Introduction
The global economic crisis is bound to reverse gains made in the war on poverty and frustrate the efficacy of ongoing pro-poor programmes. This assessment flows from the bleak picture of global trends in unemployment, poverty and inequality presented in the latest International Labour Organisation (ILO) report and forecasts (ILO 2009). What is even more alarming is that this dismal trend was initially concentrated in the ‘heartland of global capitalism’ (Gowan 2009) but is rapidly spreading to poorer economies on the periphery. In South Africa the impact of a prolonged economic slump is likely to be severe, given its jobless rate of about 25 per cent and the fact that close to 50 per cent of its population is trapped below the R462 per month poverty line (The Presidency 2008). It is commonly accepted that a recession works against the poor through two main routes. First, it is inevitable that the slump in economic activity will trigger a surge in job losses, with almost all the suffering inflicted on workers in low-paid and precarious employment. Second, the resource curtailment that results from an economic meltdown of this magnitude is likely to further cut already strained fiscal resources available for pro-poor social programmes. South African policy makers and their counterparts in business and trade unions appear to be acutely aware of how the recession is set to hurt the poor.1
The exigency of the situation has become inescapable and is prominent on the agendas of policy makers and grassroots activists. For example, a G20 communiqué issued on 14 March 2009 in the lead-up to its London Summit resolves to ‘take all necessary actions to ensure the soundness of systemically important institutions’. Global responses to the economic crisis vary from emergency actions to avert immediate systemic damages, to talks about radical systemic change. Examples of the immediate actions include stimulus packages (fiscal deficits to finance corporate criminals?) as well as rolling out plans to give the ‘global financial architecture’ a makeover. Proposals to structurally overhaul the economic system range from the nationalisation of financial institutions to consideration of how to rid the world of neoliberalism. Despite the profound questioning of the capitalist socio-economic model (Wolf 2009, Eichengreen and O'Rourke 2009, Friedman 2009), all the popular mainstream anti-crisis proposals are restricted to trying to salvage capitalism rather than transcend it. This coincides with spot-on, scathing critiques of award-winning economists (Soros 2008, Friedman 2009, Wolf 2009), for their textbooks and abstract models of made-up stories about isolated virtues of the system fail to credibly explain what is going on, and remain at a loss as to how to permanently cure capitalism of this type of destructive instability. Moreover, genuine and sustainable solutions to counter the effects of the slump on millions of its impoverished victims are not forthcoming.
Against the backdrop of these global events, how has the South African ruling elite responded to the economic crisis? Initially, key policy makers downplayed the possibility of the domestic economy sliding into recession. This position now stands exposed as ludicrous. For without radical interventions, a peripheral economy dependent on mining exports cannot simply decouple from the wild fluctuations of global capitalism. Nevertheless, as the local economic downturn started deepening, the state reacted by adopting a minimal set of anti-crisis responses favoured by the global elite. It is, for example, willing to expand its corporate welfare system (through fiscal deficits and other counter-cyclical measures). But it refuses to openly debate policies (even ‘partial nationalisation’) that point in the direction of a radical break with a system that imprisons the poor in abject misery so long after the end of apartheid. Yet at the same time, it is virtually impossible to encounter official responses to the global economic slump not expressed in pro-poor rhetoric. Two interesting questions arise: how pro-poor is the deep-seated economic logic of these responses to the economic slump? And what benefits exist for poor working people from restored growth within a systemically unequal and anarchic political economy? This brief analytical narrative explores these core questions.
The goal is not to repeat the well documented and exhaustive analyses of how the economic crisis started and evolved. Instead, this briefing exposes the different ways in which the costs of the downturn and recovery will be downloaded onto the poor. It argues for and invites critical thinking about pro-poor socio-economic alternatives that go beyond mainstream measures that are structured against the poor. Towards this end the second section gives a snapshot of how government's thinking about the crisis has gradually shifted over time. The third section shows how the global stimulus framework sets the parameters for the local interventions. A critique of the touted pro-poor measures to drag the economy out of recession is presented in the fourth section. The conclusion stimulates some thinking about ‘anti-capitalist transitional alternatives’ for the poor.
A system-wide economic downturn
How has the South African government's perception of the global economic crisis evolved in recent months? A document spelling out the official viewpoint, entitled Framework for South Africa's response to the international economic crisis, appeared on 19 February 2009 (RSA 2009). During the preceding year, key state officials had joined the global political and corporate elite in forums convened to figure out the nature of the economic collapse and appropriate strategies to salvage the system. South African policy makers generally downplayed the possibility of any local recession, investing their energies in talking up the economy. Then, on 3 April 2009, the South African Cabinet issued a media brief in support of the resolutions of the G20 summit in London. The G20 summit had concluded the previous day with a firm commitment and time-bound action plans to tackle and solve the global economic crisis (or more precisely the ‘financial crisis’, as they prefer to characterise it). Following the lead of commentators around the world, the state lamented the fact that the global system had been plunged into its worst economic crisis in almost 80 years. However, it stopped short of saying that the world was approaching, or exhibiting compelling signs of, another Great Depression,2 presumably to avoid spreading or fanning the flames of the panic and despair which become so contagious in typical crisis situations.
