At TEDxTableMountain, ‘the case for the maximum wage’

This is the text of a talk I did on 27 May at TEDxTableMountain, at the Fugard Theatre in Cape Town. It should perhaps be prefaced by saying that it is not an argument for communism or punishing the wealthy, nor for removing decent and proportionate incentives for hard work and enterprise. The video of this talk can be viewed here – or you can find it at the bottom of this article.

Introduction

Speaking at TEDxTableMountain, 27 May 2012: 'The case for the maximum wage'I’m an environmental journalist. I believe that the environmental crisis is mostly a human crisis. It reflects profound imbalances of power in human relationships, and it won’t be solved just by switching to renewable energy and electric cars and improved seed varieties.

To restore the Earth, and that’s what we now need to do, we must begin by restoring the relationships between ourselves.

Slide: ‘It is all wrong to have millionaires before you have ceased to have slums.’

Which of course is something we should be doing anyway – but it’s a priority we seem too often to have lost sight of.

I am speaking today about what is for some people, a very sensitive topic: how we distribute wealth in most of today’s economies and societies, and particularly here in South Africa. Wealth and income, of course, is just one dimension of inequality.

VIDEO: The case for the maximum wage – David Le Page at TEDxTableMountain, May 2012

By the way – I am not going to be advocating communism, though I am certainly going to be advocating more sharing.

Why inequality is a problem

Let’s look at the costs of inequality.

Slide: Increased inequality brings increased health and social problems

According to research done by the British epidemiologists Kate Pickett and Richard Wilkinson across more than 20 countries, inequality is associated with shorter lives, higher infant mortality, increased rates of mental illness, increased drug abuse, poor performance in schools, higher rates of imprisonment, higher rates of obesity, higher rates of violence, homicide and teenage births. Sound familiar? Here in South Africa, obesity combines with malnutrition as poor people are forced to buy cheap, low-nutrient processed foods.

I’m speaking like a statistician, but what this analysis reveals is in fact a great deal of human suffering.

How bad is inequality in different countries?

Slide: Inequality worsens health and social problems.

Here we see how as countries become more unequal, so health and social problems stack up. Here are the more equal countries, with fewer problems; here the less equal countries, with more. That’s the US, up there. In the more unequal countries, there is less trust, more impoverished community life. Women suffer far more. There’s less social mobility. Birth increasingly becomes destiny, even in a country like the US, tearing up the idea that anyone can succeed by working hard enough.

More equal societies innovate more; they spend more on overseas aid and do better on the Global Peace Index. But more unequal societies are more likely to go to war.

In conventional economic terms, inequality is crazy because as the middle classes become poorer, the rich can’t spend everything they have, demand dries up and economic growth is crippled.

Slide: Income gaps – the difference between poorest and richest 20%

This is the range of inequality across twenty countries, showing just how much richer the richest 20% of people are compared to the poorest 20%. For Japan, the gap is a ratio of just 3.4; in the US, where inequality is becoming a political crisis, it’s 8.5.

Slide: Richest 20% of South African households earn 38 times what poorest 20% earn

And South Africa? Here, the richest 20% of households earn 38 times more than the poorest 20% of households.

Slide: Differences between richest and poorest 20% of population, for OECD and SA.

Here’s what that looks like compared to our other countries. Since poorer households have more members, the ratio for individuals is probably even higher. This is offset to some degree, thank goodness, by South Africa’s extensive social grants.

But we’re by far the most unequal country in the G20, far worse than our developing country peers Brazil, India and China, probably the most unequal country in the world. Despite nearly 20 years of democracy, the gap between white and black has not improved at all.[1] And though absolute poverty has eased, some projections suggest we’re in danger of seeing a million more people falling back into poverty by 2020.[2]

All this is happening in a particular context, of global environmental destruction – which is making us all poorer.

Slide:  WWF: We are annually consuming water, forests, fish, carbon storage, soils and other resources far faster than the Earth can renew them, creating permanent damage to the Earth.

Each year, we now use up 50% more water, soil, fresh air, fish, carbon storage and wood than the Earth can sustainably provide.[3] You may wonder how that’s possible – to use more than we have – well, it’s a bit like keeping a ship moving by tearing up the decks and using them as fuel. Except the decks being torn up in this case are alive – we are killing soils and species and forests and whole eco-systems.

