Living Income Guaranteed Proposal for South Africa by EqualLifeFoundation

LIG

Living Income Guaranteed

LIG

Living Income Guaranteed

The Living Income Guaranteed Proposal for South Africa

DRAFT 1.2 - 2014

CONTENTS The South African Challenge 4 In the Wake of Colonization: From Apartheid to Economic Discrimination 4

Housing 4

Healthcare, food, water and social security

Incomes are Lifelines

Living Income Guaranteed

Moving beyond the boundaries of Western economics

What is L.I.G.?

Structural Adjustments

Minimum Wage Economic Ownership Taxation

15 15 17

Sustainable Pricing

Automation, Transparency and the Digitalization of Money

Matching Business with Sustainability

Expected Benefits and Rewards of Implementing Living Income Guaranteed

Real Economic Growth

Eradication of poverty

Education

Housing

Health

Crime

Relieving pressure on the environment

A democratic economy

Increased labour productivity and satisfaction

A long-term solution that is readily available

Concluding remarks

Sources

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‘I have fought against white domination, and I have fought against black domination. I have cherished the ideal of a democratic and free society in which all persons live together in harmony and with equal opportunities. It is an ideal which I hope to live for and to achieve. But if needs be it is an ideal for which I am prepared to die’. ~ Nelson Mandela

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THE SOUTH AFRICAN CHALLENGE IN THE WAKE OF COLONIZATION: FROM APARTHEID TO ECONOMIC DISCRIMINATION Within its recent history, South Africa has proven that when it stands together as one nation – behind a principle, behind hope, behind the resolve to create a better future for every citizen within it – oppression can be transformed into cooperation and co-existence. Regretfully, South Africa has fallen from an apartheid of racism, into an apartheid of economic discrimination; resulting in a vast and extensive income gap. South Africa has successfully moved towards a society where opportunities are less linked to ethnicity but despite this advancement South Africa remains a country of extreme economic inequality and disparity. This disparity of economic distribution severely limits and obstructs a large section of the South African population from having access to the opportunities necessary to thrive and lead fulfilling lives. The last recorded GINI index1 by the World Bank quantifies this vast income disparity: on the index, South Africa stood at 63.1; indicating that the most affluent 10% of the population receives more than half the share of national income while the poorest ten percent, receives a meagre share of just 1.17%.2 2000

2006

2009

57.8

67.4

63.1

Income share held by highest 10%

44.9%

57.5%

51.7%

Income share held by lowest 10%

1.28%

1.07%

1.17%

GINI index

World Bank. Poverty and Inequality Database1 1 A measurement of the income distribution of a country’s residents. This number, which ranges between 0 and 1 and is based on residents’ net income, helps define the gap between the rich and the poor, with 0 representing perfect equality and 1 representing perfect inequality. 2 World Bank, Development Research Group (2013). Data are based on primary household survey data obtained from government statistical agencies and World Bank country departments. Data for high-income economies are from the Luxembourg Income Study database. For more information and methodology, please see PovcalNet (http://iresearch.worldbank. org/PovcalNet/index.htm).

South Africa may have liberated itself from overt colonial rule, but economically remains within a neo-colonial economic model. Within the constraints of this model and this value system (or lack thereof), South African leaders have not, as of yet, been able to realise the goals and aspirations for the country and its citizens expressed in the Bill of Rights; a Bill of Rights that was incorporated in the South African Constitution in 1994. We highlight but a few points:

HOUSING “26. Housing 1.

Everyone has the right to have access to adequate housing.” 3

According to the Housing Development Agency, 27% of all households live in informal settlements. Allow us to stress the meaning of ‘27%’: Considering a population of approximately 52 million South Africans, ‘27%’ refers to about 14 million individuals living in informal settlements. The inadequacy of such housing is reflected in the following numbers. “In 2001, 26% of households living in informal settlement EAs4 had piped water in their dwelling or on their yard. A further 33% could obtain piped water within 200 metres of their dwellings. 32% had access to piped water in excess of 200 metres from their dwellings (there is no indication of how far away the water source is) while 9% had no access at all. 19% of households in informal settlement EAs used flush toilets, 43% used pit latrines, 15% used bucket latrines and 5% used chemical toilets; the remaining 19% had no access to toilet facilities. 32% of households in informal settlement EAs used electricity for lighting and 56% had their refuse removed by the local authority.”5 Although these numbers reflect 2001 conditions, comparing the data from the 2001 Consensus to the Community Survey of 2007, we see no significant improvement trend.