Globally, influential commentators locate the origin of the global slump in rival causes, or a mix of interactive causes: the complacent mindset of economic policy makers like Alan Greenspan, because they failed to create proper financial markets (Financial Times 2009, p. 10), the consumerism of low-income individuals (workers) living beyond their means, etc. Despite the nuanced differences in these rival explanations for the global downturn, a few common themes cut across the mainstream arguments. First, there is a compulsion to pin down a particular cause in the hope of finding ready-made solutions and thus averting broader systemic damage. The inherent danger in this reasoning and strategy is that it risks ignoring plausible alternative, or more fundamental, causal factors. For in an economic system based on the ruthless hunt to sustain and raise the rate of profits, a general chaotic tendency to over-accumulate and overproduce is constantly present. Second, human agency is blamed (albeit an asocial agent outside a systemic framework) (Friedman 2009), rather than traditional sources of economic crises usually described in terms of some form of arcane calamity. In this instance, the blame was pinned on finance capitalists (or sections of this group) simply because it became impossible to conceal their avarice and flagrant crimes.3
Local neoliberal experts only offer superficial and contradictory clues as to why the economic crisis managed to spread so fast. Commentators are generally silent on why the crisis moved so swiftly from a housing bubble fuelled by vulgar financial speculation to all other sectors of the American economy. More importantly, government spokespersons fail to logically explain why and how this recession crossed the borders of the major imperialist countries to drag even South Africa into the slump.4 Yet in the not-too-distant past we were reassured of the robustness of the country's financial institutions and regulations. When the Minister of Finance delivered his Medium Term Budget Policy Statement in October 2008, this is how he reflected on the economic crisis:
The thunder will pass. We can say to our people: our finances are in order, our banks are sound, our investment plans are in place, our course is firmly directed at our long-term growth and development challenges, and we will ride out this storm, whatever it takes, together, on the strength of a vision and a plan of action that we share. (Manuel 2008 , p. 4)
Locked inside the global rescue framework
Towards the end of 2008, approximately a year after the start of the worsening slump of the American economy and the implosion of other imperialist economies, the South African economy started to nose-dive at a breathtaking speed. The hyped-up (fictitious) boom of recent years, based on the extravagant consumerism of the old and nouveau rich (the black elite) and the mining export bonanza, simply became unsustainable. At the same time the ‘sudden downturn’ exposed the hollowness of the boom, its heavy dependence on foreign capital, and the enduring lopsided structure of capitalism in South Africa.
Popular concern now turned to the severity and duration of the local recession. In fact, throughout 2008 social pressure had started mounting on the state to counter the rising costs of food and energy. The Congress of South African Trade Unions (Cosatu) launched its typical one-day stay-at home campaigns in July and August before its leaders entered the National Economic Development and Labour Council (Nedlac) bargaining chambers with government and business partners (Mail and Guardian, 6 August 2008). Voices on the margins of this protest movement rightly connected the threads of local struggles to lower the cost of living with the globalising economic crisis. This deteriorating reality forced the economic spin-doctors to adapt their measured responses to the economic crisis.
Although the state's response to the recession is decorated in pro-poor rhetoric, it remains firmly embedded within the capitalist orthodoxy. Some of its anti-crisis measures indeed do appear to benefit the poor. However, any proper evaluation of the underlying logic of these measures must take into account the broader context and thinking that shape anti-recession plans. Before examining the most popular local responses, it is necessary to show briefly that the recovery plans of imperialism actually dictate the limits of local interventions.
First, the South African state has resolved to throw its support behind the G20, which is under the firm control of big imperialist powers. Second, in terms of the content of its anti-recession programme, the following elements feature most prominently: there is widespread deflection of attention to the need for social solidarity in this moment of economic distress, but without demonstrating that the full cost of this economic destruction will be offloaded onto working people; and it advocates fixing the global financial architecture with measures such as tighter regulation and coordination of the financial system, more money being made available for developing countries through the IMF/World Bank, and bringing the guilty financial corporations to book. After maintaining a budget surplus in recent years, the state is now prepared to run budget deficits, but within the restrictions imposed by investors (foreign and local), global rating agencies and the Bretton Woods institutions. But who is likely to benefit from this tiny rise in the budget deficit: rich corporations or the poor? Almost all this money has been allocated to enrich construction monopolies renovating the country's infrastructure for the 2010 world football extravaganza.
