Defend Truth


Covid-19 has thrown global capitalism into crisis – can there be any escape?


Oscar van Heerden is a scholar of International Relations (IR), where he focuses on International Political Economy, with an emphasis on Africa, and SADC in particular. He completed his PhD and Masters studies at the University of Cambridge (UK). His undergraduate studies were at Turfloop and Wits. He is currently a Deputy Vice-Chancellor at Fort Hare University and writes in his personal capacity.

Cyril Ramaphosa spent the better part of his adult life wanting to be president of South Africa, and this is what his presidency has come to: No matter how he deals with this pandemic or what the final outcome, he will always be remembered for this moment in our history.

We have now seen the naked truth about capitalism and the inept manner in which it purports to deal with this invisible enemy, Covid-19. We are told that money can solve all our problems, that nothing is too big for capital to handle, but what we see now is putrid and pathetic. Wealthy countries are buckling under the pressure. Hospitals in First World countries are unable to cope with the coronavirus. Poor countries, especially in Africa, will most probably be hardest hit by this ferocious virus. But for the First World to be exposed like this is intriguing. 

The mighty European Union (EU), that purports to be a community of common purpose, of similar values and a common market, has proven to be anything but. It is common cause that EU policies aim to ensure the free movement of people, goods, services and capital within the internal market, enact legislation in justice and home affairs, and maintain common policies on trade. 

All of these wonderful ideals have come to naught since the outbreak of the coronavirus pandemic. Individual countries have not only closed their borders but have hardly come to the aid of other hard-hit member states, like Italy and Spain. Instead, the capitalist system and rules dictate that the EU makes available loans to member states in this time of utter crisis. It takes only one major crisis to expose the fragility of the EU and its bullshit with regards to being a union. Close borders now, loans instead of aid and solidarity. These are clear indications that you are on your own as a nation state. The Portugal, Ireland, Greece and Spain (PIGS) countries cannot rely on the EU for any kind of help. Piecemeal assistance here and there but nothing that resembles a clear Marshall Plan. Nothing! How pathetic can the European Union be?  

But we would have never thought that the capitalist system is so self-absorbed and selfish that it would rather resort to piracy and bullying, as we have observed from the US, the largest economy in the world. The UK would rather argue that intellectual property rights of ventilator technology remain sacrosanct in order to make a buck during this crisis, than to save lives. These countries would outbid poorer nations to purchase limited personal protective equipment (PPE) and medical equipment globally, because they can. The US insists that any vaccine development must first and foremost be made available to the US only.    

Just like the 2008/09 global financial crisis when we saw governments having to bail out corporations and “the market”, so too are we witnessing this abomination now. So, let me see if I get this right: first we actively renounce socialism as a system, in fact, we feel so strongly about this tyranny called communism, we fight wars over it. But, when the shit hits the fan back home and our precious capitalist system is in peril, we gladly apply such socialist tendencies to bail out the market, the very capitalists who insist on less government involvement in the economy and the market in good times but when the market isn’t so good, say we need government involvement NOW please. Capitalism is indeed in crisis. 

Karl Marx once argued that the capitalist bourgeoisie mercilessly exploited the proletariat. He described how the wealth of the bourgeoisie depended on the work of the proletariat. Therefore, capitalism requires an underclass. But Marx predicted that the continued exploitation of this underclass would create great resentment. In order for us to avoid such resentment and with the continuation of the lockdown, we cannot have it both ways. We either also accommodate the poor and working people, or we face the consequences.

Furthermore, according to the Alumniportal, an organisation in Germany, today, “after the end of the Cold War and in the age of climate crisis, of chronic underemployment, of global inequality, of financial speculation and of weak growth, it has long been not only surviving leftists who talk of the end of capitalism. In economics, word of ‘secular stagnation’ is spreading, and at the world summit of the capitalist elite the sentence, ‘The capitalist system no longer fits into this world’ was making the rounds.”