3 Constitution of the Republic of South Africa (1996). Chapter 2 – Bill of Rights. http://www.info.gov.za/documents/ constitution/1996/96cons2.htm (accessed on 30 July 2013). 4 An Enumeration Area (EA) is the smallest piece of land into which the country is divided for enumeration, of a size suitable for one fieldworker in an allocated period of time. EAs typically contain between 100 and 250 households 5 Housing Development Agency (2011). South Africa: Informal settlements status. http://www.thehda.co.za/resources/ entry/informal-settlement-status-in-south-africa (accessed on 01 July 2013)

HEALTHCARE, FOOD, WATER AND SOCIAL SECURITY “27. Health care, food, water and social security 1. Everyone has the right to have access to a. Health care services, including reproductive health care; b. Sufficient food and water; and c. Social security, including, if they are unable to support themselves and their dependants, appropriate social assistance”5

Access to health care services Despite intensive government efforts since 1994, the majority of the population has no access to good quality healthcare. Preventable diseases are not effectively prevented; and treatment, where required, is not sufficiently accessible or provided in a timely manner. Inadequate health care service has resulted in premature deaths and unnecessary suffering; adding to the poor health which is already a common feature in so many South African households.6

Access to sufficient food and water According to the Development Bank of Southern Africa, “South Africa like other developing countries is in nutrition transition which includes the coexistence of under- and over-nutrition and has a malnutrition problem of public health significance. Despite various national nutrition and primary health care programmes being initiated in South Africa over the last decade, recent findings have indicated that child malnutrition rates and hence child health has deteriorated. At the national level, stunting and underweight remain the most common nutritional disorders affecting 1 out of 5 children and almost 1 out of 10 children respectively. Also 10% of the children were classified as overweight and 4% as obese. While, iodine and folic acid status appear to be adequate uniformly throughout the country, almost one third of women and children

5 Constitution of the Republic of South Africa (1996). Chapter 2 – Bill of Rights. http://www.info.gov.za/documents/ constitution/1996/96cons2.htm (accessed on 30 July 2013). 6 Department of Health (2011). National Health Insurance. http://www.doh.gov.za/list.php?type=National%20 Health%20Insurance (accessed 22 November 2013)

were anaemic, 2 out of 3 children and 1 out of 4 women had a poor vitamin A status and 45.3% of children had an inadequate zinc status. Poor dietary intake, food insecurity and poor quality of basic services prevail within the context of an HIV/AIDS pandemic.”7

Access to social assistance Severe shortcomings in the provision of social assistance is a daily reality for many South Africans. Since 1994 the government has implemented several successful initiatives to eradicate extreme poverty in South Africa. Social assistance grants have increased from R10 billion in 1994 to R37.1 billion in 2004 and currently reach 7.9 million beneficiaries, whereas in 1994 this number was still sitting at 2.6 million. Additional successful programs include the Expanded Public Works Programme, the Agricultural Starter Pack Programme and the Comprehensive Agricultural Support Programme. Despite these efforts, the NFSC-FB-I8 reported that in 2007, “...85% of the women respondents were unemployed. Unemployment was highest in Limpopo (93%), Mpumalanga (92%) and the Eastern Cape (91%). Nationally, more than one in two households (55%) had a monthly income between R1 – R1000 with urban informal households reporting the highest percentage of no income (6%) as well as an income of R1 –R1000 (35%). The authors concluded that a significant percentage of the country’s population still live in adverse socio-economic conditions.” 9

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“When were the old regime our standards? And remember some of the most influential values spoke about, “The people shall share.” We were involved in the struggle because we believed we would evolve a new kind of society. A caring, a compassionate society. At the moment many, too many, of our people live in gruelling, demeaning, dehumanising poverty.” ~ Archbishop Tutu

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7 The Development Bank of Southern Africa (2012). Combating Malnutrition in South Africa. http://www.dbsa.org/ EN/About-Us/Publications/Documents/South%20Africa%20Nutrition_%20input%20paper_roadmap.pdf (accessed on 18 October 2014) 8 National Food Consumption Survey – Fortification Baseline 9 The Development Bank of Southern Africa (2012). Combating Malnutrition in South Africa. http://www.dbsa.org/ EN/About-Us/Publications/Documents/South%20Africa%20Nutrition_%20input%20paper_roadmap.pdf (accessed on 18 October 2014)

INCOMES ARE LIFELINES Personal income is the means through which individuals and households acquire access to the products and services they need to adequately support themselves. Traditionally, the argument is put forth that expanding the economy will ‘automatically’ increase the well-being and prosperity for each citizen. We can certainly say that the South African economy has been growing, but we do not observe the promised ‘trickle-down effect’. GDP is therefore not an appropriate indicator for the performance or state of the economy. Economic growth has been shown to take place without any form of equitable distribution. Our current economic model is focused, first and foremost, towards economic growth based on the assumption that most citizens are able to effectively participate in the economy. Those unable to participate or self-support are advised to be supported through government intervention; forcing the government to step in where the economy fails. The government’s interventionist role is designed to be of minimal support and as such, it lacks the capacity to adequately support all the citizens that require social assistance; a percentage representing a large, if not the majority, share of the population of South Africa. The inequality of opportunity in South Africa – its legacy from a colonial past – has proven utterly unsustainable. We argue that the performance of the economy must be measured in accordance with its ability to provide each citizen with an adequate income – the purchasing power to secure basic human rights – and not according to gross national growth percentages.

