{"id":1195,"date":"2020-03-30T16:43:15","date_gmt":"2020-03-30T14:43:15","guid":{"rendered":"http:\/\/marxistworkersparty.org.za\/?page_id=1195"},"modified":"2020-04-23T11:37:47","modified_gmt":"2020-04-23T09:37:47","slug":"chapter-one","status":"publish","type":"page","link":"https:\/\/marxistworkersparty.net\/?page_id=1195","title":{"rendered":"Chapter One"},"content":{"rendered":"\n

The Economy \u2013 Basis of Perspectives<\/strong><\/h2>\n\n\n\n

As with all societies, we will\nfind the roots of the present political crisis in South Africa in the soil of\nthe economy: in the way the productive system has developed and in the\ncontradictions and crisis which grip that system now.<\/p>\n\n\n\n

The interlinked crisis of all\nsectors of the world today has been explained in previous material \u2013 e.g., South Africa\u2019s Impending\nSocialist Revolution<\/a><\/em> (1982) and The Coming World Revolution<\/em> (Supplement to Inqaba<\/em> No. 14). These documents should be reread as a background to\nSouth African perspectives at the present time.<\/p>\n\n\n\n

In the modern epoch it has been\nimpossible for any country simply to repeat the \u2018organic\u2019 all-round development\nof capitalism, step-by-step, from small-scale to large-scale production, which\nthe nations of Western Europe and later North America passed through a century\nor more ago.<\/p>\n\n\n\n

National markets are dominated to\nan ever-increasing extent by the world\nmarket<\/strong>, and the world market by the power of the giant monopoly\ncorporations of imperialism. In the stranglehold of world monopoly capitalism,\nthe development of the colonial or ex-colonial countries has, notwithstanding\nformal independence, been partial, uneven and distorted. The dreadful\nstagnation of most of Africa today results from this fact.<\/p>\n\n\n\n

To the extent that capitalism has\ndeveloped in these countries, and to the extent that a national capitalist\nclass has grown up, this has invariably taken place not as an independent\ndevelopment, not \u2018on their own feet\u2019, so to speak, but in a relationship part-parasitic\nupon the imperialist monopolies and part one of manoeuvre and resistance to\nloosen their grip. <\/p>\n\n\n\n

Considered against the\ninternational background, it is clear that South Africa is one of the few\ncountries of the colonial world to have had a significant national capitalist\ndevelopment. It is correct to say \u2018national capitalist\u2019 even though the\ncapitalists are whites and not black Africans.<\/p>\n\n\n\n

Descended from settlers, most\nwhites are \u2018settlers\u2019 no longer but now an indigenous part of the society with\nno motherland anywhere else. As second-, third- and fourth-generation\nimmigrants to America are Americans, so these are South Africans.<\/p>\n\n\n\n

Moreover, in the past they\n(particularly the Afrikaner nationalist middle class) organised and campaigned\npolitically and economically, to wrest part of the surplus from the\ninternational monopolies in order to develop domestic industry. If this has not\namounted to a national capitalist development, and the rise of a national\ncapitalist class (however deformed), then what would?<\/p>\n\n\n\n

South Africa\u2019s exceptional\nindustrial development, in a world economy already dominated by the great\nmonopolies of the imperialist powers, was possible fundamentally for two\nreasons. On the one hand because of the mineral wealth of this country, which\nproduces three-quarters of the gold of the capitalist world. Because gold is\nreadily exportable, it provided a source of easy foreign exchange with which to\nimport machinery, and at least part of the surplus from gold mining could be\nturned towards investment in industrial development.<\/p>\n\n\n\n

But the basis of that development\ndepended equally on the fact that there came to exist within SA a settler\npopulation of whites, a sufficiently large minority so that in the course of\ntime it could be organised and developed into a privileged elite to act as\npoliceman over the mass of the black population, who were torn from the land\nand turned into a massive working class.<\/p>\n\n\n\n

In this way it was possible to\nenforce a system of cheap labour based\non the exploitation of the black workers<\/strong>. This, indeed, is the essence of\nthe apartheid system, which has been developed into a monstrosity with no\nparallel anywhere else.<\/p>\n\n\n\n

With the African majority, 73% of\nthe population, robbed of all but 13% of the land; with an enforced racial\ndivision of society in almost every sphere; with systematic legislated inequality;\nwith the denial not only of the franchise, but of all civil rights to the\nAfricans, who have been stripped even of their citizenship; with 18 million\nblack people arrested under the pass laws and other influx controls since 1916;\nwith 3.5 million forcibly removed from urban areas and from \u2018white\u2019 farming\nareas to the rural dumping grounds of the Bantustans; with the apparatus of a\npolice-state, political prisons, detention without trial, tortures and\nmassacres \u2013 these have been the means necessary\nfor the development of capitalism in SA to its present level<\/strong>.<\/p>\n\n\n\n

Enjoying the twin advantages of\nyellow gold and \u2018black gold\u2019 (as the crude bourgeois in SA put it), the SA\nruling class has been able to withstand the competitive winds of the world\nmarket and gain some room to breathe within the stranglehold of the\ninternational monopolies.<\/p>\n\n\n\n

Over the years, funded by\ntaxation of the gold mines and later also by foreign loans, the state was used\nto invest massively in industrial infrastructure \u2013 for example in transportation,\nin steel, in producing oil from coal, in electricity supply and so on.<\/p>\n\n\n\n

The state sector, together with\nthe privileged standard of living of the whites, at the same time provided a\ncertain domestic market for the development of manufacturing. This development\nwas aided by protective tariffs and import quotas, for example to protect the\ntextile industry; and by a \u2018local content\u2019 program, so that in the development\nof the motor industry, for example, a certain percentage of the components of\nevery car (up to 65% by weight) has had to be locally produced.<\/p>\n\n\n\n

So a basis was laid for a certain\ntake-off, mechanisation and development of modern industry. So it is that SA\nhas developed as the industrial giant of the African continent \u2013 with nearly\nhalf the motor vehicles, half the electricity consumption, and three-quarters\nof the railway trucks of all of Africa south of the Sahara.<\/p>\n\n\n\n