This is directly related to inequality. When inequality goes unchecked, there is reduced support for environmental action. People recycle less in highly unequal countries, and their  business leaders have less respect for global environmental standards.

Slide: Consume less, share more.

To consume less, and share better  – this is the only sane response to global environmental and economic crisis. But we’re headed the other way. Inequality fuels unnecessary consumerism as people compete more for status through conspicuous consumption. Inequality makes it harder to gain public support for policies to reduce global warming. All this contributes to destroying what the world our children should be inheriting, creating intergenerational inequality.

Politics

Inequality makes nonsense of our political and human rights ideals. I have a friend who works for the municipality of a town in the Southern Cape. She manages services that go to the wealthy, and to comfortable retired people. And she is also responsible for services to townships where the infrastructure is far more rudimentary. So where do you think she gets the most phone calls from?

Slide: What is important in politics … ‘The first is money, the second one is money and I’ve forgotten what the third one is.’ – Mark Hanna, 19th century Ohio industrialist and Republican senator.

The fact is that in order to have real political influence in this world, you have to access to information, and communications and transport and to real social networks. Bringing people together and uniting them for a purpose, whether it is starting a business or a union or an NGO requires real physical resources – and money. Without it, your political rights are a pale shadow of the power held by the wealthy.

False solutions for poverty and inequality

The conventional economic wisdom of the last thirty years for poverty reduction is that you sell off the commons to private enterprise, the magic of private enterprise grows the economy and everyone benefits.

Slide: In SA, growth-led poverty reduction benefits CEOs far more than workers

Except this doesn’t work properly. As we can see here, for example, in South Africa, this sort of policy seems to be doing a whole lot more for chief executives than it is for ordinary workers.

  Slide: Wealth can destroy as much it can create: ‘Stop climate change’

Experts who talk about inequality are very comfortable talking about poverty reduction. They are rather more shy when it comes to talking about wealth reduction.

But we have to acknowledge and understand that extreme wealth can and often does actually destroy the prosperity of others. People are rarely naturally poor. All too often, they are poor because they have been shoved aside by the powerful, by apartheid, by war, by the climate change effects of the carbon emissions of wealthy nations, and …

Slide: Headline: Wealth can destroy: ‘UN introduces new rules to curb land grabs’

… in a recent trend, by corporations using their legal and financial muscle to finance massive land grabs in developing countries – and doing so on behalf of us, middle class customers elsewhere in the country or the world.

Slide: Wealth can destroy: ‘Global financial crisis’

The best recent example of course of wealth destroying, is the global financial crisis caused by greed, recklessness and the criminal abuse of the financial system. A British study has calculated that the highest paid London City bankers destroy £7 of social value for every pound in value they generate.[4]

Real solutions

Perhaps by now you agree that inequality is a very serious problem, and that throwing more money and power to those who already have it is not going to fix it. So how do we fix it? Here are some ideas.

Slide: Solutions…

The simplest, most obvious way to reduce inequality is to have higher tax rates to finance better public services, particularly the improved education and healthcare we so badly need. In countries with superb health and educational services like Denmark and Sweden, people happily pay tax rates closer to 60%. Even the US and UK have had tax rates far higher than 50% in the past – the more equal, more socially stable past.

Slide: ‘Tax us more!’

In the US and Europe, many millionaires say ‘tax us even more!’ Yet here in South Africa, in a context of far greater inequality, and far greater historical injustice – the rich, so far, remain silent. I think it’s time we heard from them – hear them too saying, we are committed to this country and to everyone in it – tax us more. There is such a thing as too much money and too much power. So let’s set a maximum wage.

There are many other measures we need or can try in combination with a maximum wage. One is to limit the ratio between average pay and top pay in organisations. In Venezuela, no public official can earn more than 12 times the minimum wage. JP Morgan, the founder of the great investment bank – yes, there at the dark heart of capitalism… 100 years ago, he argued the head of the bank should earn no more than 20 times the wage of the lowest paid. The American supermarket chain Whole Foods has a 1:19 ratio of this kind.

Compare that to the chief execs who gave us the global financial crisis while earning many hundreds times more than their least fortunate employees – and then laid them off when things turned bad.

In Japan, managers just earn less. And when hard times come, they often have the decency to take pay cuts rather than laying off workers.