LIVING INCOME GUARANTEED MOVING BEYOND THE BOUNDARIES OF WESTERN ECONOMICS In order to ensure equal purchasing power for each citizen to secure basic human rights, we advocate the implementation of a Living Income Guaranteed. Such an implementation requires a Paradigm Shift. One of the first points we have to acknowledge and admit to ourselves is that our current system and approach within managing resources and tending to human rights has been far from effective. This acknowledgment is paired with a letting go of some of the value systems and ideas that we as a society have been holding on to. When we hold on to the ways of the past as ‘how things are done’, we are bound to recreate the problems of the past that we wish to eradicate. The only way to move forward and bring about an actual improvement, is to do things differently. As such, we require a particular openness for change; for innovation, for creativity, for ‘out of the box thinking’. Changes in society and its structure can only be effective when matched with changes in the way we think and value things, so that in the end, the society we live in will be a living embodiment of the values and principles we as South Africans stand for, as already stated in our national Bill of Rights.

Therefore, to continue Mandela’s legacy and walk the path towards liberation of each South African, we must be willing to liberate our mind-sets and remove the frameworks within which we have perceived the South African problem – most importantly: the limited range of tools we believe are available to remedy and prevent continued violations of human rights. We underestimate our ability to create a real and sustainable solution; one that can benefit everyone, equally.

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“Overcoming poverty is not a task of charity, it is an act of justice. Like Slavery and Apartheid, poverty is not natural. It is man-made and it can be overcome and eradicated by the actions of human beings. Sometimes it falls on a generation to be great. YOU can be that great generation. Let your greatness blossom.”

~ Nelson Mandela

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First, we require considering the essence of what an economy is, and how it stands in relation to human life. Economics, in its most basic definition, has to do with the management of resources. Many of these resources are life-enabling – where, without access to these resources, human life would be impossible – unworthy to call ‘life’ when daily reality becomes a constant strife and struggle. We tend to forget that ‘the economy’ is not a physical phenomenon – it is a description of how human beings in a society interact with one another; according to rules which are implicitly or explicitly adhered to in the production and distribution of goods and services. The economy is not a ‘separate entity’ that exists independently from human participants: without an actual ‘human population’ there is no economy, because nothing and no one exists that can keep it going. Fascinatingly, the economy does have physical repercussions: if the economy is going through a depression, physical and psychological hardship ensues as unemployment increases; purchasing power drops and access to resources becomes threatened. Too often we see ourselves as ‘victims’ of the economy, forgetting that we maintain and reproduce this very economic system through convention, agreement and consent. This is not to say that economics is not relevant

and necessary. Resources must be managed; production enabled and the principles decided as to how products and goods are to circulate in the economy. What we have forgotten, however, is that we have the ability to create the economy into whatever we require it to be and how we can create and require it to function in such a manner that would allow each one’s human rights to (finally) be secured. Within the Bill of Rights, for example, several clauses state that the government is only required to ensure the “effective realization of specific rights in so far as is possible in light of available resources.” Naturally, human rights can only be delivered in so far as there are sufficient natural resources to enable and honour these rights. Regrettably, these clauses have been utilized as a justification for underperformance – interpreting ‘available resources’ in terms of the government’s budget. The words specifically state ‘resources’ and not ‘budget’ and yet the interpretation is put forth – that if the government’s revenue is not sufficient it is the fault of insufficient resources. Such reasoning reflects a self-limiting approach and the tendency to remain with inadequate economic and political frameworks when viable and alternate solutions are readily available. Within the continuation of this document, we will show and illustrate how simplistic economic adjustments can be implemented that will enable resources to flow in such a way that human rights are guaranteed.

WHAT IS L..I.G.? Living Income Guaranteed (“L.I.G.”) is a Proposal that presents a format for economic and political activity based upon the current capitalistic framework, yet adjusted in such a manner as to guarantee and protect each one’s Fundamental Human Rights. The L.I.G. Proposal may be adopted by any political party and is intended to be specified or refined according to the cultural, economic and social realities of any particular county – as we have, within this document, done for South Africa. The goal of L.I.G is to address the immediate and pressing problems flowing from economic deprivation – including not only the hardships that flow from it directly, but also those indirect consequences that are experienced in the entirety of the economy as well as on the levels of our social, cultural, political and ecological systems. We have come to view problems and phenomena in a fragmented way and all too often neglect to see how interconnected all levels of human life are. What this implies is not that we require to change all institutions, customs and traditions on all levels and in all areas of human life, but quite the opposite: that if we make only a few, yet key adjustments in certain areas of how our society is organized – we will start to see the benefits permeating through all dimensions of our shared experience. Current economic and political policies implemented to promote prosperity and the well-being of society’s disenfranchised may have, to a degree, been able to facilitate economic growth, but the bounties of this growth have yet to reach those who most need it. The Living Income Guaranteed will assist and support those individuals within society that find themselves in a disadvantaged position as a result of this structural ineffectiveness and inadequacy. The Living Income Guaranteed will provide Equal Opportunity for all; functioning as the medium through which nations, such as South Africa, will be able to remediate the most direct and negative effects of capitalism, while maintaining many of the unique strengths that such a system embodies. Living Income Guaranteed will thus aid in balancing growth with sustainability; ensuring and securing Fundamental Human Rights for everyone. At the heart of the L.I.G. proposal is the provision of an actual ‘Living Income’ for each eligible citizen – an income that provides a reasonable level of financial security so that everyone may lead a dignified life. Eligibility would initially be defined by a person’s status as ‘unemployed’ or ‘retired’ and the amount of the Living Income the same for all recipients.9 The Living Income Guaranteed differs herein from the Basic Income Grant/Guarantee proposals as it does not 9

