RESPONSIBLE DEVELOPMENT IN A POLYCENTRIC WORLD: Inequality, Citizenship and the Middle Classes

1. RESPONSIBLE DEVELOPMENT IN A POLYCENTRIC WORLD: Inequality, Citizenship and the Middle Classes • 14TH EUROPEAN ASSOCIATION DEVELOPMENT INSTITUTE -GENERAL CONFERENCE • 23-26 June 2014, Bonn. SOUTH AFRICA’S NEW MIDDLE CLASS AND ITS ENTANGLEMENT WITH BIG P AND LITTLE P POVERTY Authors: Jason Musyoka (PhD scholar) and Jennifer Houghton (PhD) University of KwaZulu Natal, South Africa.

2. COUNTRY (SOUTH AFRICA) CONTEXT • Has a population of 52.12 Million • Main economic sectors are mining services, transport, energy, manufacturing, tourism and agriculture • GDP of $ 384.3 billion • GNI Per Capita of $ 7 460 • Considered as an Upper Middle Income Country • Life expectancy of 56 years at birth • Poverty headcount ratio at national poverty line -23% • In 2014, it has a Gini Coefficient of 0.69, up from 0.57 in 1992. • Government is a constitutional multiparty democracy with three tiers of Government –National, Provincial and Local. • Since 1994, the country has made efforts to advance growth and redistribution although not without controversy. • The mixed outcomes have produced dualistic theoretical positions -Pro-growth and pro-poor -Growth or redistribution -Welfare state or State Capitalism (and as recent as in 2010, National capitalism “…the institutional attempt to manage money, markets and accumulation through central bureaucracy within a cultural community of national citizens” (Hart and Padayachee, 2010)

3. STUDY CONTEXT • Government obsessions are now shifting to: -Job creation (by government) -Rigid labor laws and -Rising levels of social protection • The realistic conundrums of job creation, the economic costs of rigid labor laws and the development tokenism of social protection force development economists to look for development elsewhere. • Among other emerging discourses, global debates are settling on the middle class as a potential solution to addressing poverty • The country’s history reveals a middle class divide –the old and the new middle class. • As part of a PhD project, this paper is an effort to deconstruct the new middle class space in South Africa, and the possibilities the new middle class holds for the country’s future development.

4. STUDY OBJECTIVES AND LIMITATIONS • The over-arching theme is to examine the emerging socio-economic character of South Africa’s ‘new’ middle class • The specific aims are as follows: (a) to understand how new wealth is being distributed in previously disadvantaged households (b) to reveal the new dynamics created by new wealth in previously disadvantaged households (c) to examine how this dynamism relates to intergenerational poverty traps. • On limitations, (i) As part of a broader project, the study collected data from seven households (ii) This paper recognizes that a sample size of seven participants is insufficient to present authoritative conclusion (iii) It however suggests that these preliminary inferences do point to a possibility of a researchable trend (iv) The final phase of the study will provide more convincing and grounded findings

5. PRESENTATION STRUCTURE 1.Theoretical Contours of the Global Middle Class 2. The theoretical problematique of South Africa’s middle class 3. Retooling poverty debates through Middle class prism 4. The empirical character of the new middle class in South Africa 5. Further areas for research

6. 1. THEORETICAL CONTOURS OF THE GLOBAL MIDDLE CLASS

7. 1.1. HISTORICAL DEFINITIONS OF THE MIDDLE CLASS • The middle class discourse is situated within the class identities context • Orthodox Marxism dominates class relations space although deconstruction of social structures is more clear in Weberian literature

8. 1.2. CONTEMPORARY (GLOBAL) APPROACHES TO CONCEPTUALISING THE MIDDLE CLASS • Both Marx and Weber’s conceptualizations have evolved to contemporary efforts of re-conceptualization of the middle class notion. The discourse is now dominated by the following approaches (a) The Journalistic Approach -Mainly guided by the media, politicians and the public in general -Adopts a positivist position but avoids the complex task of defining the middle class -Therefore based on an amorphous notion of who the middle class is (b) The Occupational approach -Mainly focuses on occupation and to a given extent, choices of lifestyles. -Has roots in 1980’s literature -Thus for Southall (2004c) the middle class hold position in government and cooperates, they do not own means of production, and, they have a subordinate relationship with owners of capital (Southall, 2004 c) and - Kharas and Gert define the middle class as the households which live comfortably (based on decent health care, job security, decent housing, higher education, reasonable retirement benefits and surplus income for leisure

9. 1.3. CONTEMPORARY (GLOBAL) APPROACHES TO CONCEPTUALISING THE MIDDLE CLASS • The affluence and Income based approaches -Mainly advanced by economists -Increasingly popular on a global scale -The lower middle class consume between US$2 and US$ 4 per day per capita, while the upper middle class consume US$6 and US$10 per day per capita (Bernajee and Duflo, 2007) -The middle class is anywhere between US$10 and US$100 per day per capita adjusted to Purchasing Power parity ( Kharas and Gertz, 2010)

