Warren Weertman
Warren Weertman

Predistribution

I recently finished reading The Spirit Level by Richard Wilkinson and Kate Pickett. I last read the book shortly after it was first released in 2009. The book made quite a splash at the time in the UK, but I don’t recall a similar fuss being made about the book in South Africa. But I digress.

For those who have not read the book, it’s premise is simple: unequal societies fare worse than equal societies when looking at societal conditions and factors such as drug abuse, teenage pregnancy and incidences of violent crime (to name just three).

Wilkinson and Pickett show that invariably the Anglo-Saxon capitalist countries (and Portugal, funnily enough) have higher incidences of teenage pregnancy, drug abuse etc. than the Scandinavian countries due to the inequality within the Anglo-Saxon capitalist societies (the focus of the book is admittedly on the developed economies).

But one of the key points I want to pick up on that is dealt with briefly in the book is the notion of “predistribution” (though Wilkinson and Pickett never use the term themselves in the book).

Economically there are two ways of creating an equal society:

The first way is to tax companies and individuals and then distribute the proceeds via benefit payments, for example. This is the predominant model used by states, including South Africa.

The second way of creating an equal society is through a method known as predistribution (admittedly not the sexiest of terms). Predistribution can be distilled to the following principle: if you pay people a decent wage (before tax) there will be less need for redistribution after tax by means of benefit payments.

Given the high levels of inequality in South Africa, it is therefore not surprising that there are such high levels of crime, for example (a la the inequality in Anglo-Saxon societies as compared to the Scandinavians mentioned above). After all, if you have something I want and I know there is never any way that I could ever be in an economic position to be able to afford what you have, why wouldn’t I resort to crime to get what I want? By the way, Wilkinson and Pickett also show that simply locking people up doesn’t solve the problem of crime.

Sure, there are a number of structural factors that would constrain the implementation of predistribution in South Africa. These factors could fill countless blog posts on their own. The question though is simple: what kind of society do you want to live in? If you want to live in a peaceful and harmonious society (ie a more equal society than the present), would you rather start looking for solutions (such as predistribution) now or simply just sit and wait for the midden to hit the windmill?

As long as the current levels of income inequality remain what they are in South Africa, the door is ajar for those who would implement far more radical ways reforming the economy and distributing the wealth in the economy than by predistribution. The results would probably not be to your liking if you currently lead a relatively comfortable middle-class existence.

As Alex Haley said, “either you deal with what is the reality, or you can be sure that the reality is going to deal with you”.

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    • Judith

      This should be stark staringly obvious, but company owners and shareholders appear oblivious to it.

      Pay good wages, grow the economy and bring everyone closer together would be a real change for the better

    • http://www.sane.org.za Yaj

      I agree completely with the findings of The Spirit Level.

      However the remedy to systemic inequality lies in fundamental reform of the monetary system starting with the ending of fractional reserve banking and replacing it with 100% reserve banking and debt-free social credit. An alternative is funding all new development through state banks.

      What is also required is the issue of a universal basic income and fundamental tax reform starting with the introduction a small levy on all financial transactions, a land tax and the simultaneous scrapping of income tax(corporate and individual) and VAT. Sin taxes and a carbon tax should be retained.

      Check out http://www.newera.org.za and http://www.positivemoney.org.uk

    • Larry Lachman

      I like it. Reduce the tax rate on wealthy individuals and companies, and increase the minimum wage accordingly.

    • Facts People

      Australia, NZ, Canada, Singapore, Switzerland, Scandinavian countries, France (less so now), Germany are examples of this. In Australia the minimum adult wage is $15.50 (R140) odd per hour. Illegal work there carries huge fines and penalties for the employer. It is illegal to pay less, even if the person agrees or is an illegal! The difference between management and shop floor wages is around 3 times for most companies and businesses. Less when one considers the extra/after hours senior/professional staff put in. Sure life is expensive there, but everyone eats well, public transport is accessible to all, health is public and of a high standard as are schools.

