Thesis Number: #6 (Page 4 of 8)

Rip-off 6         Discrediting Democracy

At the commemoration service held for the late Nelson Mandela in December 2013, the public booed their President, Jacob Zuma. The belief in the streets of South Africa was that the political elites had benefited disproportionately from post-apartheid reforms. After 20 years of democracy, South Africans are growing increasingly angry that income inequality is as bad, if not worse than it was during the apartheid era. One in three workers does not have a job or has stopped looking. Violent crime and corruption are pervasive. As part of its “modernisation” programme, the ANC government “reformed” the social infrastructure. This included abolishing the direct (albeit modest) tax on land. Meanwhile, a favoured few ANC insiders grew rich; not least because they were able to access the rents of a resource-rich nation.

Globally, scandals associated with political corruption are in the main associated with extracting rents out of the public purse. The alarming rate at which US banks are leveraging depositors’ money to purchase public assets like ports, airports, toll roads, power, and natural commodities is analysed by one attorney as a direct threat to American democracy (Brown 2013).

Rip-off 7         Killing the Future

The more a community invests in schools, the wider the choice of life-styles for children when they enter adulthood. But access to tax-funded schools is not based on equality of opportunity, but on the size of the mortgages that families can afford.

  • In the US, the premium for homes in the catchment areas of top-ranked elementary schools was an average $50 per sq. foot in 2012. In Chicago, the median price of such a home was over 58% higher than the median price for a home near an average-ranked school (Podmolik 2013).
  • In Britain, the average premium for a home near a good state primary school is 40% higher than comparable properties in the same area. In some locations, house prices near good schools are 170% higher than comparable addresses (Malnick 2013).

The higher location values register the additional benefits gained by accessing the best schools. If the rents were collected, they could be reinvested in raising the quality of poorer-quality schools. Instead, the benefits go into the pockets of land owners.

The consequences are transmitted inter-generationally. The values of privileged residential properties increase faster than dwellings in other areas. Owners accumulate those higher returns as capital gains, which are then used to fund additional unearned benefits. These may range from paying for children to enter top-class universities to enjoying “conspicuous consumption” lifestyles. Meanwhile, taxpayers in poorly endowed areas help to fund the high-quality schools that trigger this process of dividing the generations into Haves and Have-nots.

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