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Umsebenzi Online

Volume 8, No. 9, 3 June 2009

In this Issue:


Red Alert

The global economic crisis needs a transformational agenda in SA

By Jeremy Cronin

Last month's announcement by Stats SA that our economy had contracted by 6,4% in the first three months of this year appears to have shocked many mainstream commentators. But for workers on the shop-floor, hammered by a torrent of retrenchments and shortened working-weeks, the dismal figure hardly came as a surprise.

Indeed, for some 8 months the SACP has been warning against the complacent chorus that has been telling us that "South Africa's economy is well insulated", and that "our fundamentals are all fine." As recently as the February 11th budget, in the midst of what was already patently a recession, government was still predicting GDP growth for this budget year.

Why these illusions?

The illusions are partly the product of an assumption that economic policy is, first and foremost, about "sending positive signals to the markets", about "convincing potential investors that SA is a good place to come." While nobody is denying that we should in principle actively encourage fixed investment, it is a problem if economic policy is simply reduced to marketing. It was this habit that was partly responsible in the recent past for denialism about HIV/AIDS, unemployment levels, and crime in our society. And it is this "selling SA" paradigm that has played its part in the recent attempts at convincing ourselves (and then the rest of the world) that our economy was more or less insulated from the global meltdown.

But the illusions are also part of a related feature of the neo-liberal mind-set. According to this mind-set, the economic role of the state is confined to macro-economic tweaking, while the "real" (i.e. productive) economy should be left largely to the private sector. This means that industrial policy, for instance, is not something that the state should meddle in. We have been repeatedly told that "the state can't pick winners, leave that to the markets", as if an intelligent industrial policy were reducible to a gamble on the race-track. Likewise, remember how in the late 1990s we were told that it's the private sector and not the state that creates jobs? One former ANC leader told us that "the state is not an employment agency".

These attitudes produced an aloofness from the side of many about what was actually happening in the productive or micro-economy. As long as the macro-economic indicators were "sound", then everything was supposedly okay – or at least it was on track to being delivered.

It is against this background of active scepticism about what the state can do, that it is now encouraging (but ironic) to find most of the mainstream business media in our country calling on government not to abandon the R787-billlion infrastructure construction programme. This state-led infrastructure programme is, indeed, the one sector still consistently contributing to growth and employment. Even the London-based The Times has carried a recent article lauding our state-led infrastructure programme, which, it says, puts SA ahead of developed countries in coming up with a sustainable long-term response to the current global crisis.

However, notwithstanding the dawning of some greater appreciation of the role of the state in the productive economy, profound scepticism still prevails in many quarters in SA. We are still being told that the "developmental state is a dangerous illusion", and that state-led economic planning is either hopelessly "over-ambitious", or alternatively inherently "authoritarian". Often it is the same commentators who praise our state-led infrastructure programme in one breath, and then condemn the idea of a developmental state in the next!

So where does this leave us? And what must we do in response to the crisis that is now impacting so dramatically on our economy and our people?

As we have already implied, the very first requirement is that we should be honest about the nature and depth of the crisis. This involves a systematic unpacking of the relative strengths AND weaknesses of our economy. Yes, this is largely an externally driven crisis, but what are the structural features of our own economy that have made us vulnerable to it? If we do not pose this question honestly, we will simply get stuck in a waiting game – holding tight until the next global commodity boom comes around again.

But we have just been through one of the biggest global commodity booms, and while some key sectors of capital did very well, we did not create nearly enough jobs and the systemic problems of the South African economy (huge inequalities, spatial marginalisation of at least half the population, and crisis-levels of unemployment) persisted and were even actively reproduced in the midst of 5% growth.

So, strategically, our response to the present recession needs to ensure, as best as possible, that we sustain our state-led infrastructure construction programme. While the resourcing will now come under strain, there is a substantial national consensus that we need to sustain this programme. Some of what we have planned might now require longer time lines, and other infrastructural programmes need re-assessment – but, fundamentally, the multi-billion infrastructure spend (rather than the baling out of failing enterprises) needs to be our major response to the crisis.

However, we cannot just be satisfied with a multi-billion rand infrastructure programme. We need to ask critical questions of it. We need to assess whether the huge capital spending is transforming the systemic weaknesses of our economy. To what extent, for instance, is our infrastructure programme simply reinforcing the spatial inequities of our society? Is it really re-shaping the persisting apartheid geography of our cities, towns and rural hinterland? And this is where the ANC-alliance April 22 electoral mandate to commit focused attention to rural development, for instance, comes in. Infrastructure construction cannot simply be targeted to lowering the logistics costs to our mineral exporters, moving from coal and oil fields to ports. While this is an important component, simply confining our infrastructure spend to this kind of goal will lock us into the same systemic features of the apartheid economy, while our former Bantustan rural areas continue to be marginalised through poor infrastructure.

Then, secondly, we need also to ensure that our industrial policy programme aligns much more energetically with our infrastructure construction. Too many of the construction materials, components and technologies are being imported when they could be produced locally. This means we spend billions of rands, but fail to maximise the local job-creation possibilities. It also means that we reproduce our historic trade deficit vulnerabilities – we remain an exporter of primary commodities and an importer of more expensive capital goods.

These, then, are the two core strategic responses we need to make to the present recession:

  • Sustaining our state-led mass infrastructure programme; and
  • Aligning an industrial policy with this programme.

Together, these two major strategic interventions need to place us onto a new growth path that creates decent work and that overcomes the other systemic weaknesses in our economy.

There are, of course, also many more specific and short-term interventions that we need to make in order to weather the recession. These include all of the matters agreed upon in the NEDLAC framework document, among them: the massification of the expanded public works programme; much tougher interventions to block illegal imports; the strategic application of tariff protections; a review of executive salaries; and the defence and consolidation of a comprehensive social security net.

The global capitalist crisis is wreaking havoc on the lives of workers and poor throughout the world, including here in SA. While implementing defensive measures to mitigate the effects of this crisis as best as possible, we also need to use the crisis to boldly implement transformational measures that place our economy and our country on a worker and poor-friendly growth path.

At the heart of our strategic, tactical and programmatic response must be the mass mobilisation of the working class – the leading motive force of our national democratic revolution – to provide the mass power, strategic focus and tactical flexibility to overcome the current capitalist crises and lead us onto a new developmental growth path.