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Umsebenzi Online

Volume 2, No. 5, 19 March 2003

In this Issue:


Red Alert

The economic question as the fundamental challenge in the current period

By Blade Nzimande, SACP General Secretary

The SACP believes that the run up to the Growth and Development Summit (GDS) presents the Alliance with a favourable context in which to develop more adequate transformational economic policies. Apart from the impending Summit, elections in 2004, the accumulated experience of nine years in government, the failure of the global economy to be an engine of growth in the semi-periphery, and much greater fluidity and uncertainty in global economic policy perspectives all create a context for pursuing greater Alliance economic policy unity. It is up to the Alliance partners to rise to the occasion.

There are many recent and welcome signs of intra-Alliance convergence - the key resolutions of the ANC’s 51st National, President Mbeki’s State of Nation evocation of a “dual economy”, and his reiterated insistence that the ANC and government are not “free market fundamentalists”. The proposed GDS is, itself, an indication that our Alliance is unified around the conviction that the economic question is now, more than ever, the fundamental challenge of our revolution.

Of course, we must also admit that this welcome Alliance convergence sees us converging, in several significant respects, out of quite different corners. Increasingly, in the recent past, key government ministers have taken to portraying the GEAR macro-economic policy package as a time-bound, “conjunctural stabilisation programme” – rather than what its acronym suggests it once aspired to be, a growth, employment and redistribution strategy. In similar fashion, we increasingly hear that industrial policy in the latter half of the 1990s amounted “to time-bound shock therapy to prevent de-industrialisation”. We are told that the radical liberalisation measures were undertaken, not out of ideological conviction, but in order to fundamentally restructure a private sector economy that was hopelessly over-protected and liable to melt-down without such drastic interventions.

In this re-writing of history, there is also a tendency to distort the positions of those (notably in COSATU and the SACP) who expressed strong criticism of GEAR and of the radical liberalisation measures. It is said that we favoured “macro-populism”, that we “imagined government could run up a huge deficit” and that it could “neglect inflation”. Of course, we never said any such things. We never argued that the budget deficit or inflation were a matter of indifference. We argued against the severity of budget cuts, against the brutal abruptness of liberalisation measures, and we argued against mindless privatisation and the assumptions of trickle-down. I do not think that anything has happened over the last half-decade to persuade us differently.

However, we can choose to put all of the emphasis now once more on debating who was right and who wrong in 1996. Or we can choose to agree to differ on certain issues within the Alliance, while agreeing that the current reality provides us with the possibility and the necessity to seek strategic answers to the key economic challenges of our society. It is this latter course that the SACP, for its part, will certainly seek to emphasise. In particular, we welcome government’s emphasis now on the need for a focused effort on job creation, the promotion of earning opportunities for the marginalised, and the acknowledgement that perhaps it is these themes, rather than the “competitive, formal” economy, should be the focus of industrial policy. Of course, some of our comrades in government will argue that this is “now possible because of the success of earlier policies”. We disagree. But we have no intention of making our disagreement the key issue on the agenda.

Let us all agree that one of the primary contradictions in our society is that of significant progress towards political democratisation, whilst economic power remains essentially still with the same class forces as under apartheid. In many ways the President’s characterisation of South Africa as “two-nations” and, even more pertinently, his more recent characterisation of our society as a “dual economy” seek to capture this reality. If we are to transform our country it is principally to these issues that our revolution must turn its full attention to.

What are the challenges arising out of the above realities?

The reality now is that the qualitative advance of the NDR is increasingly facing the barriers of an untransformed economy (an enclave of development on the one hand, systemic underdevelopment on the other). Any advance is daily and increasingly being proscribed by an unfettered capitalist market economy. Put differently, the next key qualitative advance of the NDR, after the democratic breakthrough of 1994, is directly dependent on significant breakthroughs on the economic terrain. The SACP has sought to characterise this as the imperative of decisive economic measures, led by the state and buttressed by our mass power, to change the current accumulation regime.

The SACP has consistently advanced the thesis that the NDR seeks to resolve the national, class and gender contradictions, not in isolation from, but in relation to, each other. The “economy” cannot be mechanically reduced to the class question – as it is simultaneously about the national and gender questions. But fundamentally there is a limit to which we can advance the struggle to address the latter contradictions, without seeking to confront the class realities of our society. One could even venture to say that we cannot at present make any significant qualitative advances in the NDR without confronting the class question, both at the level of the economy and the state. In other words, the class context of the national and gender questions has become the primary challenge of the period. It is for this reason that the SACP has, amongst other things, recently been advancing the struggle for building a people’s economy – with a state-led, working class-driven overarching industrial policy, aimed at benefiting the overwhelming majority of our people.

