By proposing a wealth tax exclusively on white people because he claims they benefited from apartheid and because black impoverishment persists, Archbishop Emeritus Desmond Tutu displays not only an ignorance of economics, but also a degree of amnesia.
Like painkillers, the idea of throwing money at marginalised sections of society does not provide a cure, and at best, it may bring short-lived relief – and only to some. The more serious downside of punitive, redistributive economics is that it discourages wealth creation. That, in turn, results in fewer jobs, capital flight or relocation and greater impoverishment.
Tutu’s concern for the plight of those who continue to face economic hardship 17 years into the new South Africa is one shared by all reasonable people, regardless of colour. However, if accountability for this state of affairs is to be investigated, Tutu’s historical record is not without blemish.
In the 1980s he actively promoted the imposition of sanctions and disinvestment against the apartheid government, thereby triggering a massive wave of black unemployment. Between 1984 and October 1989, some 192 US companies disinvested from South Africa. They were joined by 160 others, including 76 British and 24 German firms (The Mercury, November 1, 1989).
As a result of Tutu’s disinvestment promotion, economic growth in 1986 slowed to 0.5 percent. Capital outflows of R24 billion occurred between 1985 and 1988. The damage to the economy saw the cost of living soar by 12 to 14 percent. In May 1990 the Washington-based Investor Responsibility Research Centre estimated that sanctions cost South Africa between R45bn and R60bn and that consequently our economy diminished by 20 percent to 25 percent.
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When President Reagan denounced the US Congress for pushing ahead with the Comprehensive Anti-Apartheid Act in 1986, stating that “the victims of an economic boycott of South Africa would be the very people we seek to help”, Tutu said he found Reagan’s speech “nauseating” and that the “West can go to hell” (Time magazine, August 4, 1986).
Significantly at the time it was Mangosuthu Buthelezi who warned against the folly of sanctions and disinvestment, saying that its economic legacy would render political emancipation “meaningless”.
Finally, there is no need for Tutu to attempt to quantify the extent to which whites benefited from apartheid because they have already paid for it. As late as 1989, taxes paid by whites amounted to 91 percent of the revenue collected from individuals.
Archbishop Emeritus Desmond Tutu’s wealth tax is sentimental, impractical and unconstitutional because of its racial definitions and, at best, would only assuage the guilt of a few.
It does, however, rekindle the important debate around the need for economic reconciliation in this unequal and divided country. In general, very few people relinquish their wealth voluntarily.
The failure of the last 17 years of neo-liberal economic policies to address the legacy of apartheid is self-evident. It is high time that the powers that be, urgently consider alternative economic policies in order to prevent explosive social unrest at the very least.
First, the immediate implementation of a basic income grant to every citizen is imperative in the context of soaring fuel, food and electricity prices, as well as the unfolding peak oil crisis and an imminent global recession. We have just read in Business Report that Iran has successfully done this in their economy (cash hand-outs of R300 a citizen a month) and averted social unrest when the government removed its fuel subsidies in spite of a seven-fold increase in petrol prices and a doubling of bread prices.
Second, we need to implement a financial transactions tax immediately (a small tax on both sides of all transactions) to raise revenue efficiently and progressively for National Health Insurance and all government infrastructure programmes while simultaneously phasing out income tax and VAT. President Nicolas Sarkozy of France is advocating such a tax for the EU.
We should not be taxing honest hard work and enterprise if we want to develop this economy, hence the need to abolish income tax and VAT and replace them with a more equitable flat transaction tax.
Third, we need a land tax, based on the land value, to free up land for redistribution at more affordable prices on a willing buyer, willing seller basis without the need for expropriation.
Fourth, we are obliged, because of climate change and peak oil, to implement a carbon tax which will incentivise investment in labour intensive job-creating ventures and renewable energy infrastructure.
Finally, we need a solid publicly owned banking system to provide the capital and credit at very low interest to entrepreneurs and small businesses for such useful and desirable enterprises aforementioned.
Fundamental transformation of the economy is required to meet the challenges of the 21st century for the benefit of all South Africans regardless of race, and not short-term knee-jerk responses like this white guilt tax of dubious effect.
Source: Business Report
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