I recently read an article in the British Press on how the installation of Rooftop Photovoltaics Solar Panels (PV’s) in South Africa makes the society even more unequal. It is an attention grabber, and poorly informed article.
Firstly, the electricity price that Eskom, the South African power utility, is allow to charge, is set by a national regulator. At current prices, foreign investors are falling over themselves to get their hands on Independent Power Producer contracts, because the return on their investment is to attractive. That means that there is not much pressure to increase electricity prices, no matter how many private households install PV’s on their roof.
Secondly, there are much fewer periods of load-shedding because private individuals and companies generate their own electricity, instead of relying on the intermittent supply of Eskom. Less load-shedding leads to more productive economy, which leads to more job creations. That is good news for the youth, where every second one does not have a job.
More importantly, it is a bit rich for a foreign journalist to criticize the increased use of solar panels for home electricity generation, because it will increase the Gini coefficient. The worlds Gini coefficient has increased dramatically over the last 15 years in favor of the developed markets. The whole of Europe and North America has experienced a boom in housing prices fueled by an almost 0% interest rate environment. In contrast, residents of developing countries are charged double digit interest rates when they wanted to purchase a home.
It wasn’t only the property market that sparked a wealth boom, but the stock markets shot the lights out. Should they have not benefited from the stock market boom or the housing bubble, they were at least sure to find a job. Unemployment rates across the rich world were at all time lows. Many companies are desperate for more workers. In some countries there were two to three jobs open for every person looking for work.
All of this is a good thing, obviously. And I am not arguing that it happened at the expense of the developing nations. However, we know that a country with a small middle class and a high disparity in wealth is an unstable one. And therefore, a world with a widening divide between the rich and the poor nations is going to be an unstable world.
Immigration is a topic that often decides elections. The hope of making their lives worth living will always draw the desperate people of poor countries to the rich ones. Unless the developed countries take their responsibilities as world citizens seriously, tensions will increase.