10. 2. THE THEORETICAL PROBLEMATIQUE OF SOUTH AFRICA’S MIDDLE CLASS

11. 2.1. CONTEXT • South Africa reflects an amplified form of definitional impasse • The journalistic approach dominates the discourse • The notion of ‘the middle class’ in South Africa is partly rooted in affirmative action policies, particularly the BEE • The following assumptions have been put forward regarding the new middle class (primarily black) -They generate new demand -They provide required human capital and -They are critical in political sustainability

12. 2.2. THE CONTEST OF DEFINITIONS (SOUTH AFRICA) 1. The occupational approach -Differentiates between the white color worker (new middle class) and the self employed and propertied (Petit bourgeoisies) 2. Income and affluent approach -Households which earn between R 1 400 and R10,000 per capita per month in 2008 prices ($ 128 and $ 917 in March 2014 exchange rates) -This strata considers the median income as a reference point and spreads the limits to between 50% and 150% 3. Basic services access approach -Used by the Statistics South Africa -Considers formal housing, access to tap water and flush toilet in the residence, use electricity as the main lighting source, and a landline (Stats SA 2009) -This definition does not consider the complexities of the South African Society

13. 2.3. IMAGES OF GOVERNMENT BUILT HOUSES

14. 2.4. MIDDLE CLASS TRENDS AND DYNAMISM –WHO DEFINES THEM? • As at 2006, roughly 26% of all households in the country were considered as middle class up from 23.4% in 1998 (Stats SA 2009) • Between 1998 and 2006 black middle class rose from 15% to 22% respectively. • Iheduru (2004) estimates that there are 400,000 new salaried black south Africans every year • While this points to declining income poverty, there are new poverty masks in unexpected places-less elegant but by no means less powerful. • Below we deconstruct the dynamics involved in middle class trends and character.

15. 3. RETOOLING POVERTY DEFINITIONS FROM THE MIDDLE CLASS PRISM

16. 3.1. THE ‘ENTANGLEMENT’ FACTOR (I) • South Africa’s new middle class is in the main, a first in generations, and therefore linked to intergenerational poverty • We view this connectedness in a tripartite prism (a) Primary households (b) Secondary households and (c) Tertiary households Traditionally bound by loyalties which obligate a middle class individual to provide financial support Bound by cultural bonds and community expectations

17. 3.2. THE ‘ENTANGLEMENT’ FACTOR (II) Y Y X

18. 3.3. BIG P VERSUS small p POVERTY • Although individual X can afford a middle class lifestyle, she is constrained by the demand to redistribute wealth to individual Y, and therefore forced to experience scarcity • We conceptualise this scarcity as ‘small p’ povertyin that it impacts negatively on wealth accumulation by minimising or depleting surplus income • This kind of poverty simply delays intergenerational investments • Individual Y is a victim of a different kind of poverty, the structural kind which requires structural interventions -what we have labelled Big P poverty • Thus by acting as a cushion in a Big P context, individual X is forced to experience little p poverty and as a consequence downgrade or delay a middle class lifestyle or invest into future generations

19. 3.4. DIFFERENCES BETWEEN BIG P AND little p poverty • By implication, poverty alleviation projects are designed to address little p poverty, mistreating it as Big P poverty • The notion of ‘community empowerment’ in founded on the tokenism approach, to an important extent

20. 3.5. CAN little p poverty BECOME BIG P POVERTY? • Because of the pressure placed upon individual X’s wealth, Individual X can potentially miss opportunities to further upgrade their skills capabilities. • This context can potentially deepen little p poverty, ultimately graduating it into big P poverty. • This conclusion assumes that the capability gap is widened by depreciation of productive networks, stagnant or decreasing income in the face of increasing demand on existing wealth, stagnant technology skills in the context of changing environment mainly influenced by new technology, among other factors. • With time, the individual’s capabilities become redundant and obsolete in the context of changing environment, as illustrated below.

