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The president, the finance minister and the economists

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Opinionista

The president, the finance minister and the economists

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Oupa Lehulere is a veteran political and social activist and the Director of Khanya College. Email: [email protected]

On 30 March about 76 economists and 29 other academics and experts in various fields of study published an open letter to President Ramaphosa on the Covid-19 crisis. However well-intentioned, the economists had their heads in the sand and ignored lessons of recent weeks and history.

The open letter had been in circulation on social media platforms from at least 27 March. The over 100 signatories to the letter asked the president, in the main, to put massive financial resources towards fighting the Covid-19 pandemic. They warned of the coming global recession and indicated that the economy could contract by up to 7%. They proceeded to warn of the risk that “millions in poverty will fall into destitution” and “thousands of businesses will be forced to close”. 

They made the point that “to date, the measures announced by the South African government, although welcome, do not match the scale of the challenge”. They further argued that “the scale of interventions required will necessitate additional fiscal and monetary expansion by the Treasury and South African Reserve Bank (SARB) respectively, as has been the case worldwide”. 

The statement went on to identify a number of interventions that were needed. All these proposals, and the overall position on fiscal and monetary expansion, had already been made by a variety of social movements and NGOs for more than two weeks prior to the open letter. Indeed, as the open letter itself indicates, the measures proposed have become part of common sense “worldwide”.

If the open letter itself introduced nothing that was new in the debate on Covid-19, either internationally or in South Africa, what does it teach us about the struggle against the pandemic in the current South African context?

The economists appease the president

The open letter begins by commending the president for “the bold and decisive public health measures that you have taken”, and “welcomes” these measures. 

It is difficult to imagine the world or country in which the 100 or so economists and academics live. Since the epidemic began in China, then spread all over the world, and since it became clear that South Africa would not be spared, the South African state did next to nothing to prepare the country for the imminent threat. Indeed, as the Treasury prepared its Budget for 2020/21, nothing was said about Covid-19. 

Further, since the first confirmed cases of Covid-19 the state still has no battle plan on how to fight Covid-19. What we get from the government is a shopping list of “measures” (some announced more for effect than substance), that many who are in townships, taxi ranks, informal settlement, clinics, hospitals still await to see in reality.

 In “appreciate[ing] the Temporary Employment Relief Scheme” against the evidence, in factories and shops, of employers that are running amok in forcing workers to take leave, in closing factories without arrangement for payment of workers, and retrenching workers, it is difficult to see how such a state of affairs could be “appreciated”. Indeed, there is no evidence for the “decisive” interventions in a country where clinics do not even have basic sanitisers at the gate, where health workers do not have personal protective equipment, and where clinics do not have provision for patients to wash their hands. 

Moody makes a move, and Ramaphosa blushes

As bad luck (or was it luck for some?) would have it, on 27 March, three days before the open letter became official on 30 March, the rating agency Moody’s downgraded South Africa’s investment rating and set it at sub-investment grade or junk status. Moody’s had South Africa on a negative watch, and it was a matter of time before SA’s sovereign (government) debt was junked. Since private corporations in the country cannot have a global investment grade higher than their state, this also means corporate South Africa was now “junk”. 

On the same day of the downgrade, 27 March, the National Treasury issued a press statement in response to the downgrade. This press statement lamented the impact the downgrade would have on the South African economy and promised to implement “structural economic reforms”. This is a well-known euphemism for economic austerity and neoliberal social and economic policies. Indeed, just a month ago, on 26 February, the Minister of Finance had shown how “decisive” and resolute he was in implementing “structural economic reforms”. In his Budget speech, the Minister slashed and burned state salaries, cut expenditures on social services including health, and in general delivered a Budget that left big business (local and international) smiling all the way to the bank. 

The minister of finance, the president and the ANC were therefore exceptionally well-behaved. 

Moody’s knew all this. 

Moody’s, however, also knows what is happening “worldwide” with respect to government expenditures, and with respect to the likely future of neoliberal economic and social policies. What has been giving Moody’s and other “hard neoliberals” nightmares have been governments that have spent money well beyond what neo-liberal budgeting allows. As the open letter states, “the United Kingdom, France and the United State have injected resources totalling 18.9%, 13.6% and 10.7% of the GDP into their economies”. 

This is heresy in neoliberal economics and for Moody’s, South Africa was not going to be allowed to go the same way on account of the pressures exerted on the ANC government by Covid-19, and by the population in general. Moody’s had to make a move – and Moody’s made a move. 

Downgrading SA’s credit rating was therefore a strong signal to the government that they should not even dream of going in the direction taken by other governments “worldwide”. Quite a feat for a government that just follows anything that happens “globally” and that it regards as “world-class best practice”. 

But Moody’s does not speak alone. It speaks not just on behalf of global capital, but also on behalf of South African capital. South African capital needs foreign reinforcements all the time because the ruling elite faces an insoluble contradiction: they preside in the interest of big capital (local and global), but their electoral base lives in informal settlements and below the poverty line. The external whip is therefore always necessary to keep the (South African) neoliberal government in check.

What is remarkable in this Moody’s saga is that the open letter was issued after Moody’s made its move, but it makes no mention of Moody’s! On Sunday 29 March, the statement was still being discussed and was receiving endorsements, before it was issued on 30 March. Given the experience and expertise of many of the economists and academics that signed the open letter, there is no doubt that they knew the chilling effect of Moody’s move on the open letter. 

