Poor countries must beware of the growing attacks on growth
The surest way to demonstrate one's politically correct credentials and signal one's virtue these days is to bewail supposedly mounting "inequality". Given its view that capitalism is a "crime against humanity", it was only to be expected that Oxfam should make a meal of inequality and demand that it be remedied by "more tax justice", whatever that may mean.
More serious is the recent statement by the World Economic Forum that "decades of prioritising economic growth over social equity has led to historically high levels of wealth and income inequality". In putting forward this argument, the WEF overlooks the single most important consequence of high growth rates in so-called emerging markets, namely that they have helped to lift billions of people out of poverty. This is an achievement that should be trumpeted from the rooftops, not hidden beneath arguments about inequality.
The achievement, great as it may be, does not mean that the poverty has been eliminated, least of all in Africa. But it would be a tragedy if further progress were now to be stalled. Rising protectionism in the US might do that. But there are also other threats to growth. One is green lobbies and their pursuit of policies that unnecessarily push up energy costs. Another is the attack on growth, typified by the WEF's statement blaming it for inequality while failing to credit it for its role in reducing poverty.
South Africa in particular should beware of the growing chorus of siren songs. We supposedly have the highest inequality in the world, the remedy for which is then held out to be more taxation and more redistribution. Yet this country's experience is an excellent example of what happens when you prioritise not growth over social equity but the opposite. Since the African National Congress (ANC) came to power, social spending as a proportion of total government spending has risen from 45% to 60%.
Yet overall income inequality has increased, for the simple reason that unemployment over that same period has risen from 3.67 million to 9.30 million. This in turn is largely the result of our poor economic growth performance. Growth in gross domestic product (GDP) per head over the last 20 years has averaged around only 1.5% (against 5.2% in India, for example).