South Africa is a colossus in\nSouthern Africa \u2013 with fourteen-times the production of Zimbabwe (the second\nmost industrialised African country per head of population), and 80% of the production\nof the whole region.<\/p>\n\n\n\n

By this development, SA\ncapitalism has brought into being a massive industrial proletariat which almost\nmatches that of the advanced countries in terms of its social weight within\nsociety.<\/p>\n\n\n\n

But in world terms South Africa\nis a third-rate industrial power, with many of the features still of a \u2018Third\nWorld\u2019 economy. It exports mainly minerals and agricultural products, and\ndepends upon imports for advanced machinery, transportation equipment and so\non. Thus SA is affected by the same kind of squeeze (partially alleviated by\ngold) as the whole of the under-developed world suffers through the terms of\ntrade weighted against it by the monopolies\u2019 domination of the world market. <\/p>\n\n\n\n

South African industry developed\nespecially in the Second World War and in the decades of the post-war up-swing\nof capitalism \u2013 linked in other words to the progress of world capitalism. In\n1946 the SA capitalists were discussing the production of their own packaging\nmaterials, so that they would not have to import bags and sacks. Now they claim\nto be able to produce 80-85% of their own armaments (although this is, of\ncourse, with the assistance of the Western powers).<\/p>\n\n\n\n

But SA\u2019s national capitalist\nsuccess has in no sense implied economic independence. The more successful they\nhave become the more integrated they have become with international monopoly\ncapitalism.<\/p>\n\n\n\n

Within SA itself there has come\nabout the integration of the Afrikaner and English capitalists together in partnership\nin giant monopolies \u2013 in mining, in finance, in industry, in agriculture and in\ncommerce. In fact one of the underlying causes of the split within the\nAfrikaner nationalist movement (with the emergence since the 1960s of two\nparties to the right of the ruling NP) has been the fact that the working class\nwhites and the lower-middle class whites feel deserted now by those bourgeois\nnationalists whom they previously raised to power.<\/p>\n\n\n\n

In turn, South African capital\nhas become more and more integrated with the big banks and multi-national companies\nin the USA, Europe, etc.<\/p>\n\n\n\n

With the development of the\nmonopolies, and with the fusion together of the Afrikaans and English\nbourgeoisie, the state, at least at the topmost levels of command, has been\nshaped into a more responsive instrument for the dictatorship of big capital.<\/p>\n\n\n\n

<\/div>\n\n\n\n

Extreme Polarisation<\/strong><\/p>\n\n\n\n

The main feature of SA society is\nthe extreme polarisation of white capitalist wealth on the one hand and black\nworking class poverty on the other.<\/p>\n\n\n\n

A study by M. McGrath of Natal\nUniversity in 1983 showed that there is a phenomenal concentration of the\nownership of the means of production in a few hands. The richest 5% of South Africans\nowned 88% of all personally owned wealth \u2013 double the proportion in the USA.<\/p>\n\n\n\n

This concentration of wealth\n(calculated on the basis of 1975 statistics) was described as \u201cmore\nconcentrated than in any other Western nation.\u201d<\/p>\n\n\n\n

Whites owned 98% of all farms,\n93% of (private) fixed property, 99.7% of quoted shares, and 95.7% of unquoted\nshares.<\/p>\n\n\n\n

Recently it has emerged that no\nless than 80% of the shares on the stock exchange are owned or controlled by\nsix South African-based monopoly corporations. In addition, the state owns 58%\nof fixed capital.<\/p>\n\n\n\n

That degree of state and monopoly\nownership is, from the revolutionary standpoint, a tremendous advantage,\nbecause it will immensely simplify the task of taking the commanding heights of\nthe economy into the hands of the working class in the future. In that sense it\ncould be considered an \u2018achievement\u2019 of the bourgeoisie!<\/p>\n\n\n\n

South Africa\u2019s economic\ndevelopment has also involved a greater dependence upon the world market: in\nfinance, and also in South Africa\u2019s reliance on the world market for exports\nand for importing advanced technology.<\/p>\n\n\n\n

Quantitative changes accumulate\nand produce \u2013 qualitative change.<\/p>\n\n\n\n

Particularly within the last\ndecade or two decades, the point has been reached in the expansion of industry\nin South Africa where the capitalists must increasingly export manufactured goods<\/strong> in order for the economy to advance \u2013 even,\nin the long term, to survive. Ironically, this stage in the development of SA\ncapitalism has coincided with the onset of the world economic crisis and the suffocation\nof world trade.<\/p>\n\n\n\n

Why has this change happened?<\/p>\n\n\n\n

Like all capitalist countries,\nSouth Africa is encountering the limits imposed on the further development of\nthe productive forces by private ownership on the one hand and the national\nstate on the other. This is the fundamental basis of the present epoch of crises,\nwars, revolutions and counter-revolutions \u2013 the most disturbed period in world\nhistory (which we have discussed in previous material \u2013 see especially The Coming World Revolution<\/em>).<\/p>\n\n\n\n

But in addition there are the\nspecial limitations of the system on which the South African bourgeoisie\u2019s\nwhole success was founded, namely the apartheid cheap labour system, the chief\nsource of their profitability in the past.<\/p>\n\n\n\n

By systematically impoverishing\nfour-fifths of the South African population, they have created a situation\nwhere the home market is extremely limited. It cannot absorb the products of\nexpanding industry.<\/p>\n\n\n\n

Now dialectically the basis of\ntheir success turns into an obstacle. But\nthey cannot break their dependence on cheap labour.<\/strong><\/p>\n\n\n\n

In the 1950s, the Stalinists\n(showing how completely they had broken from Marxism, and how little they have\nunderstood) actually appealed to the employers in leaflets to raise the wages\nof their workers, from the standpoint of the employers\u2019 own self-interest! They\nargued that this would expand the market so everybody would be better off. Of\ncourse that is impossible because every individual capitalist has to struggle\nin competition to keep his costs as low as possible against the next producer.\nAnd in competition with the advanced capitalist countries, it is all the more\nimportant that labour be kept as cheap as possible in every national capitalist\neconomy.<\/p>\n\n\n\n

As practically every trade union\nmember knows from experience, wages can only be raised, or real wages even\nmaintained, by vigorous struggle against the capitalist class.<\/p>\n\n\n\n