See page 18 of this Proposal for long-term considerations

promise a living or basic income to every citizen. In our view such a promise is not feasible and not warranted. The L.I.G. proposal also steps away from the welfare state approach for several reasons. Welfare programs tend to be complex, paternalistic and hence costly to administer. Complex, through creating a myriad of rules of who can apply for which type of benefit – although, granted, in South Africa, this complexity has not yet manifested. However, if South Africa’s welfare programs were to expand along the logic and examples of other welfare nations, we would soon experience the same complex system. Such complexity works against those who are in the greatest need of social assistance through lacking a clear understanding and knowledge of the benefits they are able to apply for and how. Complexity increases the opportunity for error, mismanagement, corruption, as well as loss of oversight in how funds are allocated and what the benefits are of each program within the economy and society as a whole. Welfare programs tend to be paternalistic due to the ‘strings attached’ approach, where in order to maintain benefits, recipients must adhere to certain standards and demands. Paternalism denies recipients the empowerment they require to take charge of their lives and their destinies, as well as enforces social labels and tensions towards welfare recipients. Complexity and paternalism combined result in high administrative costs on behalf of the government. We argue that more could be achieved through direct cash transfers without the additional costs of management and verification of adherence of standards. The Living Income Guaranteed is a social security ‘net’ available to all; on an as-needed basis. This principle exemplifies our national expectations of government, as laid out within the South African Bill of Rights, where the state ensures the well-being of its citizens when the citizens are unable to provide for themselves.

STRUCTURAL ADJUSTMENTS MINIMUM WAGE One common objection to providing a Living Income is that it will serve as a disincentive for people to seek employment, leading to labour supply scarcity for positions deemed unpleasant. To create incentive, the remuneration for employment would have to be at least that of a Minimum Wage, of which the amount would be double the Living Income. Anyone who is able to take up any form of employment, would have a direct interest in doing so. The Living Income will only cover one’s direct and basic needs to have a dignified home, food, healthcare, education and access to necessary public services (e.g. transportation); it will not provide a lifestyle with ‘extras’ or ‘luxury’. Specifically, we suggest working towards a living income of R4500 per person per month and a minimum wage of R9000. The provision of these wages is not immediately feasible and would require time for the economy to adapt and grow with the implementation of the structural adjustments proposed.10

ECONOMIC OWNERSHIP To finance a Living Income Guaranteed System, changes are required within the current socio-economic and political structure. Funding the Living Income Guaranteed directly through the Government by allocating money from the budget, through deficit spending, or through printing more currency: are not viable options. Government, by itself, is not set up to handle such a load of income transfers at the level required for all Living Income recipients to be able to live a dignified life. Adjustments and tweaks are required to free up and ensure a proper Living Income can be actually, guaranteed. We suggest that the primary source of funding of a Living Income Guaranteed system be done through the profit generated by ‘national heritage companies’ and ‘human rights companies’. Under the term ‘national heritage companies’ we comprise those companies that are directly involved with the extraction and trade of South Africa’s raw materials. ‘Human rights companies’ refer to companies that provide services or goods to the population that enable

See page 20 of this Proposal on how this would be made possible in the long run

individuals to fulfil their basic human rights – these goods and services include but are not limited to water provision, electricity, telecommunications and financing. We suggest that the South African citizens effectively become shareholders of these companies. Beyond the obvious funding function of such a step, the nationalization of resources and connected enterprises provides an opportunity for the management of the country’s resources and human rights support pillars by the people of that country – and is, in fact, an extension of direct democracy. In being a shareholder, each citizen owns an equal part of these companies and hence: - - - - - -

Each citizen has an equal vote in important decisions, such as nominating directors. Management and daily operations follow the market principles of efficiency and innovation. The companies and their management are directly accountable to every citizen. Citizens can submit shareholder resolutions. The companies serve the interest of the shareholders, which means: they serve the population as a whole. Government officials play no privileged role in the management of the nationalized companies – they are citizens and thus their role equals that of every other citizen.

