the context of a small industrial base constrains the ability of the South African market to widen. The expansion of the market is determined by demand from wages and profits. The higher the profit and wage rates, the more entrepreneurs are likely to expand investment , thus buying more inputs and labour. Higher wage rates increase workers' consumption, thus providing positive feedback for entrepreneurs to invest in production. In the long run, this may lead to economic development. State and business elites tend to spend their high incomes on luxurious consumption, while the majority of our population cannot afford this. Low wage rates imply a lower demand for mass consumption, hence low production. Since the elites are few, entrepreneurs are likely to produce fewer products because the market is small. The luxurious consumption patterns do not manifest only in differential sources of income and inequality, but are also a reflection of the state's inability to discipline luxurious consumption. Measures that discourage luxurious consumption in favour of mass consumption can grow the economy and improve the living conditions of the poor. Higher wages will inevitably lead to mass consumption as opposed to elitist consumption of luxurious goods, thus widening the market. This will increase the economic incentive for business to invest, thus growing the economy. Policy instruments to curb high levels of income and luxurious consumption among elites may also generate a sense that the burden of the economic crisis is not placed on the shoulders of the poor. Strict control of capital outflow is also necessary to ensure that the investable surplus stays in the country. In South Korea, international financial transactions are made through state banks. SA does not take extreme measures such as those in South Korea, where illegal capital flight is punishable by death. But policy sticks to keep the investable surplus in SA must be found. Locking investable surplus into the national economy will not inherently lead to productive consumption. Applied on its own, this instrument will not curb the elites from engaging in luxurious consumption within the nation state. This is why there is a need for anti-luxurious consumption tariffs and domestic taxes, as well as investment imposed through an interventionist industrial policy aimed at bolstering economic development. Income earning is determined by ownership of economic and political assets. The principal assets that enable the state and business elites to maintain these income inequalities are economic power and incumbency of state office. The only asset that workers have in order to claim the surplus they produce is their ability to organise and fight for their interests. It remains to be seen if the leftist organisations are up to the task of organising not only against income inequalities, but also for the working people to win political power and for the equitable redistribution of strategic economic assets. The economic crisis requires bold leadership, political will and militant, working- class movements to tackle the structural inequalities rooted in the unequal ownership of the key strategic resources. Unfortunately, we do not have all these in SA. So business can relax. * Masondo is a South African Communist Party central committee member and Limpopo treasury MEC http://www.businessday.co.za/articles/Content.aspx?id=155840 http://www.investec.com/en_group/#home/legal/email_disclaimer.html The disclaimer also provides our corporate information and names of our directors as required by law. The disclaimer is deemed to form part of this message in terms of Section 11 of the Electronic Communications and Transactions Act 25 of 2002. 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