There are increasing indications that in economic terms, the chickens are coming home to roost both in South Africa and beyond. Between the vulnerability of our own local currency and the volatility of worldwide influences, it’s time to take a long, hard and critical look at global capitalism – and take urgent practical steps to help local industry thrive.
Even before last Thursday, world economic conditions were worsening, with the likelihood rising of another financial meltdown before year’s end. Then, amongst other “cold shower” signals, the Brexit vote confirmed that many English working-class voters feel Euro-globalisation has gone too far and left too many ordinary people behind.
Most importantly, the rise of xenophobic and racist sentiments in what is a declining ‘labour aristocracy’ must be opposed, whether in Europe or in Donald Trump’s US support base. But neoliberal economic policy’s failure is part of the reason the populist Right is gaining ground.
Brexit also unveiled the rand’s vulnerability, what with Friday’s 8% crash in a few hours. But there is a much deeper fragility we must correct. The ongoing demise of our country’s productive investment rate follows two years of falling exports, coinciding with the commodity price crash. This condition, which Marxists term ‘over-accumulation crisis’, reflects capitalism’s most profound contradiction: overproduction in times of acute income inequality.
Yet the high priests of the Washington Consensus continue to preach that South Africa must be uncritical of neoliberal globalisation. On the one hand our degenerating global economic stance is partly due to never-ending international publicity about the corrupt Zupta network’s undermining of state and parastatal integrity. But on the other, a more durable cause for economic vulnerability is the neoliberal ideology in the Treasury, Reserve Bank and big business.
It is humiliating to see the ANC government praying to a new God: the credit ratings agencies – Standard & Poors, Fitch and Moody’s – which continually blackmail Finance Minister Pravin Gordhan by threatening to label our state credit as worth “junk”. Because they insist Gordhan cuts what is a relatively small budget deficit/GDP ratio (less than half what it was in 2009 when Moody’s actually raised our rating grade), praying to these economic gods will only worsen our prospects.
Unfortunately, we hear unfounded claims that ‘organised labour’ is being consulted about macroeconomic policy including budget cuts. Even though Gordhan denied cutting social spending at the Daily Maverick Gathering on June 10, Treasury austerity includes chopping several percentage points off the grant incomes of our poorest citizens: dependent children, the disabled, and the elderly.
And in areas we desperately need much more state involvement, such as water infrastructure maintenance, thanks to extreme drought and pollution crises, Gordhan’s cuts are in the double digits (12.4% from 2015 levels). He is also cutting municipal financing and the housing budget, in spite of local elections approaching.
This is no formula for recovery, and the National Union of Metalworkers and our allies renounce the advice of neoliberals who have Gordhan’s ear. The Congress of SA Trade Unions joined the ‘Team South Africa’ begging trip to meet foreign investors a few months ago. But more principled trade unions which are forming a new workers’ federation want no part in ‘class-snuggle’ with the likes of Goldman Sachs, the bank whose herd-speculation sunk the Rand to R17.99/$ on January 11.
Gordhan confessed in Parliament a few weeks ago: “What we should all be focusing on is how we inspire confidence in our economy, how we stop shooting ourselves in the foot, how we focus on providing new and creative answers.”
How indeed? Perhaps he could raise – not slice – state investments in basic-needs infrastructure and services that poor and working people so badly need, the lack of which is causing so many protests.
Another bullet in our economy is Pretoria’s reaction to the global steel crisis. For just as Karl Marx and African political economists like Dani Nabudere and Samir Amin predicted, when overproduction tendencies rise, even from our BRICS partner China, the first victims are economies whose leaders are too weak to protect our borders.
Chinese capitalists are currently overproducing steel at an unprecedented rate: their capacity is over a billion tonnes/year but world overcapacity is already 550 million tonnes. No wonder local industry is being demolished by cheap imports. China’s Yuan currency is kept artificially low thanks to exchange controls, while repression of labour, migrant worker discrimination (not unlike apartheid’s), and ecological destruction are widespread.
With only 10% protection recently imposed against this steel tsunami, we are suffering closures of numerous foundries plus thousands of job losses, including at those owned by an Indian (Lakshmi Mittal – Arecelor Mittal) and a Russian (Roman Abramovich – Evraz Highveld). Both tycoons are milking the firms dry.
ANC rhetoric about imminent prosperity thanks to our BRICS membership is merely cheap talk, with expensive results. Our excessive reliance on commodity exports to China and India is another bullet that ANC neoliberals have pumped into our economic feet, legs and torso, just as did Brazil’s government. There, the economic crash is nearly entirely due to the foolish decision by a formerly progressive economic-liberation movement – the Workers Party – to gamble on Brazil’s extractive industries and then to replace social democratic policies with austerity in 2015.
Rousseff made the same error the ANC is making: turning away from a popular developmental mandate and towards neoliberalism, just as the commodity crash hits hardest. She built corrupt white-elephant mega-projects, replaced her finance minister with a Chicago-trained banker, cut social welfare and public investment finance, privatised state assets, and raised both taxes and interest rates.
All this doubled unemployment and cut her popularity to single digits, leaving her far fewer defenders amongst the masses, and providing an opening to the corrupt right-wing coup plotters, including a much-hated vice president she should never have accepted from the opposition party, Michel Temer.
If the ANC government were serious about solidarity with a democratic ally, Pretoria would have withdrawn its ambassador from Brasilia and demanded that the BRICS immediately suspend Brazil (as happens with coups in the African Union) – but Zuma is far too timid. India’s right-wing Modi regime already has welcomed Temer for the next BRICS summit in Goa four months from now.
Could Gordhan stop shooting bullets into the economy and instead insulate us from world capitalist crisis, including the destructively hyper-competitive, over-productive BRICS corporations? If he wanted to take better aim, here are three silver-bullet strategies to reduce vulnerability:
1) Immediately reimpose tough exchange controls to halt capital flight, thus gaining the ability to:
2) Rapidly lower interest rates without the danger of capital flight, and
3) Urgently nationalise the steel industry so as to halt its destruction and to re-industrialise our economy.
It is our understanding that Gordhan’s mandate is the opposite: continue shooting bullets into the South African economy in the interests of foreign capital. These bullets were recently reloaded by the International Monetary Fund in this approving statement: “The government and the Reserve Bank have taken appropriate steps… The government’s 2016 Budget targets are appropriately ambitious.”
Like elite-globalisation’s adverse impact on England’s Brexiters, Gordhan’s ‘ambitious’ attack on the ANC’s natural constituency will be repaid on August 3, by angry poor and working-class protesters across the country.
However, unless South African workers join the emerging federation, unless communities and youth ally with the United Front, and unless a party of the left gathers them up for coming elections, Gordhan and Zuma will continue their mutually destructive relationship, bickering over a bullet-riddled party and economy, with a society as sharply divided as Brazil’s and Britain’s. DM
Irvin Jim is General Secretary of the National Union of Metalworkers of South Africa