In terms of receiving dividends, every citizen has a right to receive a Living Income Guaranteed, funded by the profits of these companies, when they have no other means of supporting themselves. The government would be the vehicle that transfers national heritage and human rights companies from the private to the public sector – but the companies would not be owned or run by the government ‘on behalf of the people’. As a shareholder, each citizen would become directly involved and have the ability to perform their shareholder duties. The Liquid Democracy platform would herein be beneficial to allow such large numbers of individuals to participate in events such as annual shareholder meetings.11 Through funding the Living Income Guaranteed in this manner, we project that, in South Africa,12 it is feasible to provide an initial Living Income of R1400 with a minimum wage set at R2800. 11 Liquid Democracy: The App That Turns Everyone into a Politician, http://www.shareable.net/blog/liquid-democracythe-app-that-turns-everyone-into-a-politician 12 Estimated according to profits before tax – where 14.4 million South Africans receive a living income.

TAXATION Within the Living Income Guaranteed, direct or personal tax methods can be discontinued. We suggest that taxation be reduced to a ‘pay-as-you-go tax’ as one’s contribution in exchange for the use of the economic system that enables all economic activity – taxation forms such as VAT and import duties fall under such a pay-as-you-go taxation method. Within a Living Income Guaranteed paradigm, there will no longer be a need for excessive taxation, as the role and functions that the government will be required to execute and fund, will be minimal. Taxation would then no longer be a means of ‘redistribution’ of funds from the wealthy to the poor, but a requirement of ‘contribution’ towards sustaining the economic system in the extent that one makes us of it. We emphasize that the Living Income Guaranteed would not be funded through income taxes and hence, no one would pay for another’s Living Income.

SUSTAINABLE PRICING For firms and enterprises to be able to provide a minimum wage at double the Living Income, a new price determination for wages is required. Prices must, first and foremost, reflect the input of capital, especially Human Capital, which has gone into the production process of goods and services. As such, the relationship of prices towards suppliers and consumers, is one of mutual support – where it is clearly understood that the price of a good or service reflects the labour / contribution one has put into its creation, and that within the purchase of this particular good or service, the consumer is contributing towards the livelihood of the contributors involved, as the contributor/labourer has contributed his time and effort to create the final good or service that the consumer is enjoying. We suggest that the function of prices is thus firstly to ensure that those involved in the creation process of the good or service are able to sustain themselves sufficiently, and that only secondarily prices may be used as a means to further competition.

AUTOMATION, TRANSPARENCY AND THE DIGITALISATION OF MONEY The implementation of an economic system on the basis of the Living Income Guaranteed, requires cost-effective and efficient information-processing infrastructure. To this end, we suggest that digitalization and automation will be means to fulfil on the one hand the smooth operation of the system, and on the other minimize error and human interference in the form of accidents and deliberate abusive behaviour. Ample technological options are available to create an integrated and interconnected administrative network, designed to ensure the security 17

and well-being of every citizen. With South Africa moving towards electronic identity cards; interlinking identification cards with banking cards is not a big leap. Interlinked ID cards and banking cards will retain all the relevant information for assessment and evaluation to ensure that everyone in need of financial security may receive their Living Income Guaranteed. We suggest initially that an equal Living Income is provided to everyone that is registered as unemployed or retired, thus keeping the criteria very simplistic. As information is more integrated and perfected, the Living Income Guaranteed can be tailored to individual needs. Automation will also ensure transparency and will monitor regulations such as the minimum wage to ensure that no one is attempting to de-fraud the system – whether on a personal, corporate or governmental basis. Increased automation and the ensuing transparency of data and money operations, along with a transfer away from cash money towards digital money, will result in reduced opportunity and propensity to take part in illicit financial transactions by individuals and organized groups.

MATCHING BUSINESS WITH SUSTAINABILITY As in most capitalistic countries, South Africa’s economy has come to be driven by and through consumerism. Inherently, in all economies, consumerism is a vital part in the flow of goods and services in one direction and currency in the other. But we are at a moment in time where consumerism has surpassed the satisfaction of needs and wants, and production has surpassed the levels that are sustainable in a world with finite resources. Enabling purchasing power and higher income levels within the Living Income Guaranteed proposal is not purposed towards furthering the gap between consumption/production and sustainability. Practices such as planned obsolescence and redundancy work to our own detriment in the long run. We hence propose the following adjustments.

Effective Marketing for Effective Markets: Advertisement and Public Relations To encourage the development of a stable and effective economy, adjustments are required within how markets are influenced and driven, to ensure that the supply within the economy, in fact, reflects the demands of the people. We speak of the ‘demands of the people’ because all people will effectively be able to indicate their demands within the economy through the provision of the Living Income Guaranteed. Through this simple shift and increase in purchasing power, we will be faced with new demand curves, demand curves that truly signal what is required within society for a market to be able to satisfy the consumers’ requirements and requests. 18

To truly honour the dictum of the â&#x20AC;&#x2DC;informed consumerâ&#x20AC;&#x2122; making rational decisions, modifications to advertising and public relations need to take place. The public relations and advertisement industries have primarily focused on enticing consumers on an emotional level to purchase or develop a liking towards a product or service instead of appealing to consumers on a rational level. This causes irrational consumer behaviour which then interferes with the effective management of resources, as demands are being generated and are being supplied for, which would never have existed if not for the psychological manipulation tactics used within public relations and advertising campaigns. Such marketing strategies and campaigns have led to a vast waste of scarce resources. Since this form of marketing is clearly inefficient, advertisement and public relations projects ought to be focused on educating the consumer and/or population in a factual manner using information relevant to the product or service being described and promoted. A shift occurs from emotional enticement to rational consideration within consumer decision making, leading to a demandand-supply mechanism based on genuine need and quality products and services in support of sustainability.

