Monday, September 6, 2010

How do we create a more uniform society? ...Easy tax the rich till they also poor!

Justice Malala: Here we go again. The Congress of SA Trade Unions wants to tax the so-called super-rich.

According to yesterday's City Press newspaper, the trade union federation wants a "solidarity tax" to be imposed on those who earn the top 10% of South Africa's national income in order to "cap" the growth of their earnings and push up the income of society's bottom 10%.

To say that the idea is daft is to be charitable. Trade union leaders have over the past two months been going on and on about how there is massive income inequality in South Africa, and their answer is to punish the rich? The truth is that we are making too few entrepreneurial millionaires in South Africa (meaning no job creation and more poverty at the bottom end), too few billionaires (meaning no job creation and more poverty at the bottom end) and creating too few new enterprises (meaning no jobs and more poverty at the bottom end).

Anyone who thinks greater taxation of business and high-earning individuals will change the horrific job statistics in this country is deluded. Worse, it just shows how naive Cosatu's economic policies sometimes are: to even call the thing a "solidarity" tax is an insult. Does it mean that if I pay a higher tax I feel the plight of the poor more acutely?

The poor do not need "solidarity taxes" and government hand-outs. They need jobs. Over the past few weeks we have been given a master lesson in the fact that Cosatu has absolutely no interest in creating jobs for the poor. Instead, Cosatu has led hundreds of thousands of civil servants onto the streets to demand higher wages that are far above current inflation.

The upshot is that Finance Minister Pravin Gordhan will have to find an extra R7-billion to pay these workers. And where is that money going to come from? It will come from money earmarked for job creation projects, infrastructure spend and educational initiatives. It will be money into pockets of union members. It will not be money for the poor.

Cosatu needs to stop branding itself as a champion of the poor. It is patently not. Instead, it is a protectionist racket for those who are in jobs. Consider the incredibly high wage increases it has demanded throughout this bargaining season, despite the fact that South Africa and many others countries across the globe are struggling through an intractable recession.

With a million jobs lost in South Africa, Cosatu seems hellbent on ensuring that what little is left of the pie is consumed holus bolus by the employed elite. Hence these very high salary demands without a single care for job creation. In fact, it can be argued that it is Cosatu's protectionist stance on many issues that have led to job-shedding rather than job creation.

I am a great fan of Cosatu's. Our democracy is as strong as it is today because of many of the federation's interventions. Yet on macroeconomic policy Cosatu continues to spew pipe dreams rather than real solutions for taking us from a measly 3% growth in GDP to the 7% that Gordhan says we need. If we are to take Cosatu's policy proposals seriously, we would fall into negative growth very quickly.

But Cosatu doesn't see that. Its leaders seem to think that growth and prosperity comes from taking from the rich to line the pockets of ministers buying themselves cars worth in excess of a R1-million each. Not. Prosperity and stability will come from entrepreneurs creating jobs for the poor.

You cannot blame Cosatu for its pipe dreams, though. The truth is that there is a huge clunking NOTHING where South Africa's macroeconomic policy should be. Two and a half years after he was elected ANC president in Polokwane, it is no secret that President Jacob Zuma does not have a plan.

Asked by the Sunday Times last week about the country's economic growth strategy, he answered: "No, no, no. The economic growth plan is absolutely being discussed; it has been presented to proper structures of the government. Ministers have talked about this; they are dealing with this matter."

Wow! The man has been in power for nearly 18 months and the most pressing strategy for the country is still being discussed. One can understand why the ANC Youth League, Cosatu and the SACP are all jumping in with discredited proposals such as nationalisation and "solidarity taxes".

All these formations now know that the man they propelled to power does not have an economic plan and no clue about what his indecisiveness is doing to the country. With this president we are well and truly up the economic policy creek without a paddle.

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