Even in the most technologically\ndeveloped countries the bourgeoisie is now screaming for wage cuts, precisely\nbecause of the stagnation of world trade and the increasingly desperate\ncompetition between the capitalist powers as a result. Yet wage cuts further\nreduce the size of the market and so further increase the squeeze. <\/p>\n\n\n\n

<\/div>\n\n\n\n

Acute Contradiction<\/strong><\/p>\n\n\n\n

Today we see this contradiction\nin South Africa in the most acute form. The chief capitalist in the motor industry\npoints out in the national press that there is no way the motor industry can\ndevelop further in SA on the basis of the white consumer market. Already there\nare 424 cars for every thousand whites, almost the figure of the United States.\nAmong blacks the figure is 33 cars per thousand.<\/p>\n\n\n\n

So he says: it\u2019s obvious, if we\nare to develop and sustain the motor industry, we shall have to develop our\nability to sell cars to the blacks. What he doesn\u2019t say is who will offer the\nwage increases to put the blacks in the position to buy these cars! \u2013 or how,\nin any event, that could be done without destroying the underlying profitability\n(such as it remains) in South African industry.<\/p>\n\n\n\n

At the very same moment the\ntextile bosses are complaining about the opposite side of the contradiction!\nThey are complaining that their cheap labour is no longer as cheap as labour in\nHong Kong, Taiwan, Singapore, South Korea and so on. (More than likely they\nhave cooked the figures to come up with this argument. If they cannot now face\nthe breeze of Far East competition, it is essentially because they have failed\nto invest in new technology, having sheltered instead behind quotas and tariff\nwalls.)<\/p>\n\n\n\n

Today these vultures are\nscreaming for real wages to be driven even lower in South Africa to rescue\ntheir profitability!<\/p>\n\n\n\n

The insoluble predicament of the\nbourgeoisie is expressed in the fact that at least half of the retail turnover\nin the Johannesburg central business district, for example, now depends on\nblack spending. The contradictions of their system oblige them to seek both to\nexpand and to cut black spending power at the same time. In neither direction\ncan they find any way forward. <\/p>\n\n\n\n

<\/div>\n\n\n\n

Imperialist Foreign Policy<\/strong><\/p>\n\n\n\n

As South African industry has\nbegun to overstep the limits of the domestic market and become increasingly\ndependent on exporting manufactured goods, so we have seen the change also in\nSouth Africa\u2019s foreign policy under the Nationalist government from \u2018isolation\u2019\nto increased imperialist aggression against the neighbouring states of Southern\nAfrica. Pretoria\u2019s secret arms deal with Somalia, reported recently, shows SA\u2019s\nambitions today as a continental power.<\/p>\n\n\n\n

The ruling class feels threatened\nby any advance of the revolution in Africa \u2013 by the effect of that on the black\npopulation at home. It wants, of course, to eliminate ANC guerrilla bases in\nother countries \u2013 but those are really an irritation rather than a serious\nthreat to the regime.<\/p>\n\n\n\n

South Africa pursues an\naggressive foreign policy in the vain hope of subduing black working class rebellion\nat home: to prove itself \u2018invincible\u2019 by forcing the neighbouring states,\nalready economically dependent, into obvious political dependence upon it.\nHence the pressure for \u2018agreements\u2019 like Nkomati.<\/p>\n\n\n\n

At the same time, and bound-up\nwith its political aims, SA imperialism pursues a deliberate policy of\nincreased economic domination over Southern Africa.<\/p>\n\n\n\n

The states around South Africa\nare hoping to escape the grip of SA imperialism by means of SADCC. This is\nintended as a kind of economic community of states aimed at reducing their\ndependence on South Africa.<\/p>\n\n\n\n

SADCC is, however, utopian on a\ncapitalist basis, already tending to fall apart through the inevitable competitive\nstruggle between its members over stagnant or declining home markets and scarce\ninvestments. At the same time the SA monopolies are penetrating further into\nthe SADCC countries.<\/p>\n\n\n\n

Nevertheless, Botha\u2019s dream of\ncreating a so-called \u2018constellation of Southern African states\u2019 orbiting around\nwhite-controlled South Africa will not succeed either. It will time and again\nbe frustrated and cut across by revolutionary mass pressures welling up all\nover the region.<\/p>\n\n\n\n

Overall, South Africa\u2019s policy in\nregard to Southern Africa is to try to have it as a captive market for its own\ngoods and keep at bay competitive exports from the advanced capitalist\ncountries. But domination of the Southern African countries, a market of 60\nmillion people, nevertheless provides no way out of the crisis for South\nAfrica.<\/p>\n\n\n\n

Although 49 out of 52 African\ncountries trade with South Africa, even the African market as a whole can\nprovide no way out. It is a market of the poor, of the unemployed, of the\nhomeless and the starving. In 1984 it absorbed less than R1 billion of SA\u2019s\nmore than R23 billion exports.<\/p>\n\n\n\n

Now, for their development, modern productive forces require a world\nmarket. <\/strong><\/p>\n\n\n\n

<\/div>\n\n\n\n

Scale of Production<\/strong><\/p>\n\n\n\n

For SA capitalists to produce\nmanufactured goods cheaply enough to gain a real foothold in the world market,\nor even to hold on to their own domestic market in the long term, they would\nhave to be able to increase massively the\nscale of production<\/strong> in South Africa in order to reduce unit costs.<\/p>\n\n\n\n

But that is ruled-out, on the one\nhand, because of the limits of the domestic market already mentioned, and, on\nthe other hand, because of the limitations of the world market and of world\ntrade which is a basic feature of the international crisis of capitalism.<\/p>\n\n\n\n

The avenues for major new\nindustrial developments are correspondingly narrowed. As Anglo American Corporation\nchairman Gavin Relly expressed it: \u201cThe country is still dependent almost\nwholly on a mixture of old technology and raw materials.\u201d<\/p>\n\n\n\n

\u2018As an example,\u2019 says the Financial Times<\/em>[1]<\/a>,\n\u2018he quotes South Africa\u2019s reserves of high-quality iron ore, which could be\nbeneficiated into high-grade steel and shipped to the US for rolling, perhaps\nthrough Saldanha Bay…<\/p>\n\n\n\n