Bureau of Standards: Quality Assurance Within Living Income Guaranteed, policy making and regulations within society ought to be committed to the principles of sustainability and durability. Only by applying these principles can we maximize our capacity as a society to provide a living environment of the highest quality for everyone; one that will support and maintain our present and our future. In practical terms, this translates into the production and rendering of goods and services through well-defined procedures to meet all the criteria that ensure and assure quality and durability to the consumer. Before any product or service is placed on the market, the particular product or service will be reviewed and tested stringently by the South African Bureau of Standards (SABS) to assess whether the product or service has been designed, engineered and tested to its limits to guarantee high quality of material and functioning. Once a product has been approved and certified, regular monitoring and review will ensure the continuity of quality. The concept of quality determination will be comprehensive to ensure quality in all dimensions and aspects of the production processes as well as within the final stages of product delivery and usage by the consumer. Quality would be evaluated in respect to quality of input materials used, safety of production process, minimization of environmental impact, durability of the product, as well as transparency and accuracy of information in labels and manuals. 19

EXPECTED BENEFITS AND REWARDS OF IMPLEMENTING LIVING INCOME GUARANTEED REAL ECONOMIC GROWTH As more than a quarter of the population begins to receive a living income, companies and corporations will benefit as more households will be able to afford additional goods and services. This buying power will build the economy, enabling the basic income and minimum wage levels to grow over time. As it stands today, the profits of the companies that would be allocated towards funding L.I.G. are in the hands of a select group of wealthy owners. Under L.I.G., these profits could, instead of benefiting only a few, circulate through the economy, building and supporting the incomes of those living on a living income wage and within the economy as a whole. The economy in any given location, can be likened to the dynamics of water. If the water in a river flows, then the river is healthy, life thrives in its waters and supports the surrounding terrestrial ecosystems. Water evaporates from the Earthâ&#x20AC;&#x2122;s surface, transforms into clouds, travels with the wind, and lands in a new area where it can support life. When water stagnates, it can become stale. Bacteria and disease start brooding and life stops

thriving. Water, and more specifically flowing water – is an essential element and resource in sustaining life. In our society, we have made the primary element that supports life: ‘money’. If you have money, you can eat, you can drink, you can live in a nice house, you can educate yourself, you can start new ventures, you can support a family, you can participate in leisure time. Money is used, and money is spent – and each expense in turn becomes a flow of income for someone else in society. Money like water – can be stored for the future. Water-grabs in the form of excessive damming can threaten the vitality of an entire ecosystem: as water is held back, not enough water flows and the area that was once supported by its flow is now faced with a condition of lack, resulting in the degradation of the environment. Dams, when properly regulated and monitored, can be a beneficial factor in the environment. In the same way, we know that saving money can be beneficial to get us through a future ‘rainy day’. However, when we hog money, like water, we create averse conditions within the economic environment (=ecosystem) around us. Whenever we have money/an income, we will tend to save some of it and spend the rest. The amount we spend in contrast to how much we save for each unit of additional income, is our ‘marginal propensity to consume’ (MPC). If our MPC is 0.8, then this means that for every additional increase of income, we will spend 80% of it. In turn, the ratio of how much we save over how much we spend for each additional unit of income, is our ‘marginal propensity to save’ (MPS). If our MPC was 0.8, then our MPS is 0.2, which means we will save 20% of any additional income. When income is limited, a person’s propensity to save will be very low as money will primarily be spent on everyday needs. As income increases, a person’s propensity to save will increase as well, as one feels secure enough to ‘put something away’ and still be able to tend to everyday needs. Once a person is well off, he/she will be more likely to save a higher portion of additional increments of income, leading to a lower marginal propensity to consume. The multiplier effect refers to an effect in the economy where an increase in spending will bring about a ripple effect, resulting in a greater amount of value as an outcome than the initial amount spent. In a way, one can regard it as ‘returns on an investment’. Here, we can refer to the example of the river, where additional flowing water in a river is not merely ‘additional water’. It is also the drinking water for animals downstream whose presence is absolutely vital to the local biome. Comparably, money spent in the economy is not merely ‘additional money spent’, but also the income of another human being who in turn can utilize this income to employ the 21

services of a third party and again contribute to someone’s livelihood. We can see from the following excerpt, that these propensities play a significant role in the creation of economic health and vitality: “Wall Street banks handed out $26.7 billion in bonuses to their 165,200 employees last year. That amount would be enough to more than double the pay for all 1,085,000 Americans who work full-time at the current federal minimum wage of $7.25 per hour.

