- Written by Leonard Gentle
The long wave of decline in capitalist accumulation that began in the 1970's is reasserting itself after the stock exchange bubbles of the 1990s and early 2000s. Major states have tried everything from cutting interest rates to (almost) zero, to partial nationalisation, to buying the debt of corporations, to printing money (also known as quantitative easing).
But what has the response of the South African state been and what does it tell us about our own brand of capitalism?
South Africa was in recession for much of 2009. Manufacturing output is down and there are lower returns on commodities. About one million jobs have been lost, so far, in 2009. Yet, unlike the US, Britain and the countries of the European Union (EU), our state has not gone on a frenzy of nationalisation, printing money or aggressive interest rate cuts.
Instead, what can be called the "commanding heights" of neo-liberal capitalism – the finance oligarch's, the speculators and the financialised corporations, are bolstered. This can be seen with regard to interest rate policy, monetary policy and exchange control policy.
The Reserve Bank has made five rate cuts since December 2008 and increased the frequency of its monetary policy meetings. But prime rate cuts have only been from 12% to 7% -- modest by international standards, and continuing to be amongst the highest in the world. This, despite all the evidence of a prolonged recession, one million jobs lost, the decline in manufacture/industrial output and so on, which should have prompted a much more aggressive round of interest rate cuts.
As a result, speculators are borrowing in the (almost) zero-interest rated countries and then buying bonds and equity in high interest-rated countries. The South African state makes it profitable for them to do so -- even at the expense of "the real economy."
The rand, we are told, is over-priced. This, of course, is largely driven by the decline of the dollar and the subsequent shift by speculators into gold and currencies like the rand. So despite the talk by Cosatu and others about intervening to bring the Rand down – because it makes traditional manufacturing and commodity exports more expensive (and that, by the way, in the financialised globalised world is so 'yesterday') – the Rand's strength is allowed to continue.
New Minister of Finance, Pravin Gordhan's, Medium Term Expenditure Budget Framework is illustrative in this regard. Whilst apparently committing the state to largely the same level of expenditure as Manuel's 2009 budget (despite lower revenues and a therefore increased budget deficit) and increasing the child support grant to include children up to the age of 17, his main intervention was to further remove exchange controls. In the midst of, admittedly only rhetorical, calls by governments of all the developed countries for greater regulation of financial speculation, the South African state does the opposite. It increases the tradeability of the Rand and the easy flow of capital.
Government's responses are notable for their complacency. It has launched, under the auspices of the Presidential Joint Working Group, a framework plan. The plan consists of five measures, namely: decent work, accelerated employment measures, social measures, investment and macro policy measures, industrial and trade measures, as well as global co-ordination.
These initiatives, however, provide neither an analysis of the causes of the crisis nor any will to turn the economic situation around. Implementing descent work is left to employers, as the chief planners of production and investment, to determine. Despite talk of a developmental state, there is no commitment to legislation or regulation to force the hand of employers.
Public sector employment is limited to talk about recruiting high-income managers and professionals. The new Extended Public Works Programme speaks about two million jobs, but is silent on how to avoid the notorious, vulnerable labour conditions. The plan makes a commitment to fair labour practices without spelling out legislative measures to enforce such commitments.
The plan speaks about expanding UIF benefits, but, given the shrinking contribution base of employed people as a result of the crisis, it is not clear how this will be achieved unless huge transfers are made by the state.
In the meantime, the government is party to a NEDLAC agreement with COSATU and Business and speaks of a National Jobs Initiative. The NEDLAC agreement takes the form of voluntary commitments on the part of the bosses and the state to use the CCMA in retrenchment negotiations, for greater investment and for 'buying South African'.
But there is no process for the enforcement of any agreement. Worse, the agreement seeks funding from provident funds – essentially workers' money – whilst retaining a commitment to restore faith in capital markets, which caused the problems in the first place.
Why has the response been so modest?
The conventional view is that South Africa's financial institutions have been relatively protected from global speculation in debt. Only they would know how true this actually is.
A more nuanced view is that South Africa's insertion in the capitalist world, with all the unevenness that that implies, has actually benefited sections of capital at a time of crisis.
Sections of South African capital – mining, telecommunications, retail and tourism – have scored well with investments in Africa. Such investment in commodities has enjoyed the benefits of China’s continued growth and demand for commodities. But, more importantly, the US' crisis – its debt and the fragility of the dollar - have meant a shift in investment to gold as a hedge and to bonds and currencies backed by high interest rates and high degrees of tradeability, like the rand.
So, the South African state's responses are about making it possible for the state’s main clients, the financiers, to score from South Africa's insertion in the world, the financialised nature of big capital and the current conjuncture.
Keeping high interest rates and not printing money makes sense; having fewer exchange controls and a stronger rand makes sense; even if it makes other sectors of capital non-viable, because it is consistent with the state carrying out its responsibilities to what has become the financialised "commanding heights" of the South African economy.
This article was first published online here: http://sacsis.org.za/site/article/399.1