Our Strategy Conference in 2000, in evaluating the first five years of democratic government, made the important observation that the many socio-economic achievements of that period, in fact up until today, have been directly as a result of state-led programmes. These include the very impressive achievements in the provision of water, electricity, housing, education, and clinics. We already said back then that where reliance has been placed on private capital (for example, in the provision of low-cost housing, or access to affordable financial services for the workers and the poor, or job creation and the fostering of small and medium enterprises) there has been dismal failure.

Even in the areas of “affirmative action” and “black economic empowerment” – from provision of basic services and poverty eradication measures to promotion of black and women managers – much more significant progress has been made by the public sector. The private sector has made limited progress in these areas, and only when pressured by the state.

All this requires that we ask some fundamental questions about our policies and strategies for economic transformation. To what extent have our policies of macro-economic stabilisation and repositioning our economy for global competitiveness had the consequences (intended and unintended) of reinforcing and strengthening of the class interests of untransformed white capital? This has presented a contradictory reality of using and supporting the very same (untransformed) white capital for purposes of attaining our goals of restructuring towards global competitiveness. Our policies have in fact in many instances had the effect of strengthening - as a key platform for our global competitiveness – the very same white capital. We have even liberated this private capital from the shackles of the apartheid order and allowed significant sections of it to list offshore as global players – SAB, Old Mutual, etc – but with no tangible benefits for our economy and the majority of our people. In other words, our policies have been dualistic, focusing on adjustments favourable to white corporate capital in the mainstream economy, without seeking to fundamentally transform the mainstream economy – thus reinforcing the very dualism of our economy.

Of course, a legitimate question may arise as to which other transformed (and patriotic) private capital could have been a vehicle to reposition the South African economy in the current global reality? Of course no other segment of such private capital existed. But another important question is to what extent have we, as a government, pursued policies, that explicitly, or implicitly, accepted an imperative to soft pedal transformation, and over-accommodate white corporate capital, in order to build our global competitiveness? Put differently, to what extent have our economic policies principally sought to create an even freer market economy with the hope that benefits from any growth from this will trickle down to the majority of our people?

Using the analogy of a “dual economy”, while our government has achieved some significant successes in delivering specific services to people in the “black, poverty stricken” sector, the failure to transform the “mainstream white” economy and its relationship to people in the “black poverty stricken sector” has meant that, despite new houses, schools, clinics and water connections, the masses in this “marginalised economy” remain unemployed, with little or no income and they are incapable even of finding the resources to sustain the new services. A number of questions and observations arise from this reality. It is clear that our poverty alleviation measures, important as they are, are not making any impact on the “mainstream” economy, as they are not consciously coupled with decisive interventions to transform the capitalist market. This runs the danger of undermining the sustainability of the very interventions made to push back the frontiers of poverty. One classic example of this is that the very impressive rollout of telephone connections by Telkom, in the context of failure to generate employment and transform the “mainstream” economy, has led to more than 80% of these phones being disconnected, as people cannot afford to pay. Similarly, the liberalisation of food prices, particularly the maize price has led to the escalation of prices in the food chain, notwithstanding our surplus maize production, thus endangering food security for the overwhelming majority of our people.

It would be wrong to suggest that the crisis of unemployment and poverty is simply, directly or even principally the result of government policies. The deeply imbedded, structural nature of South Africa’s “dual” economy (simultaneous enclave development, and mass underdevelopment) is the primary reason. But it is imperative that we undertake a comprehensive review of our own economic policies. Do they enable us to progressively transform the deeply entrenched “dual economy” structure of our society? Do they really lay the basis for a sustainable pushing back of the frontiers of poverty? The Growth and Development Summit calls for such open and self-critical reflection if it is to be successful.

Under these conditions it is not surprising that the task of black economic empowerment has correctly taken on a new urgency. Objectively our economy has hardly been transformed towards the interests of the overwhelming majority of our people. The job loss bloodbath, affecting, in the main, black workers, is a sharpening expression of the lack of transformation of our economy. Even the very tiny emerging black bourgeoisie has in recent years seen a decline in its fortunes on the JSE, it remains deeply indebted to the white capitalist financial sector.