Purveyors of luxury goods always welcome the Wall Street bonus season, but a raise in the minimum wage would give America’s economy a much greater boost. To meet basic needs, lowwage workers tend to spend nearly every dollar they make. The wealthy can afford to squirrel away more of their earnings. All those dollars low-wage workers spend create an economic ripple effect. Every extra dollar going into the pockets of low-wage workers, standard economic multiplier models tell us, adds about $1.21 to the national economy. Every extra dollar going into the pockets of a high-income American, by contrast, only adds about 39 cents to the GDP.” http://www.ips-dc.org/reports/wall_street_bonuses_and_the_minimum_wage 22

This article nicely illustrates the power of money movement, and where this ‘current’ is the strongest. By introducing Living Income Guaranteed into the economic picture, we allow a gush of fresh new water and transform our stagnant pool into a thriving flowing river. Apart from fulfilling our moral duty towards our fellow men through securing each one’s Basic Human Rights, we also enable a new economic drive from which will sprout new opportunities of innovation and entrepreneurship. It becomes possible to have a full and rich life, to enjoy the latest comfort and tech that science and creativity have to offer, whilst simultaneously making sure that everyone’s livelihood is guaranteed. The principle behind such a lively and vital economy really is a simple one: Give, as you would like to Receive. The modest, but adequate, level of the living income ensures that nearly all living income wages will be recirculated within the economy. This continuous circulation of funds will create a lively and healthy economy with a steady growth rate.

ERADICATION OF POVERTY Real and just economic growth entails the immediate eradication of extreme poverty. Those living in extreme poverty will start receiving an income to more adequately support themselves with. Over time, as we reach the R4500 (in real terms) living income mark, poverty in itself will be eradicated through guaranteeing a living income. Such an upliftment of the nation of South Africa will stand as a model example to other nations facing similar challenges.

EDUCATION The BIG pilot project in Namibia definitively showed that school attendance and pass-rates increased as households’ income increased. Within the following numbers we will discuss, keep in mind the modesty of the basic income grant in Namibia: a meagre N$ 89 per month to start, dropping to N$ 67 in November 2008. The L.I.G. funding through nationalization will provide a living income of R1400. With this increase, we can expect the improvements, as seen in the Namibian project will be far greater in South Africa.

In Namibia, “before the introduction of the BIG, almost half of the school-going children did not attend school regularly. Pass rates stood at about 40% and drop-out rates were high. Many parents were unable to pay the school fee. After the introduction of the BIG, more than double the number of parents paid school fees (90%) and most of the children now have school uniforms. Non-attendance due to financial reasons dropped by 42% … . Drop-out rates at the school fell from almost 40% in November 2007 to 5% in June 2008 and further to almost 0% in November 2008.”13 The Namibian example shows that when schools receive more income, they are able to provide a more supportive learning environment and increase the quality of education. An effective education system in South Africa will decrease structural unemployment levels; allowing more South Africans to pursue a career of their choice; gaining wider access to labour markets. L.I.G. will enable children and youngsters to walk a path of self-development, self-fulfilment and betterment of their economic status. L.I.G. will support the economy through an increase in skilled labour; decreasing the need for companies to invest in training and education. Betterpaid jobs, that now go to better educated immigrants, will become available to South Africans.

HOUSING An increase in purchasing power will allow households to gain access to housing loans. The building industry will enjoy a higher demand and extend operations; creating more employment opportunities as well as decreasing dependency on government to provide housing.

HEALTH Implementation of L.I.G. – which brings with it an increase in purchasing power – is expected to reduce food poverty and malnutrition in both children and adults. Results from the modest BIG project in Namibia confirm these expected health improvements: “Using the food poverty line, 76% of residents fell below this line in November 2007. This was reduced to 37% within one year of the BIG. Amongst households that were not affected by in-migration, the rate dropped to 16%. This shows that a national BIG would have a dramatic impact on poverty levels… .” Furthermore, “The BIG resulted in a huge reduction of child malnutrition. Using a WHO measurement technique, the data shows that children’s weight-for-age has improved significantly in just six months from 42% of underweight children in November 2007 to 17% in June 2008 and 10% in November 2008.”

13 C. Haarmann & D. Haarmann – BIG Coalition (2012). Pilot Project. http://www.bignam.org/BIG_pilot.html (accessed on 22 November 2013)

Increased access to transportation and healthcare facilities are projected to improve physical well-being and appropriate treatment of health issues, as illustrated by the Namibian project: “The residents have been using the settlement’s health clinic much more regularly since the introduction of the BIG. Residents now pay the N$4 payment for each visit and the income of the clinic has increased fivefold from N$ 250 per month to about N$ 1,300.” In addition: “HIV positive residents’ access to ARVs was hampered by poverty and a lack of transport before the BIG was introduced.”13

CRIME Having a guaranteed income reduces the physical and psychological incentive for crime. On a physical level, a guaranteed income enables the purchasing of goods and services that many might otherwise be tempted or compelled to steal. Telephone and electricity service will be purchased instead of stolen, reducing the burden on paying customers. On a psychological level, the reduction of despair through economic empowerment reduces the level of mental instability that often plays a factor in the act of violent or spiteful crimes. The Namibian pilot project supports this assessment. A significant reduction of crime was observed: “Overall crime rates - as reported to the local police station - fell by 42% while stock theft fell by 43% and other theft by nearly 20%.” 15

RELIEVING PRESSURE ON THE ENVIRONMENT Sound economic practices should go hand-in-hand with sound ecological practices. The L.I.G. structural adjustments pertaining to modifications in advertisement and public relation practices together with an increased mandate for the South African Bureau of Standards will reduce wastage of resources due to the elimination of products of inferior quality and the creation of products for which there is no genuine demand. The resulting need for the most efficient use of resources will relieve pressure on the environment due to a more sustainable rate of extraction of resources as well as a reduction in pollutants.

