Inequality in Post-Apartheid South Africa (PDF)

Inhaltsangabe:Introduction:
In the course of globalisation and increasing liberalisation, the question of how the costs and benefits of these processes are shared is of special concern. Recent studies suggest that they are shared unequally. Although inequality between countries is declining, global inequality is on the rise owing to the fact that inequality within countries is increasing. These developments raise the question of how growth affects inequality and vice versa. Further it has to be explored what role governments have to play to ensure that all members of society benefit from growth.
Kuznets suggested that countries would initially face rising inequality as they grow richer, however, as a certain threshold of per capita income is reached the degree of inequality would decrease. From this proposition it is easy to conclude that governments do not have to be concerned about rising inequality as it eventually will decrease once the economy has reached a certain level of economic development. It may also imply that there is a trade-off between growth and equality.
More recent studies challenge Kuznets¿ proposition. These studies indicate that high levels of inequality hamper economic growth. Yet, economic growth is an important instrument in the fight against poverty. It is assumed that economic growth creates employment opportunities and increases the scope for distributive policies and thus tends to reduce poverty. Therefore, any country that is determined to address the problem of poverty ought to pay attention to the nexus between inequality and growth.
In the theoretical part of this paper, arguments that support and challenge Kuznets¿ hypothesis are analysed. Thereafter an interesting proposition developed by Addison and Corniais presented that suggests that there may be an efficient level of inequality. From these different arguments conclusions are drawn and policy implications presented. The theoretical part does not attempt to analyse the causes of inequality. To identify the causes of inequality, it would be necessary to undertake a case-by-case analysis. The general assumption for the theoretical part is that inequality is caused by unequal access to resources as well as inadequate economic policies which can lead to persistent unemployment and poverty. Unequal access may be caused by market failures especially in the capital and labour markets, or by historical and political developments that create uneven power [...]