\u201cHowever,\u201d he concludes, somewhat despondently, \u201cwe had these ideas for twenty years now, and we have not yet been able to make them work.\u201d<\/p>

Nevertheless, this is still seen as one of the possible areas for expansion, given that the small size of the South African economy does not allow for economies of scale in the production of finished steel products<\/strong>. \u201cWidgets tend to be more expensive here than in Widgetville, US,\u201d he says. (Our emphasis.)<\/p><\/blockquote>\n\n\n\n

For these reasons there is a long-term decline evident in South Africa\nin the proportion of the surplus which the capitalists are re-investing in\nindustry, and therefore a stagnation in productivity. In consequence, the\neconomy is becoming diseased to the roots.<\/strong><\/p>\n\n\n\n

In the ten years from 1972, the\nannual rate of growth of productivity in South Africa averaged only one-tenth\nof Japan\u2019s; one-ninth of West Germany\u2019s; one-sixth of the USA\u2019s; and one-fifth\nof Britain\u2019s (one of the most rapidly declining capitalist economies in the\nworld).<\/p>\n\n\n\n

Although the choice of\nstatistical basis for calculating productivity in SA (viz., whether GDP or GNP\nis used) affects the figures to some extent, it does not alter the fact of\nSouth Africa\u2019s declining competitive position \u2013 certainly not as far as\nmanufacturing is concerned. In manufacturing, productivity actually fell about\n4.7% from mid-1982 to mid-1983. A year later the Financial Mail<\/em>[2]<\/a>\nsummed up the predicament of the bourgeoisie: \u201cWe are no longer seeing even the\nminimal gains in productivity achieved between 1972 and 1982.\u201d<\/p>\n\n\n\n

One of the biggest lies peddled\nby the bourgeoisie in every country is that workers are responsible for low or\nstagnant productivity. This is nonsense. To an overwhelming extent it is investment<\/strong> which determines productivity,\nor output per unit of labour-time: investment in machinery, technique and\nexpanded production. That is in the hands of the bosses.<\/p>\n\n\n\n

In South Africa the monopolies,\nincapable of undertaking the expansion of domestic industry as in the past, and\nhaving already carved the joint among themselves, are turning their greedy eyes\nmore and more towards investment opportunities and profit-making abroad.<\/p>\n\n\n\n

According to Clewlow of Barlow\nRand, for instance, \u201cBarlows is already a dominant force in many areas of the\nSouth African economy and it has become necessary to expand internationally in\norder to maintain our long term record of growth and profitability.\u201d[3]<\/a><\/p>\n\n\n\n

For over a decade now the\nmonopolies have been seeking ways of exporting capital from South Africa. By\n1981, South African companies already held foreign assets totalling R13.5\nbillion (a figure which, despite exchange controls, had increased more than\nthree-fold in the preceding six years).<\/p>\n\n\n\n

Anglo American, for example, has\noperations now in 45 countries and is pursuing profits in Latin America, Europe\nand even the United States.<\/p>\n\n\n\n

All this expresses the impasse of\nthe South African economy, the limits to its development on the basis of\nprivate ownership and within the confines of the national state.<\/p>\n\n\n\n

<\/div>\n\n\n\n

Investment and Inflation<\/strong><\/p>\n\n\n\n

The economic impasse is expressed\nalso in the growing difficulty South Africa finds in attracting foreign\ninvestment. While the regime has found it relatively easy to obtain foreign loans<\/strong>, the international financiers\nhave grown shy of risking their capital directly in production \u2013 as much\nbecause the profitability of investments in SA is increasingly in doubt as\nthrough fear of the country\u2019s \u2018instability\u2019.<\/p>\n\n\n\n

The sale by foreign corporations\nof their shares on the Johannesburg Stock Exchange reached major proportions before<\/strong> the current \u2018disinvestment\u2019\nfurore in the USA. In the past the US and every other bourgeois never lost a\nwink of sleep on moral grounds over their South African investments. It is the\nchange in SA\u2019s economic and political\nsituation<\/strong>, and hence in the assessment of their material self-interest,\nwhich has tipped the scales among those sections of the American bourgeois now\nhastening to identify themselves opportunistically with the anti-apartheid\ncampaigns of the labour unions and the black civil rights organisations.<\/p>\n\n\n\n

The fear of the SA regime and\nruling class that disinvestment could become a flood, flows from their\nknowledge that the economy cannot regain the old relatively high rates of\nprofit which alone could attract investment back.<\/p>\n\n\n\n

The declining competitive\nposition of SA capitalism manifests itself also in a rate of inflation\npersistently two- or three-times higher than the average in the advanced\ncapitalist countries, and in a tendency for the value of the rand to depreciate\nagainst the major currencies.<\/p>\n\n\n\n

Because the bourgeoisie cannot\nlook the organic disease of its system in the face, its most authoritative\neconomic spokesmen have for years refused to admit that there is any \u201cstructural\u201d\ncause for South Africa\u2019s inflation rate. Apparently it is all<\/strong> a matter of the money supply. Curbs on public expenditure, \u201cif\nonly\u201d sufficiently stringently applied, would succeed in reducing inflation to\nthe levels unavoidably imported from the developed countries. Then South Africa\nwould be on the road to economic health. This is sheer quackery.<\/p>\n\n\n\n

In a pamphlet to be published\nlater in the year, Inqaba<\/em> will deal\nfully with economic issues. Here it is enough to make the central point:<\/p>\n\n\n\n

Because of the interlinking of\neconomies through the world market to a greater extent than ever before, the\nlaw of value explained by Marx operates ever more imperiously through the world\neconomy.<\/p>\n\n\n\n

Lagging productivity in a\nnational economy, due to low investment, means that more labour is required to\nproduce goods locally than the equivalent goods on the world market \u2013 and this\nmust reflect itself, in the final analysis over time, in a tendency towards\ninflated domestic prices and a weakening currency. Even the cheapest of cheap\nlabour cannot overcome this in the modern epoch of computer technology and\nautomation.<\/p>\n\n\n\n

The same was proved in Chile\ndespite all the potions of the monetarist witchdoctor Friedman and his \u2018Chicago\nBoys\u2019. In the face of a catastrophic collapse of industry, in fact, the Pinochet\ndictatorship was forced desperately to swing back to policies of deficit\nspending, which in turn have only made matters worse.<\/p>\n\n\n\n