Finally, while the scandalous corporate bailouts fit neatly within the framework of capitalism, the nationalisation of collapsed financial institutions carries some radical undertones. In rich countries, scandals persist that corporate executives have used the bailout packages to award themselves lavish ‘bonuses for failure’. At any rate, taxpayers are unlikely to ever know what happened to their money thrown into these bailouts, because this entire system of competition and speculation thrives on business secrets. The partially nationalised firms, of course, will eventually be returned to full private ownership (The Economist, 2009); it is a scheme ‘to nationalise the corporate losses but to privatise the gains’. Despite the fact that this is a badly twisted form of nationalisation, it is worth asking how this idea has resonated with the South African governing party. Remember that during the liberation struggle era, even the ANC fought for nationalisation of the commanding heights of the economy. Make no mistake, today a thoroughly democratic programme of nationalisation remains critical to the restructuring of the political economy in the interests of the poor majority. Unsurprisingly, and consistent with the market fundamentalist faith of the ANC, a deadly silence has prevailed on even this half-baked type of ‘nationalisation’. Without a doubt this serves to reassure investors that the party will never pursue any ‘leftwing utopian’ project.
Critical analysis of ‘pro-poor interventions’
The living and working conditions of poor black South Africans have seen little improvement since the end of apartheid in 1994. Terreblanche (2009) has consistently shown that a more careful analysis of official statistics actually reveals a woeful deterioration in the conditions of the poor over more than a decade. For example, the standard measure of inequality for the country, the Gini coefficient, increased from 0.64 in 1995 to 0.69 in 2005. There has thus been a widening gap between the rich and the poor in the country, driven in part by policies designed to fast-track the creation of a black economic elite. Over the same period, the simple poverty headcount, based on a monthly poverty line pegged at R462 per person, shows a marginal fall in poverty from 53 per cent in 1995 to 48 per cent a decade later (The Presidency 2008). Narrowly defined unemployment only started dropping below 30 per cent in the last five years, due to the economic boom as well as a series of ‘revisions on how to define and count an unemployed worker’.
However, sceptics from conflicting ideological standpoints question the positive trends in the dubious official statistics. Critics underscore the argument that there has been manipulation of statistics to conceal extreme and deep-rooted misery in contemporary South Africa. A thorough analysis of these disputes falls outside the scope of this briefing.5 But a careful study of the facts raises key questions about the socio-economic policy framework institutionalised after 1994. The GEAR macroeconomic policy and the post-apartheid Constitution entrench a socio-economic model based on private accumulation of wealth and profits. GEAR is a free market fundamentalist doctrine which prescribes wholesale privatisation as well as labour market flexibility. The Constitution promotes and protects private property. Why have these policy instruments been so blunt, and so ineffective in dismantling the socio-economic edifice of apartheid and radically reconstructing a social system that benefits the poor majority? To what extent has the dogged implementation of neoliberalism in South Africa worsened the suffering of the poor?
Given the importance attached to the anti-crisis Framework issued on 19 February (RSA 2009), its pro-poor economic logic deserves proper analysis, albeit briefly due to limited space. This Framework basically outlines three mechanisms by which to alleviate the plight of the poor: reliance on the workings of the labour market, scaling up of social welfare programmes, and better access to basic social services for poor families. There is now a closer look at how, in practice, each mechanism is likely to work against the poor.
The notion of making private sector labour markets work for the poor is apparently at the heart of government's response to the economic crisis. But this is far from any innovative proposal because the wage labour system is the engine of the existing political economy; the well being of working families is tied to their ability to work (Smith 2003). Core policies (such as GEAR) that entrench the wage labour system, designed to intensify the exploitation of working people, are definitely not being abolished. Even mild and ad hoc reforms to counter the increasingly egregious exploitation of workers for the profit of monopolies that control most of the economy are not on the agenda. On the contrary, the anti-crisis Framework document merely urges ‘companies to do everything in their power to avoid retrenchments as a result of the global economic crisis, and to instead invest in their people and modernise their productive capacity’ (RSA 2009, p. 15). It includes tax breaks and other measures to rescue ‘companies in distress’ (like the job-shedding textile industry) that pose no threat to the wage-capital relation. But it is silent on basic and workable pro-poor options, for example, restructuring failing and idle firms and placing them under the democratic management and control of self-organised workers.
Urging corporations to invest in technology and a skilled workforce is contradictory and deeply flawed. Typically, a capitalist enterprise invests in technology to raise the rate of profit and beat its rivals. But this drives cycles of over-production, financial speculation, fictitious growth (economic bubbles) and crises. When corporations do decide to invest in a few skilled workers, this tends to increase unemployment rather than reduce working hours for the sake of a sustainable expansion of decent jobs.