BEE is government policy and it needs to be intensified. However, we need to ask the question why white private capital remains untransformed and untransforming despite its benefits from the democratic dispensation. It is no secret that white private capital has ironically and objectively, been the major class beneficiary of the democratic breakthrough of 1994. However there has not been enough pressure towards spreading such benefits to the overwhelming majority of our people. Instead the benefits of white private capital from the democratic breakthrough have translated into the job loss bloodbath, at the direct expense of the black workers and the poor of our country. It is therefore necessary that BEE be intensified. However the danger of doing this (without far-reaching measures to change the current accumulation regime) is that BEE will simply become an add-on, rather than a fundamental component of transformation itself. It is for this reason again that the SACP has been talking about the need to build a people’s economy through people’s power in the economy.

To transform our economy will require a combination of measures – persuasion, negotiation and compulsion, including legislative measures and mass power. We must not naively allow sections of private capital to secretly draft voluntary charters with voluntary implementation, hoping that this will take us out of the current economic crisis and jobs impasse. For example, legislative compulsion through community reinvestment by the financial sector is a necessary component of any measures to transform this sector and the economy as a whole. In addition legislative compulsion around the investment of the billions of surplus pension funds and millions of unclaimed insurance policies is a necessary component to mobilise domestic investments as a key strategic goal of the Growth and Development Summit. This should, of course, be underpinned by sustained mass mobilisation to pile pressure on private finance capital towards investment in infrastructure for job creation.

Transformation of our economy must also include a review and prevention of willy-nilly offshore listing by South African companies. So far this has not benefited the country at all. It is also important that the public sector should be strengthened as the primary deliverer of social services, including the building of new institutions where necessary. Of critical importance to us is the need for a state-led and working class-driven overarching industrial policy, prioritising areas for job creation and investment in infrastructure. To attain this again will require a combination of measures – persuasion, incentives and legislative and mass mobilisational compulsion. The apartheid regime used prescribed assets to address the problems of poor whites through the building of large parastatals and forcing the financial sector to invest in government bonds. We are today being told this is not feasible for reasons of the current “global realities”.

Whilst the issues prioritised for discussion and agreement at the GDS do not constitute the entirety of a growth and development strategy, approached with the above perspectives, the Summit can lay a very firm foundation for a state-led, integrated growth and development strategy. Let us openly debate these issues in order to use the Summit as an important moment towards a new qualitative advance in the NDR.

The populism and neo-liberalism of the Democratic Alliance  

Input to the Budget Vote Debate 18/3/2003 By Rob Davies, ANC MP and member of the SACP Political Bureau

The budget debate offers a unique opportunity each year for parties represented in this Parliament to put forward their views on economic policy issues. It is an occasion therefore that allows contending perspectives to be identified, differences to be demarcated and the alternatives being presented to be debated both by us as MPs and by the public at large.

The ANC, as the party of government has put forward its approach in some detail - both in the President's State of the Nation address and in the Budget speech. Our current perspectives were widely canvassed and debated in processes that culminated in the adoption of resolutions at our 51st national Congress held in Stellenbosch in December last year. Our fundamental objective is an unshakeable commitment to roll back the frontiers of poverty and bring a better life to our people. Our basic approach is to see the challenges of promoting economic growth (an increase in the output of goods and services) and improving human development as inextricably interrelated requiring therefore integrated and multi-faceted strategies. As the Hon. Barbara Hogan has indicated the complex reality created by the appalling legacy of apartheid and the new challenges of globalisation have required different emphases at different phases. Our approach has always been to consolidate on achievements of one phase to bring us ever closer to being able to promote lasting and sustainable solutions to the problems of poverty and underdevelopment confronting our people. Priorities in the current phase include pushing forward the micro-economic reform strategy as a key component of raising investment and promoting growth. Key initiatives here include infrastructure development, promoting a transition from dialogue to collective action by stakeholders within the framework of the Integrated Manufacturing Strategy and the Growth and Development Summit. Simultaneously, we have recognised the need for a number of new focussed, integrated initiatives to combat poverty and unemployment. These include expanding public works programmes, accelerating efforts to promote income generating opportunities for people in the so-called informal sector, encouraging the growth of a viable cooperative movement and expanding the social security system. All of this is informed by the target we set ourself in Stellenbosch of halving the number of people who are unemployed by the year 2014.

The Hon. Hogan has already eloquently addressed a number of these points, and other speakers from our side will elaborate on various aspects later. I want to use the time still available to me today to reflect on the alternative offered by the party that is today physically on my left, but which in political and ideological terms is far to the right.

