On the Great Gatsby Curve and Electric Fences in South Africa

thoughts economics personal

The Great Gatsby tells the story of a man who claws his way from rags to riches, but finds that wealth alone cannot provide him the privileges of those born in the upper class. On the economic side of things, a new and hotly debated idea, dubbed the Great Gatsby curve, encapsulates this anecdote in data. It illustrates the possibility that income inequality might lead to lower social mobility in a country.

TJ Palanca https://www.twitter.com/tjpalanca

An electrified city

Having recently gone to Johannesburg, South Africa to participate in a business case competition, I’ve of course taken the opportunity to explore the city as well. On our way to Sandton City, a shopping area, I began to notice that almost all of the beautiful buildings were nested in ominous, tall, and electrified fences:

Electrified fences tarnish the beauty of many of the buildings in Johannesburg's Sandton business district

Figure 1: Electrified fences tarnish the beauty of many of the buildings in Johannesburg’s Sandton business district

All this obsession with protecting private property made me wonder how much South Africa has managed to heal from the scars of Apartheid which, after all, only ended 19 years ago in 1994. Apartheid was a former policy of racial segregation in South Africa that caused huge disparities in the living conditions between blacks and whites in the country. It permeated everything from residential areas down to the public toilets.

One could still see traces of this policy today - not of the segregation itself, but in terms of high income inequality. There were extremely wealthy subdivisions (again, protected by electric fences and even armed guards) in one part of town, but very impoverished townships on the other.