/ 21 June 2013

SA must build economic democracy

Sa Must Build Economic Democracy

Twenty years after this country chose to end relentless violence and injustice by introducing political democracy, our right-wing government is ready to roll out the troops and subdue mineworkers by force of arms. But the only lasting remedy for the discontent on the mines is to make South Africa an economic democracy.

South Africa is being crushed by economic totalitarianism. Few of us realise this, and few of us know that there are alternatives – many of them up and running in other countries.  

Economic democracy is about ensuring that everyone in society, not just the elites, has a meaningful share in the wealth of the country and a voice in deciding how that wealth is shared. It's a term that has emerged from nearly two centuries of worker mobilisation in Europe, the United States and Latin America.

It is particularly necessary in South Africa because of our history of colonialism and apartheid. To paraphrase Walter Rodney, most South Africans are not underdeveloped, they have been underdeveloped. This means that real development will be impossible as long as the institutions responsible for underdevelopment persist.

Our history has made us one of the most unequal countries in the world  and inequality has been linked to everything from increased crime, violence and imprisonment, obesity and mental illness to more teenage pregnancies, drug and alcohol addiction, reduced environmental concern, lower educational achievement, shorter lifespans – and, not surprisingly, reduced social trust.

Inequality, as Joseph Stiglitz points out, crushes growth as it squeezes the middle classes and the poor.

Accountable government
In the United States, where there is now significant social dissent over inequality, the income ratio between the richest 20% and poorest 20% of the population is eight to one.

It's a little mind blowing to consider that the equivalent ratio in South Africa is 38 to one.

So how do we fix this? What are some of the features of economic democracy? An important pillar is fair and accountable government. Since money always follows power  it's vital to have democratic structures that keep money out of politics.

The ANC and the Democratic Alliance might be entirely funded by Shell, Enron and the nuclear company Areva and we would be none the wiser. Our current party finance arrangements are a licence for corruption.

The wealthy must pay far more tax. In his last budget speech Finance Minister Pravin Gordhan warned that multinational companies, including mines, are avoiding tax. Meanwhile, South Africa's overall tax to gross domestic product (GDP) ratio, about 27% to 29%, remains startlingly low compared to our peer, Brazil, at 38%. The middle classes groan and complain about our small tax base but it will remain small as long as we fail to invest properly in health, housing, education and infrastructure.

"Higher taxes will chase away foreign direct investment!" goes the ritual cry. Perhaps, but it will be replaced by less predatory investors who put their money in socially

stable countries. Higher taxes will make the wealthy less individually wealthy but they will gain along with everyone from living in a more stable country. Anyway, they can afford to be poorer.

Improved working conditions
We need to put business in the hands of workers, not the state.

This used to be the rallying cry of unions, but our conservative unions confine themselves to lobbying for improved working conditions.

There are many honest and responsible businesses and business people, but the modern corporation is designed for amoral pillage. Fossil fuel companies, particularly, are literally destroying the environment needed to sustain human civilisation.

The corporation limits and dissolves the moral responsibility of its employees and shareholders. Directed by small, powerful elites, they are an astonishing example of economic feudalism (as Marjorie Kelly has detailed in The Divine Right of Capital).

The alternative? Worker-owned companies and co-operatives and the latest trendy twist from California, the B [benefit] corporation.

This brings us back to the mines.

Peter Leon of the law firm Webber Wentzel, an authority on worker equity, says: "If black economic empowerment in the mining industry is to be meaningful there should be mandatory provision for the empowerment of mineworkers and mine or near-mine communities under the Mining Charter.

Average payouts
"I have also suggested moving towards the German two-tier board model, with equal representation of workers and management, as a means of enhancing workers' interests and sense of ownership.

"Worker equity makes a real difference to workers' attitudes as they have a real stake in the company and its success … The Kumba Envision workers' share scheme is probably the best example of this, with workers receiving an average payout of R550 000 per worker after five years.

"Having said that, there is nothing like the John Lewis Partnership for workers in South Africa, where the employees of Peter Jones, Waitrose and John Lewis in the United King­dom all share in the company's profitability. We have a long way to go."

Leon points out that Lonmin, whose workers were massacred by police at Marikana, had scrapped its employee share-ownership scheme.

The employees of Waitrose don't just share in profits, they own the company, as do the employees of many successful modern businesses and even banks in other countries. Mott MacDonald, an international engineering company that helped construct the Durban harbour tunnel, is wholly owned by its employees.

Worker-owned companies have strong internal democracy, far lower internal inequality and conduct themselves in far more socially responsible ways. They're often more stable as businesses. The co-operative model is even being extended to public services in countries such as Venezuela and the UK.

There are many other measures of economic redesign that are needed to address South Africa's persistent ills properly. We must face the startling fact that our problems begin not with too much poverty but with too much wealth. If we share that wealth better – if we build economic democracy – everyone but a few psychopaths will win.

David Le Page is an independent ­journalist