Inequality is the binding constraint to growth

> Inequality is not only a moral and political issue in South Africa but a core structural constraint on economic growth. Despite significant progress in income redistribution since 1994, the South African economy remains stuck in a cycle of stagnation, high unemployment, and deepening exclusion. The dominant development model—focused on enabling markets and fixing the state—lacks a transformative vision capable of shifting the underlying structures of economic power and production. This can be remedied by a shift in emphasis from income redistribution to the redistribution of assets and endowments, including land, housing, education, and access to capital.  Introduction The relationship between inequality, redistribution, and growth is a central policy problem facing South Africa. A persistently high level of inequality limits the rate of economic growth through a multitude of channels. Inequality is also self-reinforcing. The rising incomes that growth generates accrue to large corporations and affluent investors. Growth that results from the extension of markets generates lower costs and efficiency gains but often entails new forms of exclusion or dispossession. A progressive policy agenda must envisage a path in which economic growth and social change are connected and mutually reinforcing. This requires revisiting some of the assumptions made in previous attempts to connect redistribution and growth.  In the past 30 years, the democratic state has enacted a significant increase in income redistribution through fiscal means (i.e. taxation to finance income and services for the poor). However, this path of redistributing income has reached its limits. I suggest those concerned with growth and egalitarian transformation should shift their attention from income transfers towards the redistribution of assets and endowments.  South Africa’s development trap and the GNU program Increasing GDP may not be the central goal of South Africa’s development age