21. 3.7. CAPABILITY GAP

22. 3.8. INTERGENERATIONAL TRANSMISSIONS OF CAPABILITY GAP (I) • Capability gaps might constrain future generations from acquiring economic functioning’s mainly due to lack of resources to utilise opportunities. • Thus if parents lack labor skills, they are likely to have less income, which diminish the probabilities for their children to acquire decent education. • In this way, the parents’ capability gap potentially influences their childrens’ capability gap. • This is not necessarily a cause and effect situation. Children can get sponsorships to study, or the parents might get sudden inheritance, which they can dispose to pay off school fees, schools might offer work opportunities for poor children to raise school fees, and so on. • Capability gap in the current generation might therefore not in totality determine future generational capability gap, although it plays a significant role

23. 3.8. INTERGENERATIONAL TRANSMISSION OF CAPABILITY GAP (II)

24. 4. EMERGING RESEARCH FINDINGS

25. 4.1. STUDY SAMPLE

26. 4.2. SUMMARISED (EMERGING) FINDINGS • All but one black participants claimed to have manoeuvred through their education by chance, support by extended family, sometimes by neighbours and occasionally by parents • All but one black participants provide financial support parents, in-laws, and siblings and in some cases neighbours • This support is out of necessity rather than cultural • All the black respondents (except for respondent C) expressed a measure of disappointment over the fact that they had to start from extreme adversity, and looking forward, all of them expressed commitment to transmit wealth to the next generation. • In effect, two of the black participants have already purchased property, and have formed a Trust with their children as beneficiaries. • The three white respondents were satisfied with parental investment towards their capacity to accumulate wealth. • Two of the three white respondents have been bequeathed assets as well as monetary resources, which have played a fundamental role in founding their ability to accumulate wealth.

27. 5. EMERGING TRENDS

28. 5.1. THE NEW MIDDLE CLASS AND ENTANGLEMENT WITH POVERTY • There are strong ‘backward household linkages’ (households which reveal financial dependence of first generation on the second) among newly affluent Black South Africans. • Contrary to prevailing assumptions, this study found that financial support of secondary households is out of necessity rather than cultural conformism • The new black middle class functions within big P poverty in that subsiding the subsistence of secondary households limits its ‘forward looking’ potential. • In the interviewed households, the secondary households appear trapped in big P poverty, of which addressing it is a necessary responsibility of the new middle class. • Effectively, the new middle class is unable to achieve all the desired aspirations (and thus trapped in little p poverty) on account of secondary households. In this light, the new middle class functions in a ‘double middle’ terrain. • Double middle here means that newly affluent black South Africans find themselves in middle class profile (first middle), but also in the middle of the past and future generations (second middle), all demanding their share of resources. • The ‘second middle’ suggests that the new middle class is trapped between empowering two generations, the past and the future. • This study concludes that secondary households support is unsustainable, due to its subsistent as well as open ended nature (without any sunset clause). By this token, secondary households are more predatory in their relationship with the middle class.

29. 5.2. WEALTH LEAKAGES • In some cases, secondary households receive support only to give away, and consequently expect more. • First, it is almost impossible to control this leakage, and second, by doing so middle class households indirectly support tertiary households. • Even more disempowering is the fact that the middle income –secondary household support is sometimes intended at maintaining subsistence. • By so doing, the new middle class interacts with big P poverty, to a far reaching extent. • Thus all respondents lamented that supporting secondary households profoundly delays investments into future generations.

30. 5.3. CAPABILITY GAP • As data suggests, the wide capability gaps evident in the older generation, profoundly impacts on the capabilities of the current generation. • Excessive resource distribution on the part of newly affluent Black households does not appear to prevent but rather delay skills upgrade. It needs to be mentioned here that the South African state has played a fundamental role in enhancing the capabilities of the current generation, which would have otherwise remained in the same continuum of low skills similar to the older generation. • The effort by almost all the respondents to upgrade their skills is a positive sign. Except that the upgrading of skills are ‘late life’ upgrades, which suggests that although the impact into the future generation is inevitably positive, this upgrade will deliver delayed impact, which is produced by delayed investments. These delays hold negative possibilities for the future generation, and thus a reflection of small p poverty.

31. 5.4. POSSIBILITIES FOR MORE FREE MIDDLE CLASS GENERATION? • It is clear that the rise of South Africa’s black middle class has been rapid. • Considering that all the interviewed respondents appear to financially function from a higher platform relative to their parents, all other factors equal, the possibilities for a more affluent future generation do exist. • This is however based on two conditions. (a) the new middle class (rightly qualified to be termed as ‘transition generation’) will in all probabilities absorb much pressure than the parent generation, and the immediate next generation (b) In effect, the new middle class will have to sacrifice the bulk of aspired lifestyle, if the current small p poverty trap is to be terminated. • On the basis of these two conditions, the future middle class is likely to experience less distributive pressure than the current, and, the capability gap for the future generation is likely to be relatively narrow to the current. • South Africa’s next (genealogical) generation middle class will thus be different than the current in its shape, resources at disposal and in wealth accumulation opportunities.

32. FURTHER AREAS FOR RESEARCH • Who is the middle class and for what purposes should they be defined? • The middle class and social action • Aspirational differences or similarities between state created middle class and ‘non state ’ created middle class • The middle class in the informal economy • The middle class and gender dynamics • The middle class and the rule of law • The middle class in conflict states

33. Thank you for your attention!! Jason Musyoka jasonmusyoka@gmail.com