Slide: ‘It is all wrong to have millionaires before you have ceased to have slums.’ – John Lewis

John Lewis was the founder of the successful British department stores that bear his name. The company is 100% owned by its 70,000 employees. Everyone gets a share of profits. Everyone has a voice in management. The employee benefits are excellent.

Employee ownership and cooperative ownership and benefit corporations[5] are incredibly successful and stable business models – far more stable than shareholder-owned enterprises. We need more of them, driven by tax incentives.

In the great socialist paradise of Alaska, every citizen gets a cheque every year –  $1100 last year – their share of royalties on oil and other revenues. Here in South Africa, we have been exporting our immense mineral wealth for 150 years – and I still haven’t seen a cheque.

Cap and share is a proposal that would force fossil fuel companies to buy the rights to pollute from every adult citizen – cutting carbon emissions and boosting equality at a stroke.

Of course, many will argue that reducing the wages of the highest paid will destroy incentives. But the notion that we’re so driven by money is a myth. That’s someone else’s TED talk, though.

Of course, we need a foundation of renewed governance for all this. In Norway, Finland and Sweden, everyone’s tax returns are public. You can see where the money’s going. Here in South Africa, we also need to open up the finances of our political parties and we need an electoral system that makes our MPs more directly accountable to us for more equality of representation.[6]

Slide: Democracy does not require perfect equality but it does require that citizens share in a common life. – Harvard philosopher Michael Sandel

But we need more than that. We need different institutions, institutions that bring us together again. Rebuilding decent public transport and healthcare, and inclusive schools, is vital not just because we need those services – it’s also vital for the health of democracy. The MIT economist Daron Acemoglu has shown that nations succeed because of inclusive institutions, and fail when wealth and power is seized by the few. It’s vital we act soon: our own South African finance minister, Pravin Gordhan, has warned that the Arab spring was fuelled by inequality and youth unemployment – and that we run the risk of similar, growing instability here.

Greater equality is good for the rich too

So what about the rich, what happens to them with more equality? Well, Wilkinson and Pickett have shown that the poor in Scandinavia, Holland, and Japan are actually better off than the rich in the most unequal countries.[7] So more equality means the rich may have less money, but they’ll lead better lives. Their children will be less vulnerable to crime, addiction and depression. And their grandchildren may get to escape global ecological collapse.

Conclusion

Slide: Great declarations of the right to equality, from the American Declaration of Independence to the SA Constitution.

These suggestions I have made are not attempts at a utopia or at erasing all social distinction. I am suggesting only that we give real substance to the founding promises of our civilisation and country. Almost every solution I have mentioned has been tried and proven in practice. Highly egalitarian societies do exist and are very successful.

Slide: ‘It is all wrong to have millionaires before you have ceased to have slums.’

‘Consume less, share better.’

Some years ago, I was working on HIV documentaries. We were filming in a desperately poor part of South Africa, Burgersfort in Limpopo province. We’re used to seeing shacks here in Cape Town, but Cape Town shacks are often palaces compared to shacks in Burgersfort. I was with a small crew, sitting on a hillside, interviewing a woman who lived in a little tin box, and who had been raped and been given HIV. And as we spoke there was a moment when she did a double take, seemed to lose her composure. We asked what was wrong. ‘The man who raped me,’ she said. ‘He just walked behind you.’

Actually, I tend to think the technical solutions I have offered may not be enough to resolve our inequality crisis. I think another step’s required: that we all decide that we care too much for this state of affairs to continue. It’s not being clever that reveals our full humanity; it is our ability to use our knowledge with empathy and compassion, the courage to see the dignity and potential of other human beings, and the courage to acknowledge injustice when we see it.

I would like to live in a South Africa, in a world, where no woman has to live within a few dozen metres of someone who raped her. I am quite sure the same goes for you. As I have shown, there are many, many ways to achieve this, and many examples to follow.

Let’s do it. Let’s acknowledge how destructive too much wealth can be, and the vision to see how creative it can be when shared. Let’s campaign for a maximum wage.

Notes

[1] Borat and van der Westhuizen (2009), ‘Poverty, Inequality and the Nature of Economic Growth in South Africa’.

[2] http://www.oxfam.org/sites/www.oxfam.org/files/bp157-left-behind-by-the-g20-190112-en.pdf

[3] WWF Living Planet Report 2012.

