Sunél’s Blog | Wealth built on inequality, is fragile

Sunél Veldtman, | 26 June 2020

Last week, I took some time away from my blog space. I needed some time to process what has transpired since the outbreak of COVID-19. While away, I felt compelled to send this blog – a version of it was waiting in my outbox.

The world has never been a more unequal place. South Africa specifically, tops the log as the most unequal society in the world. When the top 3 500 people in a country are worth more than the bottom 32 million, the distribution is unsustainable. When the bottom 32 million are almost all black people, it also becomes a race issue.

COVID-19 exposed the marginalisation of groups of people, particularly along colour lines. And not just in South Africa.  Even in the US and the UK, people of colour were more likely to die of the virus: COVID-19  exposed the lack of access to healthcare and the impact of poverty on health. The environment was fertile for revolt. People were already scared and angry. Revolt came in the form of #blacklivesmatter protests. #blacklivesmatter is as much a result of systematic marginalisation of groups of people in the social realm as it is an economic reality. Police brutality against black people is just one symptom of a system which keeps people out.

As a white person, I acknowledge that I do not understand enough about the systemic racism that affects people of colour. I am trying to listen. I am reading. It will be part of my life’s work to eradicate the racist lenses I have been raised with.

Here, however, I am writing as a financial commentator and predominantly addressing our clients and community about the need to dismantle the systemic marginalisation of people. 

The recent protests are just a sample of the outcry of those who find themselves at the bottom of the economic pile and an indication of what we can expect to come. Those at the top are likely to increasingly defend their territory with force, rising nationalism and right-wing politics and those at the bottom of the system are already becoming increasingly violent in their demands.

When wealth is built on taking from the bottom to give to the top, which is effectively what has happened over recent decades, it can never last. History shows us this. Just go back to the French Revolution. In the US, earnings of the top 1% have increased by 157% since 1980, whilst the earnings of the bottom 90% show a meagre 24% increase. When the earnings of the top increase exponentially while the bottom suffers a declining standard of living, it is not sustainable.

If you have ever played Jenga, the game of building a tower by taking blocks from the bottom to build on top, you will know that at some stage, it all falls in a heap. The higher the tower, the more tension in the room and the more likely it is to come crashing down.

Sadly, the world’s leaders cannot be trusted to dismantle the system or to use our money to redress the wrongs of the past. Many of them are part of the problem. We must do it. If we want to protect our own wealth, we should start by taking an active part in dismantling the system. 

We should all begin by acknowledging our position in the pile. Perhaps you think that you do not fit at the top of this pile. If you earn more than R7 300 per month, you fall in the richest 10% of this country’s earners. The richest 1% of earners take home R48 753 per month. If you have R80 000 to your name, you are richer than half of the world’s residents.

In other words, most readers of this blog will be at the very top of this pile. We are extraordinarily wealthy by local and global standards.

We also need to acknowledge that the game is unfair and not protest at every opportunity to defend our gains or position. Access to capital, not talent, or creativity, is the biggest contributor to success for entrepreneurs and even corporates. It means that intergenerational wealth and access to connections determine the success of the next generation.

Our current form of capitalism has failed the bottom of the pile – the spoils have not trickled down, either intentionally or magically. The bottom of the pile has stayed behind while the top has experienced exponential gains. Hard-working people in the ranks have gone nowhere.

We can no longer play Jenga. We need to do the right thing, the moral thing – which is also the prudent thing. Ironically, we can now only protect our wealth by giving up some of it.