      I think that a solid wage all round is a great idea. the key is to avoid “leakage” ie the buying of commodities or whatever that causes money to leave the country. ipads, cell phone, and of course my pet topics of the week, McDonalds and smart water meters made elsewhere….. The result is a population that can build houses, pay for utilities, use public transport, pay for varied food stuffs. The demands then stimulates more productivity and hence work etc etc etc. Key though is productivity, real productivity ie goods and services of real benefit efficiently produced. Lower crime rates lead to more efficiencies, lower insurance rates, more business confidence……

    • Comrade Koos

      Thanks Warren. Great article. What we need to remember is that global corporations are only interested in one thing, that is profit. They need to be closely regulated.

      Secondly, its up to South Africans to get their government to create the society they want to live in. Unfortunately South Africans like to blame all sorts of other things rather than hold their government accountable.

      They just vote the same old government in again and again. You cannot expect different results if you do the same thing over and over.

    • Really???

      I agree with the premise essentially.

      But I do take issue with your inference that poverty leads to crime. I can accept possibly theft as a result of poverty – but where does poverty play a role in murder, torture, rape, child molestation, mutilation, muti-killings etc? Violent crime cannot be explained away by poverty.

    • Momma Cyndi

      mmmm what about Burundi or Liberia? They have very low levels of social inequality. Would you say that their levels of crime and/or social problems are on a par with the Scandinavian countries? Places like Thailand and Japan, on the other hand, have HUGE differences between the rich and the poor. Would you say that makes them more violent and criminal?

      The equality isn’t the biggest problem the ‘not having anything’ is the major problem along with a national mindset.

    • Facts People

      Buying and spending for consumption outside of South African and on foreign made good make-able or available in South Africa is the vilesh thing. Not a white-ness thing either. Watch the Italian shoes…

    • africalover

      you can increase basic salaries significantly by just putting ceiling on management’s own top salaries and other benefits. That is a precondition to -possibly- reducing taxes. Otherwise you increase inequalities further. The selfishness and blindness of most among the elites, past and present, leads our societies (and others as well) to increasing rates of violence and conflicts

    • Facts People

      @mamma c: Burundi had discrepancies. Not in the billionaire to minimum wage contrast, but in the some land to no land contrast which is huge. Read Midland by J Steinberg. It is the indignity of no place to call ones own ….

    • Momma Cyndi

      Facts People

      So you are telling me that if a lot of people own land then they the rape statistics would come down?

      Try reading ‘The Shackled Continent’ – can’t remember the author

    • Farmer Brown

      @Momma

      In summary what does “The Shackeled Contient” say?

    • Momma Cyndi

      Farmer Brown

      A part of it does deal with the problems of communal land ownership but it deals a lot with the problems of the investors being the ‘enemy’ and the general problems of civil unrest.

    • OneFlew

      There is an important difference between the approaches.

      The prescription of an initially egalitarian distribution (what you call ‘pre-distribution’) relies on a state that has the wherewithal and know-how to prescribe what that initial distribution should be. It is a far more intrusive state that prescribes, for instance, the fair wage that should be paid to every single employee, whether any particular bonus programme and its associated metrics are acceptable and so on.

      Redistributive tax requires a less intrusive state and less centralisation of the ‘right’ ideological answer.

      There have been societies that practised what you call ‘pre-distribution’. While ideologically different from redistributive societies it doesn’t seem likely that they were necessarily more conducive to human well-being and contentment.

      The other difference is that societies that ‘pre-distribute’ need an addtional mechanism for determining what they will keep for shared (not necessarily redistributive) purposes, such as defence, schools roads etc. So they need also to ‘pre-distribute’ the fruits of collective efforts to themselves. Including company profits. So they end up making a judgment about how much a company and its shareholders may keep.

      Is there space in this calculus for individual shareholding and reward for risk-taking? Historically, no. And it’s unclear that it would be analytically coherent to do so.

      So ‘pre-distribution’ may require dismantling…

    • OneFlew

      [Last three words cut off previous post. They were important ones.]

      …the ‘free’ market.