What is the alternative that the official opposition in this Parliament has to offer? We have recently seen a series of populist interventions from the DA on various issues of poverty and social transformation. We are told that the DA will be launching a new economic policy document in a few days. No doubt this document will offer more of the same. Anyone who dropped in from Mars, and had no other idea of what the DA was, could be forgiven for imagining that the DA was a party preoccupied with promoting a Basic Income Grant, with reducing poverty and unemployment and with promoting access to treatment for sufferers from HIV/AIDS. Those of us who don't come from Mars, however, know that behind this new found façade of concern with poverty, promoted with all the sincerity of a used car salesman, lurks another more familiar DA.

This is the DA whose core economic policy perspectives have frequently been presented in the form of a winge about reducing taxes for the benefit of the rich. If you doubt what I am saying I suggest you consult what I presume still to be the DA's current economic policy document - entitled "DA Economic Policy Information". The first substantial chapter of that document is entitled "Fiscal Reform" and it begins with a call for reduction in the tax burden. This is immediately followed by a more specific call to "reduce the maximum marginal tax rate on individuals". If you want another example consult the speech of the Hon Ken Andrew in the 2001 Budget Vote debate recorded in Hansard of March 15, 2001, columns 1251 - 1257. Most of this speech is a rant about the alleged excessive tax burden on middle and upper income tax payers and the impact this was allegedly having on emigration by what he called "high income and high-wealth individuals" This is the DA we are familiar with.

It is the DA that has consistently opposed capital gains tax again because it would hurt those same "high wealth individuals". This familiar DA, let us remind ourselves, has also consistently championed less progressivity in the tax system by advocating a shift away from income and profit based taxes, in which the rich pay proportionately more, in favour of expenditure taxes like VAT, where the poor pay proportionately more. The DA we all know is a party that has instinctively supported less regulation driven by a naive belief that markets will always deliver, when in fact many government activities arise precisely because markets have failed to deliver. This is the party whose instincts have led it to blindly champion corporate demands on issue after issue resulting in what its leader later acknowledged was a biggest tactical blunder when in 1996 it slavishly responded to lobbying by pharmaceutical companies and opposed the Medicines and Related Substances A/B.

This, too, is a party that has championed and continues to champion a big bang, ideologically driven approach to privatisation. I won't pretend that this has been an easy issue for the ANC or the alliance. But we are agreed on a number of fundamental principles. These include agreement that the fundamental issue with regard to SOE's is one of restructuring, not privatisation and that the main goal of restructuring is to make SOEs operate more effectively as public institutions operating according to a public and developmental mandate. The second principle is that where restructuring involves elements of privatisation or nationalisation the decision will be taken on a case by case basic on the balance of evidence. In other words there is a strategic approach to this issue. Many of the biggest debates in our ranks are not over these principles but over the details of particular plans or proposals. The DA's view by contrast sees large scale privatisation as a panacea - in which SOEs are mere cash cows to be milked for revenue to avoid having to tax the rich, and in which privatisation is seen as an unmitigated benefit based on naïve belief that the private sector or profit seeking institutions will always deliver services better. The DA, in other words has come to defend the kind of big bang, ideologically driven approach to privatisation, which Nobel economics laureatte Joseph Stiglitz, speaking note from a perspective of support for privatisation, has severely criticised. In his recent book, Globalisation and its Discontents, Stiglitz argues that while in his view strategic privatisation of certain assets can be beneficial under the right circumstances, proponents of big bang approaches ignore the reality that there are a range of vital services that profit maximising institutions are simply not equipped to deliver. He also criticises the cavalier dismissal of concerns and fears of workers about threatened pay offs arguing "… moving people from low productivity jobs in state enterprises to unemployment does not increase a country's income and it certainly does not increase the welfare of the workers".

Even the DA's new flagship populist gesture - its supposed support for a Basic Income Grant

is fundamentally flawed by its overall ideological perspective. The BIG emanates as a proposal from a Commission appointed by government and ibeing championed by forces within our tripartite alliance. The Deputy President confirmed last week that this remains under consideration as a proposal within a shared perspective that accepts the need for a comprehensive extension of social security. The DA has opportunistically taken up the call for a grant of R100 per month, but added a proposal that this be financed by an increase in VAT. What the one hand giveth, the other taketh away. When a similar proposal was put by academic economist, not linked to the DA, to the hearings held by the finance committee it was suggested that VAT be raised to 21%. It was further argued in those hearings that this would be of net benefit because families that would be dependent on the grant consume only a few zero-rated commodities. Perhaps yes for the very poorest of the poor, but for many other poor people and ordinary working people raising VAT to 21% would be a cause of great hardship. What this debate has highlighted is the total unacceptability of proposals that envisage the burden of redistribution measures falling on other strata of the poor rather that the rich. Even the DA's flagship populist gesture is constrained by the need to prioritise the interests of its core constituency - the rich and the privileged.

