Economic disconnect caused by Technology and Welfare disconnect

SOUTH AFRICA’S YOUTH are experiencing an economic disconnect. A generation faced with a world without jobs, a massive debt burden, and an economy that has failed miserably to gear itself up for the third-wave technologies that Asia and the West have embraced decades previously.

While you were out striking, marching or simply shopping, the world evolved, from a bipolar economy, dependent upon China and the USA, to a multipolar universe ‚ÄĒ an economy without a centre. The rise of the Information Economy ‚ÄĒ based as it is on information freedom, has been coupled with successive innovations. The Third Industrial Revolution has produced a ‚Äėpost-scarcity economy‚Äô, where having a ‚ÄėChina on ones Desktop‚Äô, a 3D printer capable of printing anything, is considered de rigeur.

Successive waves of innovation have seen ‚ÄĒ the virtualisation of the economy, the dematerialisation of assets and the Internet‚Äôs proverbial death-of-distance. Pop-up factories, makerspaces, friction-free digital copies and the ‘Internet of Things’ are all buzzwords and terms which the youth are invariably going to meet on their free education journey. In the future, your neighbour will hand you a copy of an open source motorcycle, just so the two of you can go for drive. When you return, you will recycle the vehicle into any number of other open source devices.

We are rapidly approaching an era in which robots self-assemble and produce the goods, which we buy with our wages, which are in turn given to us, via a more efficient means of production and redistribution of wealth. This is an alluring proposition. Holland for instance had moved to end labour in mining. Machines are replacing humans wherever they are found, and the full automation of society is only a matter of time.

Now, Let’s talk about the welfare disconnect

Although the country is one of the few nations on the continent to have implemented a social security programme, this programme is geared towards the elderly, disabled and child-care grants. Thus the youth of today, are born into social security ‚ÄĒ their parents are recipients of state welfare not because they are citizens, but because they have children.

Once a child is over the age of 18, this grant falls away. The double-whammy of unemployment and poverty kicks in. Some 25.5 percent of the population is unemployed and this figure is worse when the youth and first-time job-seekers are concerned, rising to 63%.

Today’s student unrest is a direct result of the situation where a pupil, having generated income for his or her family, simply by being a child, turns into a liability on becoming a young adult and tertiary student. In most cases, such a person is forced to fend for him or herself.

This is an enormous shock to both the youth and the family.

So far as social security in South Africa is concerned, we are a nation which has the cart before the horse. Instead of paying families to have children, we should be paying people to stop working.

South Africa’s youth can work and play, just about anywhere there is an Internet connection or icafe, but getting connected to the Net is not sufficient to enable jobs and free education. There are other necessities, common to first world economies which we lack as a nation, and without them, being merely connected, is simply not good enough. In fact, a job, as an end in itself, may not necessarily be all that desirable, the same way that owning anything in an economy based upon abundance, is not the alpha and omega.

Fixing the disconnect

Exactly how is the country to going pay for free education, and range of services? How are we all going to live in a world without jobs? These are the questions foremost on people’s minds, as the country sobers up to the events of the past weeks, which saw the unprecedented storming of parliament and storming of the Union Buildings.

South Africa as luck would have it, already has a ‚Äėsovereign wealth fund‚Äô with a massive R1.5 trillion rand invested, and certainly the youth need to be tackling finance minister Nhlanhla Nene and education minister, Blade Nzimande on why they are suffering in the face of so much wealth.

Instead of a Public Investment Corporation (PIC), benefiting one privileged generation who just happened to be in power during the 90s, let’s make the public investment more inclusive of all citizens, and all generations, and recommit the fund to its Public goals, since the ruling party appears to have lost the distinction between what is public and what is private, funding Nkandla, and government pensions for party insiders.

PIC should rather be redirected to funding a social wage for all citizens, one which includes free education, health insurance and a basic income grant. Instead of a party wage, we could have a social wage reducing the worst affects of poverty and mitigating the coercion inherent to the job market, even one that is Internet-enabled, while providing free education.

Moving South Africa from a coercive labour market to a voluntary labour market, could easily be achieved by removing the compulsion, violence and necessity to seek employment.

A job should not be a requirement in order to survive or be a South African citizen.

Labour should never be compulsory, or forced under the barrel of a gun. As Marikana has proven, people are willing to die for their freedom, and this message is now being taken up by students, who rightfully are demanding free education. The same generation will soon be demanding social security, a social wage for life.

Only the most productive labour and most capable persons would enter the wage economy. One has merely to look at social democracies in Europe to see what a social wage economy looks like:

The State disburses funds, seeing an immediate benefit to the fiscus, via the value added taxation system, which recoups the money spent, in a virtuous cycle.

Citizens with a social wage, are able to purchase the necessities of life and thus avoid the worst pitfalls of extreme poverty.

There are compelling reasons for embracing wealth redistribution in this way.

Alaska for example, pays its citizens to purchase services that would normally be gained from the state, from the private sector. In this way, the state avoids creating enormous bureaucracies which are costly and unsustainable by their very nature, and avoids the cost escalations that come from tenderpreneurs, and mega projects, whose only aim, is to keep people employed, in a world in which labour not leisure is the goal.

