WORLDVIEW: How the economy is s***wing SA’s middle class

By Felicity Duncan .South Africa's middle class is facing a crisis. Stagnant incomes, slow growth, and rising costs for everything from electricity to water to food have combined to push many households to a breaking point. Many middle-class families are teetering on the edge of disaster, putting the entire South African political project at risk..Now, I'll admit that this is a dramatic statement. But it's not wrong..___STEADY_PAYWALL___.In modern democratic, capitalist countries, a thriving middle class is vitally important, because democracy is basically a deal between the middle class, the capitalist class, and the political class..The goals of the middle class are to get a good education, work hard, get married, buy a house, and have kids who will be educated and hard working. The middle class agrees to vote for the political class because it promises a stable and consistent environment that will facilitate this lifestyle, ensuring that businesses operate honestly in fair markets, and managing things like crime and infrastructure..From the perspective of the capitalist class, this is a good deal. The middle class offers its votes, skills, and hard work in exchange for decent jobs that pay well enough to let them buy houses and raise kids. The capitalist class gets good, reliable, skilled workers and a stable policy environment in exchange for having a share of its profits going to workers (in wages) and the government (in taxes). The middle class votes for the system in large enough numbers that the capitalist class isn't threatened by the voting power of the very poor, who may seek to seize its wealth..Read also: WORLDVIEW: The real threat to a Ramaphosa recovery in South Africa.This is the basic system that has historically worked to create mass prosperity in countries ranging from the US to Germany to Japan. Admittedly, this is now breaking down in most Western countries. The middle class has experienced a couple of decades of stagnant incomes and faces unaffordable housing, education, and healthcare, while the capitalist class has held on to an ever-higher share of the profits, and the political class has failed to deliver on its promises. This is why there's so much political instability in the West right now – the old deal is breaking down..However, the picture in South Africa is even more alarming..South Africa has a very small middle class. In a country of around 55 million people, there are about 5 million individual taxpayers. Estimates put the SA middle class at about 20% of the population. This is very low. In the US, about 50% of the population is considered middle class, and even in China, it's over 30%..SA's small middle class faces an outsized tax burden. Tax rates on individual incomes (the middle class) are higher than corporate tax rates (the capital class), so SA's middle class ends up shouldering the bulk of the tax burden in the country..Meanwhile, from a middle-class perspective, government services are non-existent. The middle class has to pay for its own transportation (failing public transit), security (failing police service), education (failing public schools), healthcare (failing state health system), and electricity (failing Eskom)..Read also: WORLDVIEW: First power, now water – SA must get the basics right.While the unhappy poor have no choice but to accept what the state provides – however bad – the middle class is stuck in a different bind – paying for both those poor public services and for private, functional versions of those services..Now, in a country with as many poor and unemployed people as South Africa, it can be a little difficult to feel bad for the middle class. After all, middle-class people, by definition, enjoy adequate food and shelter, their kids get a decent education, and for the most part, they are safe from disease and harm (with the exception of lifestyle diseases and, in some cases, harm from crime). They're doing OK, even if they're struggling..But the issue here is that this struggle is becoming unsustainable for many in the middle class, especially the black families that have only recently joined it (who often have to spread their income over a broader, extended family and who don't have any inherited wealth to fall back on). If a middle-class family finds that it can no longer afford a middle-class lifestyle, it stops being a middle-class family and reverts to being poor – and stops paying taxes to boot..The smaller the middle class, the worse the society. When a society is just a handful of rich people and a mass of the poor, it usually ends up being violent and dangerous. The wealthy use their wealth to violently suppress the poor – so that they don't threaten the wealth of the elite – and the poor often turn on one another in a struggle for resources (especially when it's too dangerous to target the wealthy). Democracy cannot exist in such circumstances, not in any meaningful way, and the economy cannot prosper and grow..The South African political project is founded on the same basic deal as other democracies, but SA has a tiny and endangered middle class. As the pressures on this middle class mount, its very existence is threatened. Something has to give.

WORLDVIEW: How the economy is s***wing SA’s middle class

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