Taxes, Taxes, Taxes!
If you woke up on your birthday or Christmas day in 2014 and found what felt like a heavy brick in wrapping paper, then there is a good chance that some thoughtful relative gave you a copy of “Capital in the Twenty-First Century” by Thomas Piketty. The French economist’s 685 page authoritative review of wealth and income inequality topped the New York Times’ bestseller list and became Harvard University Press’ greatest ever success. With newfound personal experience of the upper end of the wealth scale, Mr Piketty has recently been in South Africa to lecture on inequality.
Mr Piketty was guest speaker at the 13th Nelson Mandela Annual Lecture at the University of Johannesburg’s Soweto campus and received two standing ovations from the nearly 2,000 guests. Unfortunately, Mr Piketty was not always complementary about South Africa, where 60-65% of all income earned goes to the top 10%, compared with Europe where the figure is around 30-35%. Indeed he believes that inequality has increased rather than decreased since the advent of democracy. Mr Piketty blames global factors, the legacy of apartheid, commodity prices and unemployment; but also identifies failings in the implementation of BEE. His prescriptions include more ambitious land reform, worker participation at board level, a minimum wage and making better education a national priority (although he is strongly against privatising education). He wants increased transparency on who owns what in South Africa and believes that the best way to obtain this is through a progressively increasing annual tax on individuals’ net assets (in addition to normal taxes on income). On the upside, Mr Piketty highlighted South Africa’s young and growing population as a key asset for future national prosperity.
It has been over a year since I read Mr Piketty’s book (and yes, I did read the whole thing), but what struck me most was that he focused on inequality within nations. My view is that inequality between nations is much more of an issue and that the problems of inequality created by family wealth are much less significant than the legacy of inequality between the metropolitan countries and their former colonies. I believe that equality in the world would be better served if Mr Piketty focused his energies on removing protectionist policies in the developed world (e.g. for French farmers) that constrain growth in developing nations. Regarding the local implementation of Mr Piketty’s policies; former Finance Minister, Trevor Manuel, commented to The Daily Maverick after the speech: “while we all know Piketty is right, no one – not the government, not big business, not the economic elites – is in a hurry to implement his ideas”.
(Capital in the Twenty First Century by Thomas Piketty, New Republic, SABC News, Daily Maverick)
DR ANDREW LOUW CFA