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Inside Labour: A budget by any other name would smell the same

IN THE wake of the budget, some elements in the labour movement will continue to express anger, while others will register perhaps faint praise, especially about there being no increase in VAT. And there may even be some murmured hopes about turning the corner. But nothing, really, has changed. 

South Africa still faces a frighteningly high national debt, and gross and growing inequality in a country where the cost of services to citizens has consistently outstripped official inflation. The 2017 increases in social grants continue this trajectory: in percentage terms, they are below even the official rate of inflation, meaning the recipients are falling further behind. 

So for all the talk about radical economic transformation against a background of currency dealers in major banks fiddling exchange rates, it is still business as usual. And part of that business is to gamble with currencies as commodities, a far cry from money being a supposed means of exchange. No change there either. 

Because collusion is the only sin perpetrated by the forex dealers: they are not supposed to gang up to better pillage hapless treasuries and the citizens that rely on them. They are supposed to compete with one another in an insane and unproductive game where the livelihoods of millions of people, who have no agency, are the victims.  

It is also a totally fixed game, but one where the remedies proposed merely tweak the rules. And that is what has happened and continues to happen with policy steps taken with budget after budget. 

Tweak the tax rates, while still ensuring that the bulk of revenue comes from those who sell their labour for a living. Make promises and comforting noises about future growth and the need for transformation. This is the stock in trade of finance ministers around the world as they continue to apply claimed remedies that repeatedly fail. 

But, to give most unions their due, inflation targeting is a measure they have consistently opposed because of the adverse effect this has on economic growth and jobs. It was, in the first place, only introduced in 1989 - in New Zealand. South Africa followed suit in 2000. 

Now it is something of an argued about article of faith. And when it comes to belief systems, there still seems to be broad agreement about the way companies and stock exchanges should function, along with the need for income tax and VAT. It is here that workers and their organisations fall into line with the tweakers and manipulators, accepting the apparent inevitability of these. Yet this reveals a remarkable ignorance of economic history. 

Income tax, for example, was first introduced in Britain in 1799 as a temporary measure to raise money for a war. It was abolished in 1802 and reintroduced when war broke out again. It has been with us ever since, with the United States adopting the system in 1861, also to finance a war. 

Along the way, it seems to be forgotten that Adam Smith, the moral philosopher turned economist who is regarded as the father of our modern economic system, supported the banning of shareholder companies because they were inherently prone to corruption. And Britain did ban such companies for 105 years - and that was before the advent of that additional boon to private capital, limited liability.

Rigged game of international roulette

Today, various currencies merely act as chips in a rigged game of international roulette: this produces nothing but vast paper profits to the players while creating instability and suffering among millions. Yet these are the players whose annual incomes almost always exceed many times the R1.5m that will now attract 4% more tax, at 45%. 

Clearly far-reaching and innovative steps are clearly called for - but are nowhere in sight. A truly radical economic transformation would require a move away from this casino approach. Yet such a step is inconceivable if it is accepted that our present economic dispensation is inevitable.  

However, there were - and are - other radical measures, within the bounds of the present system, that might provide more resources to the state and so provide decent levels of social services. Why not, for example, scrap VAT, a tax that penalises the poor, and abolish income tax for those earning less than R500 000 a year? Introduce instead a tax regime, starting at 45% and increasing progressively to even 75% on those paying themselves R10m and more.

Then there is also the possibility of a miniscule tax on all financial transactions, the so-called Tobin tax. This tax has the support of several trade unions around the world and would also target the currency gamblers. 

Above all, is it not time that that we realised that we cannot solve our problems with the same thinking, methods and institutions that created the problems in the first place?

* Add your voice or just drop Terry a labour question. Follow Terry on twitter @telbelsa.

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