Page 81 - Monocle Quarterly Journal Vol 1 Issue 1 Q4

pIKetty: pRofIle of AN ecoNomIc ImpeRIAlISt
the measure for economic growth – G – was the nominal GDP values of South Africa, collected from the Federal Reserve Bank of St Louis (FRED) for the period 1994 to 2015.
e research team hypothesised that the composite index for capital return, R, would vary depending on investor risk appetite. Consequently, R was calculated for three di erent investor appetites: risk-seeking, risk- neutral, and risk-averse. Each investor risk appetite was given a di erent weighting for each of the four asset classes. To ensure all realistic invest- ment scenarios were tested, each composite R was compared to G over the same period.
Recall, while Piketty’s original studies never included South Africa, he does indicate in a Ted talk, quite emphatically, that in a country like South Africa, R would almost always exceed G. Distressingly for Piketty, as well as for his South African admirers, the Monocle Research Team found that the underlying assumption he makes seems not to be true. Speci cally, we found that in the past two decades across all investor types de ned above, the return on capital, R, on average did not exceed South African growth, G. is phenomenon of R being less than G in South Africa, over the past two decades, does not necessarily disprove Piketty’s thesis that when r > g, inequality increases. But if r < g does it necessarily mean that inequality has decreased?
Despite the general perception propagated by the media that South African inequality is largely on the rise, a more scienti c measure was required to question whether inequality has increased or decreased in South Africa since the fall of Apartheid. e rst measure was taken from the World Bank, which undertakes research into the state of global inequality. In terms of South Africa, it was found that income share held by the highest 10 percent made up 52 percent in 2009 and 54 percent in 2011. Comparatively, the lowest 10 percent had a 1.17 percent share of total income in 2009 and a 1.05 percent share in 2011. Unfortunately, 2011 was the latest data available at the time the research was completed. Similar inconclusive results were found when using the Gini Coe cient, which looks at the statistical dispersion of the income distribution of a country’s residents. e Gini Coe cient uses a scale of 0–100, with 0 indicating that the dispersion of income is completely equal (i.e. everyone gets the same amount) and 100 being the most unequal or having the most uneven distribution of income. South Africa’s Gini Coe cient increased from 59 in 1993 to 65 in 2011, again showing an increase in inequality.
“Despite the general perception propagated by the media that South African inequality is largely on the rise, a more scienti c measure was required to question whether inequality has increased or decreased in South Africa since the fall of Apartheid.”
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