Throughout the world capitalist\neconomy, prices continue to rise even during the worst recessions \u2013 a condition\nwhich, fifty years ago, used to cause prices to fall. Now only the rate<\/strong> of inflation can be curbed, and then only here and there for temporary\nperiods<\/strong>.<\/p>\n\n\n\n

Directly or indirectly, 500\nmonopolies control about 90% of capitalist world trade. To the extent that\nmonopolies can ward off competitive pressures, they raise prices at the stroke\nof a pen in order to reap super-profits.<\/p>\n\n\n\n

State expenditure has continued\nto rise relative to production in all the main capitalist economies, even in\nThatcher\u2019s monetarist Britain, necessitating continued deficits of vast\nproportions.<\/p>\n\n\n\n

A thousand billion Euro-Dollars \u2013\nmoney without real backing in production or gold \u2013 float around the European\nand North American capital markets. Mountains of international debt continue to\naccumulate, now also in the region of $1,000 billion. World arms expenditure is\nnow approaching a similar figure \u2013 every year.<\/p>\n\n\n\n

All this adds up to massive\ninflationary pressures throughout the capitalist world economy.<\/p>\n\n\n\n

Only brutal deflationary<\/strong> policies have held down the rate of price rises in the\nadvanced industrialised countries in the recent period. But these policies have\nresulted in turn in the wholesale slaughter of old industries, rising mass\nunemployment, decaying infrastructure, and pressures towards protectionism and trade\nwar which would precipitate a major world depression if resorted to on a big\nscale.<\/p>\n\n\n\n

Any massive reflation, on the\nother hand, would rapidly lead to galloping inflation. The bourgeoisie is\nhaunted by the spectre of Latin American rates of inflation, should they be\nforced to swing back to Keynesian policies. (By \u2018Latin American\u2019 inflation is\nmeant prices which rise, not by tens of percent, but by hundreds or thousands\nof percent annually. In Argentina, for example, a one million peso note, which\ncould buy a car twelve years ago, buys less than a packet of cigarettes today.\nIn Bolivia, inflation has now reached 8,200%. Elsewhere, for example, Israel\u2019s\ninflation rate topped 500% in 1984.)<\/p>\n\n\n\n

In the United States, the\ndominant capitalist economy, the recent boom was based on record budget\ndeficits and astronomical arms spending. However, for exceptional reasons<\/strong> which cannot be repeated elsewhere, price\nincreases slowed below 5% at the same time. Now the signs are that a new\nrecession in the US is beginning again coupled\nwith rising inflation<\/strong>. The chickens are coming home to roost. <\/p>\n\n\n\n

<\/div>\n\n\n\n

Diseased System<\/strong><\/p>\n\n\n\n

World capitalism is now an\norganically diseased and totally reactionary system. It staggers on at\nappalling cost to mankind only because it has not been overthrown, because the\nproletariat internationally has yet to raise itself consciously to the position\nof ruling class and carry-out the revolutionary tasks which history poses\nbefore it.<\/p>\n\n\n\n

To free itself from exploitation\nand solve the problems facing mankind, the working class has to take the productive\nforces into common ownership and, linking up internationally, organise a\nplanned economy, under workers\u2019 democratic control and management.<\/p>\n\n\n\n

In this way all the vast\nresources of the earth, all the modern technique created by science and labour,\ncan be put to use \u2013 not for the private profit of a few, but to meet the needs\nof all. In this way, easily within the space of a generation, it would be\npossible to end unemployment, homelessness and mass diseases throughout the world,\nwhile lifting all humanity out of the nightmare of ignorance, competition for\nsurvival, and war \u2013 to begin for the first time a really civilised human<\/strong> existence and development.<\/p>\n\n\n\n

Only the bourgeoisie, whose\nsystem has outlived itself; or inveterate reformists for whom the socialist\nrevolution is too ghastly to contemplate; or Stalinist bureaucrats who know\nthat democratic workers\u2019 rule anywhere will toll the end of their own\ndictatorship and privilege \u2013 only these can continue to place hope in the regeneration\nof capitalism in the West.<\/p>\n\n\n\n

Capitalism is bankrupt. What is\nthe case on a world scale is the case ten and a hundred-times over in a country\nlike South Africa.<\/p>\n\n\n\n

In the past, the mainstay of SA\u2019s\neconomy has been gold, and that remains the case to an important degree.<\/p>\n\n\n\n

Gold production does serve at\nleast partially to cushion the economy against the effects of world recession.\nIn particular, the capitalists can export all the gold produced, and this tends\nto ease what would otherwise be very serious balance of payments crises.<\/p>\n\n\n\n

But what has become clear is that\ngold no longer provides a means of sustaining the development of industry as in\nthe past. That was shown in 1979-80 when the gold price reached record levels.\nAn absolute bonanza of profits resulted, which could not be profitably invested\nin production.<\/p>\n\n\n\n

At the same time the ups and\ndowns of the gold price on the world market \u2013 a feature of the world crisis \u2013 now\nintroduce a factor of tremendous instability in the financial system of South\nAfrica. Very rapidly a high gold price produces an excess of \u2018liquidity\u2019, of\nmoney that cannot find a productive home.<\/p>\n\n\n\n

It has become characteristic now\nthat there can be booms on the stock exchange, booms in bank profits, bubbles\nof property speculation as massive amounts of money change hands among the rich\n\u2013 at the same time as industry is stagnating or actually declining.<\/p>\n\n\n\n

This is a mark of the sickness of\nthe productive system. It also accelerates the tendency towards inflation,\nfurther undermining the competitive position of the economy and the position of\nthe rand on world currency markets.<\/p>\n\n\n\n

It is an expression of the\ncontradictions inherent in the economy that the regime has been obliged to\nmove, by a series of steps over the past ten years, towards easing foreign\nexchange controls and \u2018floating\u2019 the rand on world currency markets precisely\nas the difficulty of attracting funds into productive investment in SA, and the\ntendency towards excess \u2018liquidity\u2019, has increased.<\/p>\n\n\n\n