The state plans to upscale access to its vast menu of social welfare interventions – state social grants, public works, food relief schemes, etc. It is estimated that at least 12 million South Africans (or 25 per cent of the population) receive social grants, with the number of beneficiaries steadily increasing over the last decade. The old age, disability and child support grants certainly reach some of the poorest households, often being the sole source of household income. Periodically the state has increased the monetary value of social grants, but because increments have been below the inflation rate, the purchasing power of the social grants tends to fall due to the skyrocketing cost of living. At a more fundamental level, the capitalist socio-economic model restricts or undermines the sustainability of an extensive pro-poor social welfare system (Smith 2003). With more aggressive fiscal belt-tightening suddenly easier to justify in the context of the economic crisis, the move to drastically cut the size of the social welfare budget is likely to gain momentum. Moreover, neo-classical labour economists forcefully argue that social welfare grants pegged at high levels discourage the unemployed from seeking work and cultivate dependency on the state (Nattrass 2007). The premise of this policy advice is that the invisible hand of the market is the best regulator of social justice for the poor – a fallacious and unrealistic assumption. Furthermore, it builds on spurious abstractions about individual rationality and maximising behaviour.
The government's Expanded Public Works Programme (EPWP), tasked with contributing massively to halving unemployment by 2014, has been critiqued on similar grounds. Notwithstanding such criticisms, the revised EPWP now guarantees beneficiaries full-time jobs for a year, a change from the earlier model of the programme which catered for short and irregular jobs of six months' duration. But this scaled-up EPWP is hazy on the wage levels involved, and this raises doubts as to whether it is a genuine path out of working poverty. Furthermore, it fails to reflect on big political economy issues that an anti-capitalist public works programme could explore, for example, stimulating thinking about how to use public works as a transition to permanent and decent jobs. Another issue that could be examined is whether it is possible to use public works as a platform to dynamically restructure and transcend the badly discredited market-based model, in order to provide affordable, efficient and quality services to the poor.
The state has repeated promises to expand poor peoples' access to basic social services, ranging from water and electricity to housing and roads. However, in practice it has been unable to deliver on these promises and this failure has sparked militant protests in townships across the country. It is true that poor families enjoy rations of free water and electricity. But as soon as they exhaust this ‘free quota’, access depends on their ability to pay charges dictated by private companies that control the water and electricity networks. Poor people are increasingly directed to financial corporations to gain access to houses. Local governments, correctly viewed as closer to the people on the ground, are in practice bankrupt, indebted and often dysfunctional points of service delivery (National Treasury 2008, SARS 2008). This is unsurprising, because all tiers and divisions of government function in line with the neoliberal framework of the post-apartheid state. This has meant that corporate welfare guides the operations of local governments, whilst the social welfare of the community must rely on the magic of ‘trickle-down logic’.
Conclusion
This article has briefly analysed the economic logic of the pro-poor responses of the South African government to the global economic crisis. As the local economy started sliding into recession, the state echoed the global political and corporate elite in talking up the economy and its neoliberal fundamentalist policies. It pinned the cause for the crisis on a mix of factors connected to the activities of financial capitalists. Although sections of finance capital triggered the recession, this is basically a classic economic slump rooted in capitalist over-accumulation, falling profit rates and the expansion of fictitious credit. Integrated into the global economy as a mining exporter and heavily reliant on foreign capital inflows, South Africa has been unable to escape being pulled into a downturn on this huge scale.
It has been illustrated how the state is aligning its anti-recession interventions to the stimulus packages of the global elite. Within this framework, it has adopted a minimalist set of anti-crisis proposals that steer clear of threatening or transcending the reign of capital. Yet the cost of the slump is set to be downloaded onto the poor, the majority of whom are mired in chronic structural poverty. To counter this accelerated depression in their living standards, poor people have stepped up their social protests, thus intensifying pressure on the state for workable measures to relieve their suffering. In this situation the state has been compelled to adopt pro-poor rhetoric to articulate its interventions to salvage capitalism. The post-apartheid governing elite is well known for adopting this populist tone, while at the same time resolutely sticking to and implementing capitalist policies that inherently work against the poor. It is a form of neoliberal populism that helps to politically disorientate and disarm the trade unions and emerging popular movements. It shields the elite in their accumulation of power and wealth as they switch between political office and the corporate world.
Debating concrete alternatives to capitalist economic crises, radical left thinkers invite us to think through, formulate and advance realistic anti-capitalist measures (Callinicos 2003, Smith 2003, Blackburn 2009). For the moment, one could probably refer to these as anti-capitalist transitional alternatives. They are transitional in that the solutions are practicable actions to overcome economic crisis, but also seek to revive accumulation which serves as a bridge to move towards socialism. As a case in point, Blackburn (2009) introduces anti-capitalist transitional alternatives to restructure the financial system. The basic idea behind these is a network of social funds to serve the needs of the poor, financed through taxes on corporations. But this network of social funds must be placed under popular democratic control, an approach in sharp contrast to the temporary banking nationalisation under corporate management currently taking place.