In Das Kapital, Marx lays claim to having discovered “the economic law of motion of modern society”. It is, first of all, a law of progress: capital-driven economy, as the sketch in the Communist Manifesto predicts, “has created more massive and colossal productive forces than have all preceding generations together”, it has fostered technology and science and created the world market. But the actors in this economy, the capitalists, are driven men: at the risk of bankruptcy, they must develop the productive forces, perpetuate innovation, press out of the workers as much output as possible and exploit the raw materials of the Earth as rationally as possible so as to transform them into commodities. Thus, capitalism creates the conditions for a world without want and hunger.

But under the systemic constraint to maximise surplus value and drive on growth, this mode of production can in the long run “develop only by simultaneously undermining the original sources of all wealth – the soil and the worker”. Best we start looking after our working class during this very difficult period.

Thomas Piketty, on the other hand, tells us that the problem was inherent in capitalism itself. Over the past century, the rate of return on capital (r) and existing wealth, owned disproportionately by the rich, had exceeded the rate of growth in the economy (g) as a whole. That had created a chasm of inequality comparable to what existed during the Gilded Age, before the gilding was removed by two cataclysmic world wars and the Great Depression. You could distil the core of Piketty’s theory down to three characters: r>g.

Piketty both diagnoses and prescribes: he tries to expose the contradictions of the reigning ideology of “hypercapitalism” and its malign consequences (including a populist-nativist backlash), and, to stave off disaster, he recommends a breathtaking series of reforms. They include a schedule of taxation on income and wealth that reaches 90% and the elimination of nation-states in favour of “a vast transnational democracy” which will secure “a universal right to education and a capital endowment, free circulation of people, and de facto virtual abolition of borders”. A serious disease, Piketty believes, calls for strong medicine.

So, Piketty’s thesis, supported by his extensive research, is that financial inequality in the 21st century is on the rise, and accelerating at a very dangerous pace. For one thing, this changes the way we look at the past.  In the 21st century he says, “this is not only the case in the so-called ‘rich’ countries – the US, the UK and Western Europe – but also in Russia, China and other countries (including South Africa) which are emerging from a phase of development”. The real danger is that if this process is not arrested, poverty will increase at the same rate and, Piketty argues, “we may well find that the 21st century will be a century of greater inequality, and therefore greater social discord, than the 19th century”.

Why I mention all this is because the current debate in South Africa is about whether we as South Africans can afford to continue with the lockdown in order to curb the spread of the virus or whether we must pay more attention to the ailing economy. The key thing here, it seems to me, is a stimulus package that is needed now.

This must comprise two crucial elements: stabilising the economy through a number of tools available and improving the socioeconomic position of the most vulnerable in our society.

How do we do this? Do we borrow from the IMF/World Bank or the New Development Bank (BRICS) or do we instigate a start to some very serious structural economic reforms? We all know what this means: in effect another self-imposed structural adjustment programme.

Or do we do a combination of both, borrowing (albeit a small amount to deal with the immediate crisis of Covid-19), combined with a self-imposed structural adjustment economic programme? Do we succumb to the desperate need of the capitalist to get the economy going again at the expense of the working people and their health considerations or do we put the people first and get to the economy a bit later?

These are the hard choices for President Cyril Ramaphosa.  And if I know anything about the people around him at this point in time, they are split down the middle surrounding these hard choices above. The neo-liberal types would want to emphasise the economy and the market because as outlined above, the capitalist system yearns for money to circulate, while the left types would want to place emphasis on the poor and leftist ideas such as nationalisation, more state intervention, quantitative easing and so much more.

Ramaphosa spent the better part of his adult life wanting to be president of SA and this is what his presidency has come to. No matter how he deals with this pandemic or what the final outcome, he will always be remembered for this moment in our history.

We now have an economy in an induced coma and that’s fine for now, we must get the swelling down and ensure the patient will be able to handle the recovery process before we slowly bring the patient, SA, out of the coma and back to normality. 

The capitalist would want us to consider the market and the stock exchange during this Covid-19 crisis, but as Paul Krugman reminds us, “jobs and deaths are the measures we should be watching and not stock markets nor ‘the market’.” DM 


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