Capitalism is an anarchic system,\ngoverned by private profit, and cannot be otherwise. Thus the capitalist regime\ncould not simply direct funds available locally into local productive\ninvestment. It had to allow capital, which capitalists did not want to invest\nlocally, to flow out of the country. At the same time, foreign investors were\nall the more wary of investing in enterprises in SA if they could not bank on\nbeing able to withdraw their capital again at will. Uninvested local funds\nfuelled inflation and necessitated a foreign outlet; a lack of foreign\ninvestment was threatening further to weaken the country\u2019s productive base and\nthus add to the spiral of competitive decline and inflation.<\/p>\n\n\n\n

Under these and related pressures\nthe government introduced, for example, the \u2018managed float\u2019 of the rand in January\n1979. This was soon followed by the high gold price of 1979-80, which in turn\nincreased the pressure for further easing of controls. Against the background\nof a rising gold price in 1982-83, the regime abolished exchange control over\nnon-residents on 7 February 1983, allowing foreign investors to withdraw funds\nfrom SA without obtaining prior approval from the Reserve Bank.<\/p>\n\n\n\n

There was a massive outflow of\ncapital. In the first nine months of 1983, for example, foreign investors alone\nsold R1 billion worth of shares on the stock exchange in Johannesburg.<\/p>\n\n\n\n

The boom in the United States,\ntogether with a partial rise in the gold price, contributed to a short consumer\nboom in South Africa from late 1983 onwards. But the depth of the organic\ncrisis is shown in the fact that that boom lasted no more than six months. A\ncombination of factors rapidly turned it into a recession once again.<\/p>\n\n\n\n

Because American interest rates\nwere high, and because the dollar was rising also on the basis of the US boom,\nthe gold price fell.<\/p>\n\n\n\n

This, together with doubts about\nthe economic and political viability of SA capitalism, caused the international\nspeculators to turn away from the rand. Rapidly the rand plunged in value from\n$1.30 to below 60 US cents. The rand also fell sharply against sterling and\nother major currencies, showing that its weakness was due only in part to the exceptional\nrise of the dollar.<\/p>\n\n\n\n

The SA capitalists found\nthemselves in an impossible position. Although the gold price was low in\ndollars, the rand fell even lower against the dollar \u2013 and therefore the gold\nprice actually rose in rands, in fact to record levels. So they found\nthemselves with excess \u2018liquidity\u2019 again \u2013 on top of a collapsing rand.\nInflation, which never went below 10%, again approached 14% or more officially.<\/p>\n\n\n\n

Meanwhile, the South African \u2018boom\u2019,\nfuelled by massive increases in consumer credit, was sucking in imports at\nrapidly rising prices (measured in depreciating rands), so giving a further\ntwist to inflation.<\/p>\n\n\n\n

The dangerous consequences were rapidly\noutweighing the advantages the SA economy would derive from the cheapening of\nits exports abroad.<\/p>\n\n\n\n

Therefore very rapidly the\ngovernment had to take measures to induce a recession, to attempt to rescue the\nrand and prevent hyper-inflation by jacking up interest rates to a record level\nof about 25%. This is nearly double the level at which \u2018high\u2019 interest rates\nhave been running in the USA.<\/p>\n\n\n\n

<\/div>\n\n\n\n

Effect of these Measures<\/strong><\/p>\n\n\n\n

With a prime rate of 25%,\ninterest on hire-purchase has been raised as high as 32%, sharply hitting the\ncar market. Interest on mortgage bonds has gone above 20%, inevitably affecting\nconstruction. Whites accustomed to cheap mortgages now face the little problem\nof finding R10,000 or more a year just to pay the interest on their R50,000\nhouses! The high cost of borrowing meanwhile squeezes investment still further\nand deepens the recession.<\/p>\n\n\n\n

But high interest rates alone are\nnot sufficient to support a currency whose basis in the productive economy is\nin decline. It was notable that, despite the extreme monetary measures taken by\nthe SA government, the rand continued to fall, at one point dropping to 42 US\ncents. It has only partially recovered since (currently to 51 cents) with some\nimprovement in the gold price and an easing of the dollar. Significantly, it\nhas not regained lost ground against sterling, etc.<\/p>\n\n\n\n

The most spectacular consequence\nof the devalued rand so far has been the 40% hike in the price of petrol. More\nprice shocks are sure to follow.<\/p>\n\n\n\n

Not to have induced the recession\nin this way would have led to even worse inflation. Yet, by crash-diving the\neconomy and throttling production in an attempt to rescue the rand, the ruling\nclass is merely ensuring by another route the long-term decline and instability\nof its currency and financial system.<\/p>\n\n\n\n

Whichever economic policy the\nbourgeoisie pursues now, it is a question of alternative roads to ruin.<\/p>\n\n\n\n

There will continue to be\ntemporary recoveries in the economy \u2013 continued cyclical phases in the life of\nworld and SA capitalism. But these will be like the temporary remissions of\ndisease in a cancer victim. The general course will be downhill. The reason for\nthis lies in the fundamental contradictions we have outlined, for which there\nis no capitalist cure.<\/p>\n\n\n\n

Even future leaps in the gold\nprice, inevitable in the context of extreme instability in the world monetary\nsystem, will confer only limited advantages on South African capitalism. As\nalready explained, whether the gold price is high or low, damaging consequences\nfollow each fluctuation. It is now impossible, on a capitalist basis, to\nrejuvenate the productive system. <\/p>\n\n\n\n

<\/div>\n\n\n\n

Protectionism<\/strong><\/p>\n\n\n\n

As the limits of the domestic\nmarket have driven the capitalists onto the world market to find an outlet for\nmanufactures, so the limits of the world market and SA\u2019s weak competitive\nposition drive them back to the domestic market again \u2013 which, meanwhile, has\nbeen more extensively opened to foreign goods.<\/p>\n\n\n\n

A section of the bourgeoisie \u2013 those\ndependent to a significant extent on manufacturing \u2013 have begun talking of the\nneed for major new protectionist measures to insulate industry from foreign\ncompetition while a programme of expansion is undertaken.<\/p>\n\n\n\n

But, by employing more expensive\nmaterials and less productive technique, and by sheltering the SA monopolies\neven further from competition, this would soon lead to further leaps in\ndomestic prices. There would be an explosion of demands for wage increases,\nfrom black and white workers alike. Costs throughout the economy would rise\nfurther, undermining in particular the profitability of exports.<\/p>\n\n\n\n