Economists and academics without memory

Many (though not all) the signatories to the open letter have a long history of struggle (at the least at the level of ideas) against the neoliberal ANC government. This history covers the best part of 25 years or more. 

Many of them were involved in the first battles in the mid-1990s against the current minister of finance and his neoliberal bloc in the ANC. Many remember that this same minister, Tito Mboweni, was the hatchet-man brought out by big capital to disown the policy report on the South African economy that was commissioned by the ANC – the report titled “Making Democracy Work” by the Macro Economic Research Group.

Tellingly, Mboweni was wheeled out to disown the Macro Economic Research Group’s position on that very important Chapter 8, which dealt with the future of the Reserve Bank and the financial system in general. It’s a small wonder that under the ANC the South African economy has become hyper-financialised, and the banks rule the presidency and through him the country. 

Notwithstanding that many of the signatories were bruised in that battle, were defeated and marginalised, they now behave as if this history does not exist. Well, any disposition towards historical amnesia and denialism was put to bed even before they issued the open letter. 

On 27 March the Treasury made it clear where they stood. If for any reason they would have thought that the president would think differently from his minister, this was put to rest on the 30 March. In his (non) statement to the nation on 30 March, President Ramaphosa reinforced the position of the Treasury when he made it clear that “we remain committed to implementing structural economic reforms to address weak economic growth, constrained public finances and struggling state-owned enterprises”. 

In that address, the president made it clear that the anti-Covid-19 fight will be fought not with state resources, but with (phoney) donations and philanthropy. There will be no massive injection of state resources into this battle – and against this, one fails to see how any “decisive” action is going to be taken by the South African state in the fight against Covid-19.

The question still remains: why did all these economists and academics behave like the proverbial ostrich? Why did they put their historical heads in the sand? This question is even more important given that we have as yet seen no statement from the signatories of the open letter responding to the affirmation of the neoliberal road by the finance minister and his president. We still have to see a response to Mboweni, who is reported to have exclaimed “Hallelujah!” and went on to say:

“We now need to move more boldly on structural reforms programme. …I have been preaching that agenda for a long time!”

So why do the economists “koop gesig”, as they would say on the Cape Flats? Why are they avoiding facing reality about the road the South African state is taking, and the hundreds of thousands of deaths and social catastrophe that awaits the working class at the end of that road?

The policy of appeasement

On the eve of World War II, one prime minister thought he could avoid the war by appeasing the fascists led by Hitler and Mussolini. His policy of appeasement ended in tears and millions of people dead. Another leader of a state founded by a workers’ revolution also thought he could appease the fascists and cut deals with them. He too paid for this policy with more than 20 million people dead. 

The fascists were finally defeated, but it is now generally agreed that the heavy cost of the victory against fascism could have been avoided. This is not to say there would have been no cost, but it is equally clear that the Soviet Union would have been more prepared if Stalin had not entertained illusions that he could prevent Hitler from attacking the Soviet Union. 

We are now on the eve of another war, a war against a deadly enemy – the coronavirus – and there are many in the intelligentsia, in the NGOs, in the trade unions and even the social movements who want to adopt a policy of appeasement towards a neoliberal state that is committed to the economic and social policy of austerity. 

So bad is the tendency towards appeasement that one movement/NGO circulated a letter to be signed by NGOs and movements that said: 

“The World Bank’s announcement of $12-billion in immediate support is promising. Through the package, which will be prioritised for the poorest countries and those at high risk but with low capacity, the Bank will offer support for a range of interventions aimed at strengthening healthcare systems.” 

How did it come to pass that after four decades of structural adjustment programmes, of at least two decades of struggles in South Africa against the World Bank and the Fund, a letter such as this could be circulated for signing by South African social movements? 

Now, the finance minister, in his “light-hearted” manner that tells us more about his embarrassment and nervousness, is refusing to use the South African fiscus to fund the struggle against Covid-19. Instead, he is reported to have said that “if I approach the IMF or the World Bank it will be if we run out of finance for health interventions”. This from a minister who has not even hinted at the possibility of additional appropriation through the fiscus, but instead has a president that promises the country false donations from the likes of Rupert, Naspers and their types.

The economists, at least those that did battle with neoliberalism 25 years ago, have also adopted a policy of appeasement. We hope that the rapid fire from Moody’s and the embrace of neoliberal austerity in the face of a national catastrophe by the ANC will wake the economists from their slumber. 

We hope they will see, even at this late stage, that their policy of appeasement is a road to hell. 

It is time for a rigorous critique of neoliberalism linked to organising

It took a while, after retreats in full disorder and millions of deaths, for the Soviet Union to slow down and then reverse the tide of World War II. 

Our economists can learn from this bitter lesson of history. They too can join the battle to slow down, to halt, to reverse and then to defeat the twin evils of the coronavirus and neoliberal austerity. This deadly alliance cannot be defeated through making unfounded praises of the state (about “decisive” action that never existed); nor will it be defeated by historical amnesia and pretending the battles of the past 25 odd years on social and economic policy were never fought; it will not be won by silence in the face of the threesome deathly embrace between the ANC, local big capital and Moody’s. 

The economists need to come over to the side of the people. It will be a difficult walk across this Rubicon, across this point of no return. Theory must meet the practice of resistance and organising in the face of the pandemic. The economists, like Julius Caesar, must now say “let the die be cast”. There will be no going back. DM/MC

Oupa Lehulere is a veteran political and social activist and the director of Khanya College. Email: [email protected].

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