[4] neweconomics.org/sites/neweconomics.org/files/The_Ratio.pdf

[5] ‘Certified B Corporations are a new type of corporation which uses the power of business to solve social and environmental problems. See www.bcorporation.net.’

[6] Transparency of political party funding (at Polokwane in 2007) and a new electoral system (following the Independent Assessment Report on Parliament) have both been promised by the ANC, but so far not implemented.

[7] findarticles.com/p/articles/mi_hb6394/is_66/ai_n56471290/

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David

I am an environmental writer, journalist and speaker living in Cape Town, South Africa.

8 thoughts on “At TEDxTableMountain, ‘the case for the maximum wage’”

  1. A pertinent speech, wish I was there to have heard it. The multitude benefits of equal societies are so well documented, yet these vast inequalities seem to be the entrenched status quo. Our social studies absolutely support the idea of equality, as being a natural precondition to harmonious societies. I think the case for a maximum wage and equality, ties in very nicely with the push for a steady state economy (http://steadystate.org), which attempts to take our ecological reality into account when devising an economic system (as opposed to adopting the same logic as a cancer operates under in the body). It could also find space in the growing movement for the rights of nature (http://therightsofnature.org). A movement for social equality would be strengthened by unification with ‘environmental’ causes, there needs to be a recognition that they are two sides of the same coin. A very useful resource concerning inequality: http://inequality.org/ . Good luck with strengthening and solidifying this message.

    1. Thanks very much, Steven. I’m well aware of both the steady state set of ideas about economics, and the rights to nature approach, and agree that they are very important indeed. Had I had the time, my speech would have emphasized that economic inequality is but one dimension of inequality, and I would have spoken more about our (unscientific) presumption that we are Earth’s most important species, and more about the interpersonal, intergenerational, gender and other dimensions of the issue.

      I find the steady state economy approach very persuasive, but am not entirely convinced by the name – I have coined the term ‘restorative economics’ for a good part of the set of ideas that I try to advocate, which broadly overlaps the steady state concepts, but also tries to add a note of dynamism to the concept, and to explain that since we have been and are destroying natural capital (a term I use with a little hesitation) at such a rate, it has become vital to build an economy based on rebuilding natural capital.

      1. The idea of an economy based on rebuilding natural capital is a really interesting idea. I would be interested to learn more about the concept.

        You wrote “Each year, we now use up 50% more water, soil, fresh air, fish, carbon storage and wood than the Earth can sustainably provide” – degrading our natural resource base, or the ability of earth to provide ‘resources’ into the future. I am a big fan of annual ‘withdrawal’ and pollution limits (fishing, mining, grazing, forestry, emissions, etc.), the limit representing the earth’s carrying capacity, or perhaps as per your idea, above it as to allow for regeneration. I wonder if this would lead us to grow, rather than manufacture and process, a lot more of what we need, and more locally as well (providing resilience in diversity). I also wonder what you think of the pricing of nature that will be discussed at Rio later this year, a good thing or with potential pitfalls…

        Part of my thought process always goes back to the issue of competition – as long as there is competition between countries, we will always be stuck in the ‘race to the bottom’ and ‘race to the finish’. As long as WTO laws favour corporations over social and environmental safeguards, and trade agreements do not allow nations to protect their assets, politicians will be stuck with the dilemma of economic security vs sustainability, surely. A move away from GDP as the sole indicator of development, and a re-imagining of development, is part of the rationale of change in this area.

        The other thing I wanted to mention, which I am sure you are well aware of already, but for other readers of this post, is the scientific ‘happiness’ studies that have included greater levels of happiness in equal societies, and the finding by these happiness scientists that above a relatively modest income, happiness does not increase – if I am remembering that entirely correctly. Well done once again, will not spam your blog post any further I promise!

  2. Hi David, couldn’t be at the event, but read your blog! Thanks for picking up this topic – I also read quickly George Monbiot’s article. I quite like his idea about a nationwide maximum wage, which would avoid difficult negotiations in all sectors. Where would you set the national maximum wage for South Africa? R1,000,000 would be in the range of about 20 times the average worker’s income. Where would you set the cap?

    1. Hi Robert,

      Somebody rightly pointed out after I did this talk that I had made a good case for serious action on inequality, but hadn’t really made a complete case for the maximum wage itself. I’m working on this, and your questions are a very good starting point! I’ll keep you posted… :)

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