Already the government has had to\nmove to dismantle part of the previous protectionist devices \u2013 notably import\nquotas \u2013 as a measure against inflation.<\/p>\n\n\n\n

Even if a protectionist policy\nhad a temporary effect in boosting SA manufacturing, it would soon be met with\nretaliation against South Africa\u2019s exports by countries whose exports to South\nAfrica had been cut-off. This at precisely the time when SA capitalism is\ndesperate to break new ground for the marketing of its products abroad.<\/p>\n\n\n\n

Already heavily dependent on\nforeign loans, the SA ruling class is worried that exports will soon not be sufficient\nto finance the country\u2019s rising debts. SA\u2019s foreign debt is now R40 billion, of\nwhich R17 billion is very short-term.<\/p>\n\n\n\n

Meanwhile exports have declined\nas a proportion of GNP from 30% in the late 1970s to about 25% in 1984 (15% if\ngold is left out of account). Although gold enjoys a virtually guaranteed\nmarket, the SA bourgeoisie can scarcely afford to risk retaliation against its\nother exports, by gambling with protectionism.<\/p>\n\n\n\n

Nevertheless, it may resort to\nsuch self-defeating measures under the impact of the crisis in the coming\nyears. Marxists must combat any\nillusions which may develop in the trade unions that this would provide a way\nout for the economy, or for employment.<\/strong><\/p>\n\n\n\n

Whether on the road of\nprotectionism, or an \u2018open door\u2019 policy in trade, or a combination of the two,\nthe bourgeoisie is leading SA deeper and deeper into the swamp. At each and\nevery step, the effects of the crisis are loaded onto the already bent backs of\nthe black working class.<\/p>\n\n\n\n

The present sharp recession has\ncome against a background already of three million or more black unemployed,\nmost of whom have no social welfare protection whatsoever. For the small\nminority entitled to the pittance from the Unemployment Insurance Fund,\npayments end after six months.<\/p>\n\n\n\n

Many survive only by sharing the\nmeagre income of the aged in their families, whose pensions were recently \u2018raised\u2019\nto a mere R79 a month.<\/p>\n\n\n\n

Job losses continue apace. Now\neven plant closures, hardly known in SA previously, have become a feature of\nthe situation. Press reports claim that 45,000 black jobs have been lost in\nsteel and engineering alone. In a new turn of immense significance, 20,000\nwhite jobs have also disappeared in this industry.<\/p>\n\n\n\n

In the three months to October\n1984, an estimated 10,000 jobs were axed in the motor industry. Most motor\nmanufacturers were down to a three- or four-day week by the end of the year. On\ntop of that has come the merger of big motor corporations and the closure of\nthe Ford plant in Port Elizabeth.<\/p>\n\n\n\n

Employment in other manufacturing\nsectors has likewise been hit by the recession. In a survey reported in Die Beeld<\/em>,[4]<\/a>\n22% of blacks said a family member had been hit by retrenchment. 5% of whites\nsaid the same.<\/p>\n\n\n\n

The point we have to stress is that even during the long upswing in the\ndevelopment of South African industry since World War Two, capitalism was\nincapable of raising the living standards of the mass of black people.<\/strong> The\nonset of the world crisis and the crisis in SA has had a shattering effect on\nthe living standards of the blacks.<\/p>\n\n\n\n

These fell persistently in the\nsecond half of the 1970s, even during the few \u2018boom\u2019 years. Then there was a\nfall of at least 20% in the past four years. In Die Beeld<\/em>\u2019s survey, 39% of whites said their living standards had\ndeclined in 1984, while 64% of blacks in the PWV and Port Elizabeth areas said\nso. <\/p>\n\n\n\n

Barclays Bank calculates that\nliving standards of all South Africans, white and black, will fall an average\nof 6% this year. At least half the black population already live in what\nnewspapers term \u2018absolute poverty\u2019. The burden of poverty on the black proletariat\nhas become intolerable.<\/p>\n\n\n\n

<\/div>\n\n\n\n

Nightmare Situation<\/strong><\/p>\n\n\n\n

It is impossible in a few lines\nto describe adequately the nightmare situation of poverty, of homelessness, of\nhunger which is faced by growing numbers of the black working class and\nunemployed masses in the rural and the urban areas.<\/p>\n\n\n\n

Food prices are rising much\nfaster than the official rate of inflation, which is currently above 16%. In\n1984 alone the price of maize rose 30%, bread 25%. In the twelve months to\nFebruary 1985, the price of goods in household budgets rose 21%, when the\nofficial inflation rate was 14% \u2013 and that was before the petrol price went up.<\/p>\n\n\n\n

There has been a 20% fall in the volume of maize consumption without\nany corresponding rise in the consumption of other foods.<\/strong><\/p>\n\n\n\n

Meat has become a luxury. Only\n11% of black urban households can afford to eat fruit.<\/p>\n\n\n\n

In the Durban area every year 8,000\nnew-born babies are dumped by parents who cannot keep them. In the rural areas\nthere are now 820,000 people dependent for their food on charitable relief. \u2018Active\nmalnutrition\u2019 among children in the Ciskei is estimated at 89% \u2013 and the\nprobable figure for other Bantustans would not be much lower.<\/p>\n\n\n\n

Thus the hideous system in South\nAfrica \u2013 the system of capitalism and apartheid bound together \u2013 now devours\nthe very foundations of society, forcing growing numbers down towards an animal\nexistence, murdering human beings with poverty and hunger as surely as with the\npoliceman\u2019s gun. <\/p>\n\n\n\n

<\/div>\n\n\n\n

Crisis in State Expenditure<\/strong><\/p>\n\n\n\n

With the productive base of the\neconomy weakening, increasingly we see the inability of the state to finance\nits expenditure out of taxes on companies, incomes and profits. The white\npopulation and the monopolies are proving to be an extremely narrow tax base.<\/p>\n\n\n\n