Societies with some form of social wage, whether social security or social welfare, produce more scientists, artists, musicians and thinkers. They are better equipped to innovate and create. They experience stability and longevity, both in terms of health extension and the extension of the period in which these societies exist, and remember.

[This is a condensed version of the previous five part series on the economy: Fix the Economy Stupid and Provide Free Education]

Co-ownership democracy – the path to a basic income grant

South Africa’s path to a welfare state has not been easy. For starters the problem of how to pay for social welfare in a country with too few taxpayers and not enough full-time employed citizens, has meant that social services have been rolled out first to those in most need — children, the disabled and the elderly. In recent months the ruling party announced the introduction of universal healthcare in the form of National Health Insurance and a number of pilot schemes in which the system would be phased in incrementally.

Although opposition parties and civil society groups have already called for a basic income grant for all citizens along with health care, South Africa has lacked both the political will and the means to achieve this goal. Both¬†the Freedom Charter and our country’s Constitution enshrine the right of citizens to share in the wealth of the country but this promise has appeared out of reach, resulting in ongoing poverty for millions. The pressure on the state to deliver essential services while moving towards a technologically sophisticated industrial economy has resulted in political infighting with far left groups such as the Economic Freedom Front (EFF) demanding that private property be confiscated by the state in a plan that would essentially reduce the economy and the country to a communist dictatorship.

Such a path is not the inevitable outcome of South Africa’s democracy. According to social and economic rights activist Nicole Tin,”Communism tries to correct the imbalance between the poor and the rich through the idea of common ownership. The fault is the implementation of a centralized common ownership. All the wealth gets centralized into the hands of a few people in the government and wealth distribution becomes a problem. China and Russia have given up on this idea of a common centralized ownership.”

Democracy, she says “is attractive as every citizen has a vote to pick the government. However, beyond this vote, democracy has nothing tangible to offer to its citizens. Wealth and power are concentrated among the rich.”

In the new democratic order envisaged by post-Marxists like Tin the common ownership of property would exist side by side private ownership of property by individuals or organizations, as currently practiced in democratic countries. For example, land pieces sold by governments.

The most important difference is that the proceeds from the lease or sale of common properties are distributed directly to all citizens equally.

In current democracies, even communist ones, Tin says, “such proceeds are kept, confiscated, in the government treasury. Common properties include land, oil, minerals, water, air space, road space, electromagnetic wave bands, nature parks, fishery license, sovereign wealth fund, and anything else in the country that is not already owned by private individuals or organizations.”

“In current democracies, citizens get zero wealth from being a citizen. In a citizen-ownership or co-ownership democracy, citizens equally share the wealth realized when common properties are sold. Each citizen in a citizen co-ownership democracy has a right to vote and a right to an equal share of the country’s wealth.”

In South Africa where the dominant theme  of wealth sharing and resource allocation is known as ubuntu, this makes sense, since there are limitations to what can or cannot be shared, necessitating the creation of shares, stocks and bond certificates.

“The amount of citizen dividend per citizen depends on the country’s common wealth. The amount is expected to be very substantial in many countries. For example, in Alaska, the amount can be easily a few thousand dollars per resident. In Singapore, the amount is estimated at about $9000 per citizen. (The details are in the cases supplied by Tin below). The amount over a person’s lifetime is easily hundreds of thousand of dollars, or even a million dollars.

So how exactly are we going to pay for all of this wealth sharing? Welll, South Africa has mineral wealth, the reserves of which remain some of the world’s most valuable, with an estimated worth of R20.3-trillion ($2.5-trillion). Overall, the country is estimated to have the world’s fifth-largest mining sector in terms of GDP value.  Government investment in the economy is in the region of billions of rands and like Dubai plans are afoot to beneficiate mineral wealth and to move beyond this windfall to a modern information economy.

The transition from a democracy to a citizen co-ownership democracy needs no revolution says Tin, ¬†It needs only a political party to champion this idea, win the citizens over and you institutionalize this idea. “In some countries such as Switzerland, citizens can initiate and vote for a new democracy. They do not have to wait for any political party.”

“Careful institutionalization of citizen co-ownership and citizen dividend is essential. Past examples, e.g., the Alaska Permanent Fund and Alberta Heritage Fund, have shown that ¬†dividend funds without careful protection will be diverted by politicians to other “urgent” uses. A good protection is through Constitutional laws that require a high referendum to change. A normal law that can be easily changed by a simple Parliamentary majority is not much of a protection.

The path towards a Basic Income Grant in which citizens gain financial freedom from birth and where the state essentially pays each and every citizen a basic salary every month is a long one. We may not ever get there as a developing nation, but we can certainly redistribute the nation’s wealth on a per annum or quarterly basis. There is no reason why the annual windfall from the state on the basis of co-ownership could not benefit us all in the same way that below par taxpayers already receive annual benefits from SARS in the form of a tax return. If you earn under¬†R99 056 pa you already get your employees IRP pay deductions back, but if you unlucky enough to be unemployed you receive nothing. This is the gap which opposition parties need to fill in order to stay¬†relevant¬†to the 25% -36% segment of South Africans who remain unemployed.