This then is the DA that we are familiar with. The DA we know is a party that has consistently rooted its core economic policy perspectives in calls for tax relief for the rich, rapid big bang privatisation, weakened labour rights and opposition to affirmative action _ which its current policy document calls "race based quotas". If you doubt that look at the section of their policy document, headed "Priorities". This says and I quote " Many of the impediments to savings, investment and growth will disappear if the DA's macro - economic, privatisation and labour policies are implemented".

This DA that we are all familiar with is, in short, recognisable as the local peddler of an ideology that is well known internationally. It is an ideology described by prominent British commentator, Will Hutton, in his recent book, The World We're In, in the following terms: "…the rights of the propertied and the freedom of business come before any assertion of the public interest or social concern…taxation is depicted as confiscation…an intolerable burden that should be reduced. The social, the collective and the public realm are portrayed as enemies of prosperity". Whether they know it or not, the DA are our own local Tories or neo-conservatives - the purveyors of an ideology that continues to enjoy support in powerful circles of the rich across the world, but which is increasingly widely recognised as incapable of producing answers to the central challenge facing peoples across the world of promoting inclusive growth and development, eliminating poverty and reducing inequality within countries and globally. Theirs is an outmoded and passé neo-conservative approach whose claims to offer a way forward - let alone the only way forward - have patently proved to be false.

But, this is an ideology that is of critical importance to the DA. The past decade or so, has seen the DA increasingly abandoning the human rights liberalism of its predecessors - under whose banner a small number of individuals campaigned with honour against human rights abuses of apartheid. The contemporary DA has abandoned this approach in favour of an aggressive economic, neo - liberalism which marks it as a conservative force today. It is this ideological shift that underpinned the DA's transition from a fringe group in the previous order to becoming today the authentic representative of a sizeable section of the most backward and reactionary forces in our country - united in their determination to fight back against transformation in our country. For such a group to present itself as a champion of the poor is rather like the Sheriff of Nottingham masquerading as Robin Hood. The DA's campaigns on poverty issues are ill thought through, populist gestures aimed opportunistically at broadening its electoral support.

But I have news for the DA. Neither we, nor the electorate, come from Mars. We know who you are and what you represent. Tony's new façade of concern for the poor, to shift the metaphor, is like the emperors new clothes. It won't take long to recognise that there's nothing there.


SACP calls for actions against US war  

The South African Communist Party (SACP) is outraged at yesterday's address by President George Bush clearly indicating that the US, Britain and its other allies have decided to launch a war against the people of Iraq despite the absence of a UN Resolution and growing opposition to any war by the peoples of the world.

As part of the Stop the War Campaign, the SACP will join a candle-light vigil to be held tonight (19h00 - 21h00) at the US Consulate in Johannesburg (corner River and Riviera Roads, opposite the Killarney Mall, Killarney, Johannesburg). The General Secretaries of the SACP and COSATU, Blade Nzimande and Zwelinzima Vavi, will attend the vigil.

As the anti-war mobilisation has affirmed, the clear intention to attack Iraq confirms the intention of the US to act unilaterally, undermine global dialogue in order to impose its hegemony militarily and otherwise in every corner of the globe.

This has grave consequences for the future of the United Nations and how the issues and interests of all the people of the world can be advanced on a mutual basis based on social progress, social justice and global peace. This war will fundamentally reverse the struggle for the transformation and democratisation of the UN and other multi-lateral institutions.

The SACP wishes to make it clear that any attack on Iraq not authorised by the UN Security Council (let alone the desirability of any war given the unjustified domination of the UN Security Council by the advanced capitalist countries) constitutes a gross violation of human rights and those involved in such actions should be regarded by all progressive forces and peace loving people as war criminals.

The SACP calls on all South Africans and all peace-loving people in the world to escalate anti-war mobilisation and solidarity with the people of Iraq. As the Iraqi Communist Party has said, "The dangers of invasion and military occupation by the US, Britain and their allies, which could only bring further death and destruction. They have already endured terrible suffering as a result of two wars waged by their dictatorial rulers, the Iraq-Iran war (1980-88) and the Gulf War in addition to devastating consequences of more than ten years of economic sanctions".


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