A DEMOCRATIC ECONOMY Transferring ownership of national heritage and human rights companies from a select few to each South African citizen institutionalises democratic practices. Although only eligible citizens 14 15

Ibid Ibid

will receive an income from the profits of national heritage and human rights companies, each citizen will be able to participate in shareholder meetings. Through this process of making democratic important sectors of the economy, citizens will enjoy a real sense of ownership of the economy which will, in turn, increase direct political participation and nation-building. It will ensure that the national heritage and human rights companies operate with the objective of enhancing and supporting the national economy and the citizen’s quality of life – rather than furthering the economic prospects of a small elite. With L.I.G., everyone’s voice will also be heard in the market. Since ‘money-votes’ determine demand and supply and as long as unemployment and poverty exist, there will be those who are left unattended in a free a market-system. Through guaranteeing a Living Income as the absolute minimum income – everyone will have the ability to participate and be heard in the economic sphere.

INCREASED LABOUR PRODUCTIVITY AND SATISFACTION Higher wages can translate into lower costs for firms in the long run. When employees are effectively valued through high wages, satisfaction on the job increases, resulting in higher productivity and loyalty to the firm. This in turn decreases turnover costs related to replacing employees and other costs involved in monitoring performance.

A LONG-TERM SOLUTION THAT IS READILY AVAILABLE The implementation of L.I.G does not require an extreme redistribution of personal incomes through increased taxation, nor does it require a particular rate of growth to be reached – but instead, L.I.G. uses South Africa’s national heritage to guarantee each citizen with its basic human rights. As such the L.I.G. solution is readily available, providing a blueprint for longterm economic stability. L.I.G. is not a temporary solution in an attempt to move the country out of a recession, nor is it an experimental or short-term expansionary policy – it is a long-term solution for a stable, sustainable and human economy.

CONCLUDING REMARKS In this document we have only briefly described some of the most persistent challenges facing South Africa. The truth is, no graphs or numbers are required to illustrate the gravity of the situation. It is a reality we share and live with; that we bear witness to every day as we go about our lives â&#x20AC;&#x201C; sparking within us a deep sense of injustice and a knowing that â&#x20AC;&#x201C; there must be another way. South Africa is a country of many peoples, many cultures, many colours, and many riches. South Africa can become much greater than it is today if we commit to a solution that guarantees, as a start, the well-being of all her citizens. We have offered such a solution in this proposal. It is a proposal that provides a solid foundation for economic and political harmony. This is a proposal for change that honours the aspirations for this country and its citizens as enshrined in our Constitution. Living Income Guaranteed - it can be our reality.

SOURCES Anderson, S.Institute for Policy Studies, Wall Street Bonuses and the Minimum Wage. http:// www.ips-dc.org/wall_street_bonuses_and_the_minimum_wage/ (accessed on 17 March 2014) Constitution of the Republic of South Africa (1996). Chapter 2 â&#x20AC;&#x201C; Bill of Rights. http://www. info.gov.za/documents/constitution/1996/96cons2.htm (accessed on 30 July 2013). Department of Health (2011). National Health Insurance. http://www.doh.gov.za/list. php?type=National%20Health%20Insurance (accessed 22 November 2013) Haarmann, C. & Haarmann, D â&#x20AC;&#x201C; BIG Coalition (2012). Pilot Project. http://www.bignam.org/ BIG_pilot.html (accessed on 22 November 2013) Housing Development Agency (2011). South Africa: Informal settlements status. http://www. thehda.co.za/resources/entry/informal-settlement-status-in-south-africa (accessed on 01 July 2013) Ramos, J. Liquid Democracy: The App That Turns Everyone into a Politician (2014). http:// www.shareable.net/blog/liquid-democracy-the-app-that-turns-everyone-into-a-politician (accessed on 31st October 2014) The Development Bank of Southern Africa (2012). Combating Malnutrition in South Africa. http://www.dbsa.org/EN/About-Us/Publications/Documents/South%20Africa%20 Nutrition_%20input%20paper_roadmap.pdf (accessed on 18 October 2014) World Bank, Development Research Group (2013). Data are based on primary household survey data obtained from government statistical agencies and World Bank country departments. Data for high-income economies are from the Luxembourg Income Study database. For more information and methodology, please see PovcalNet (http://iresearch.worldbank.org/PovcalNet/ index.htm).