South Africa has a huge gap between the rich and poor - 4 urgent reasons to tackle inequality

South Africa has exceptionally high levels of inequality. As someone who studies issues of inequality and sustainability, I have argued before that South Africa’s income inequality is the highest of all countries that have data on this. This means that the gap between the rich and the poor is wider than in any other country.

While South Africa is somewhat exceptional, income inequality within countries has been growing across the world.

The most recent data suggests that income inequality between countries has been falling, but this is largely due to the rising incomes of people in China, who make up a large part of the global population.

If we consider inequality in wealth, which gives us a fuller picture than income, the situation in South Africa is even more extreme. The top 0.1% of the population owns 25% of the wealth. Globally, according to the World Inequality Report, the top 10% of the global population owns 76% of the global wealth.

There are a number of good reasons why the South African government should focus on reducing inequality. I wish to highlight four reasons.

Not good for the economy

First, high levels of inequality are not good for the economy. This is a complex issue, because the causal relationships between economic growth and inequality are multifaceted. But these obscene levels of concentration in wealth leave too much economic power in the hands of a small group of wealthy individuals.

Not good for democracy

Second, high levels of inequality are not good for democracy. Across much of the world, especially in the developed countries, ultra-rightwing politicians such as Donald Trump have been drawing support from the electorate. Among the reasons for this is that working class people feel left behind as wealth and income gaps widen. But in fact, the effect of the economic policies that these right-wing politicians promote is to increase inequality. These political shifts undermine democratic systems, leading to a rise in ultra-nationalism and discrimination against migrants and other minority groups.

We are, unfortunately, seeing the rise of these political views in South Africa too. The rise of this type of politics also undermines multilateral efforts to address global challenges, such as climate change. For example, politicians such as Trump have promoted climate denialism and removed the United States from the Paris Agreement on climate change.

Not good for social cohesion

Third, high levels of inequality are not good socially. Not only is inequality bad for social cohesion, it entrenches inter-generational inequalities.

Economist Branko Milanovic, one of the world’s academic authorities on inequality, has shown in his 2016 book that an American child, purely by the chance event of being born in America, is likely to earn 93 times the income of a child who, also by chance, is born in a poor country.

This is especially a problem in South Africa, where a child born in a low-income household is unlikely to go to a good school, and therefore less likely to attend university, and therefore less likely to find employment, and so on. This increases barriers to social mobility and gives rise to a divided society, with higher levels of tension, uncertainty and conflict.

Undermines climate change efforts

Finally, with climate change, humans are now facing a challenge that threatens their very existence. The wealthy countries, and the elite in developing countries, are largely the cause of the problem, but the costs of climate change are likely to be borne disproportionately by low-income countries and communities. This inequality, which is of course linked to the historical trends of wealth accumulation, is likely to undermine efforts to deal with climate change, by creating resistance to change.

More equality, both within countries and across the world, is imperative if we are successfully to address the existential challenges of climate change.

Prof Sanjay G. Reddy will deliver the Southern Centre for Inequality Studies’ 2024 Inequality Lecture, The Political Economy of Global Inequality: A Drama in Three Parts, on 15 August. In partnership with the Southern Centre for Inequality Studies, The Conversation Africa has published several articles on inequality.