The cost of internal repression\nand external aggression is rising. This year R4.3 billion will be spent on \u2018defence\u2019.\nThere is the occupation of Namibia to pay for: amounting to R1,031 million\nbetween 1982 and 1984, according to Pik Botha. There is the structure of puppet\nBantustans, the stooge councils, the administration boards, etc. \u2013 this whole\nedifice costing at least R2 billion a year to finance.<\/p>\n\n\n\n

Then there are the salaries of\nthe 660,000 provincial and central government employees. And, of course, the\npoliticians don\u2019t want to forget about themselves. Botha took the precaution,\nwhen he \u2018retired\u2019 as Prime Minister and became President, to pay himself a\nR300,000 \u2018gratuity\u2019!<\/p>\n\n\n\n

Finally, and most annoying of all\nto the bourgeoisie, is the rapidly expanding human need for social services.<\/p>\n\n\n\n

There is now a persistent\ntendency to rising deficits. State expenditure has gone over the budget in\nevery one of the past five years \u2013 sometimes dramatically \u2013 and despite\nmonetarist stringency. As a result the regime has begun to shift the burden of\ntaxation from companies and the richer individuals towards taxes on the poor.<\/p>\n\n\n\n

Black workers have been brought\ninto the income tax net. General Sales Tax has been introduced, and now raised\nto 12%. Only basic foodstuffs are exempt. That is a tax on the workers, on the\nyouth, on the aged, on the homeless, and on the unemployed.<\/p>\n\n\n\n

The contribution of the individual taxpayer, as opposed to companies,\nhas gone up from 31% in 1980 to 58% now.<\/strong><\/p>\n\n\n\n

Nevertheless, the ruling class\nfaces the impossibility of keeping public expenditure within bounds which their\nsystem can \u2018afford\u2019.<\/p>\n\n\n\n

The Star<\/em>[5]<\/a>\nbluntly expressed the cold calculation of the bourgeoisie: \u201cThese can only be\nthe first tremors (of the crisis in public spending), since the demand\nexplosion in housing, education, health services, social pensions,\ninfrastructure, and the provision of energy and safe water will, in competition\nwith other more legitimate [!] state functions like defence, law-and-order,\nforeign affairs and public administration create a bill we [!] cannot meet.\u201d<\/p>\n\n\n\n

With South Africa\u2019s rapidly\nrising population, \u201cpresent stresses could reach crisis proportions… To\nfinance these cost explosions from taxation in a tottering economy is out of\nthe question.\u201d<\/p>\n\n\n\n

Even South Africa\u2019s prized\nnational roads grid is threatened with breakdown because of cuts in essential\nmaintenance spending. R2.5 billion is needed just to repair rural roads.<\/p>\n\n\n\n

Just how \u201cout of the question\u201d it\nis that SA capitalism can ever meet the basic needs of the working people is\nshown by the present backlog of 700,000 houses. One million houses need to be\nbuilt for black people by 1990 \u2013 yet only 20,000 were built last year. State\nspending on black housing this year is to be a paltry R265 million (less than\none-sixteenth of military spending).<\/p>\n\n\n\n

Meanwhile, massive increases for\nrents and electricity and water supplies are being loaded onto the\ntownship-dwellers, who find it impossible to make ends meet.<\/p>\n\n\n\n

Now the SA ruling class,\ndisplaying even more lunacy than Thatcher in Britain, wants to privatise the\nstate corporations, or the profitable sections of them. This, they figure, will\nkill two birds with one stone: raise easy money to finance state spending for a\ntemporary period without immediate tax increases, and give the capitalists new\navenues for private profiteering.<\/p>\n\n\n\n

The regime plans to sell-off part\nof ISCOR, possibly by the end of this year, and there is talk even of the privatisation\nof electricity supply.<\/p>\n\n\n\n

This would mean turning over the\nvital infrastructure of the whole economy to the anarchy of the market, and\nwould prepare the way for an even more fundamental crisis in future.<\/p>\n\n\n\n

There is an old saying that \u2018those\nwhom the gods wish to destroy they first drive mad.\u2019 Some of the money-crazed\nbourgeois in South Africa now go so far as to demand privatisation of services\n\u2013 health, education, etc. \u2013 so that these will only be available to people with\nthe money to pay for them.<\/p>\n\n\n\n

Even the lower-middle class and\nworking class whites would not tolerate this for long. And it would be a sure\nroute to yet more massive revolutionary explosions among the blacks. Yet even\nthis madness on the part of the ruling class could not be ruled-out, because of\nthe impossible dilemmas that will face them.<\/p>\n\n\n\n

The connection between racial\ndomination and capitalism, between the bosses\u2019 apartheid dictatorship and their\nexploitation of the black working class, now stands nakedly exposed in every\nsphere of life. <\/p>\n\n\n\n

There is a simultaneous economic, social and political crisis going so to the roots of the entire system that there is no possible way out except a social revolution. This idea has begun to grip the consciousness of masses of black working class people.<\/p>\n\n\n\n

\u00a9 Transcribed from the original by the Marxist Workers Party (2020).<\/em><\/p>\n\n\n\n

Continue to Chapter Two<\/a><\/h4>\n\n\n\n
\n\n\n\n

[1]<\/a> 1\nNovember 1984<\/p>\n\n\n\n

[2]<\/a> 20\nJuly 1984<\/p>\n\n\n\n

[3]<\/a> Financial Times<\/em>, 18 October 1984<\/p>\n\n\n\n

[4]<\/a> 12\nDecember 1984<\/p>\n\n\n\n

[5]<\/a> 24\nSeptember 1984<\/p>\n","protected":false},"excerpt":{"rendered":"

The Economy \u2013 Basis of Perspectives As with all societies, we will find the roots of the present political crisis in South Africa in the […]<\/a><\/p>\n<\/div>","protected":false},"author":1,"featured_media":0,"parent":1186,"menu_order":0,"comment_status":"closed","ping_status":"closed","template":"","meta":{"_acf_changed":false,"footnotes":""},"class_list":["post-1195","page","type-page","status-publish","hentry"],"aioseo_notices":[],"acf":[],"_hostinger_reach_plugin_has_subscription_block":false,"_hostinger_reach_plugin_is_elementor":false,"brizy_media":[],"_links":{"self":[{"href":"https:\/\/marxistworkersparty.net\/index.php?rest_route=\/wp\/v2\/pages\/1195","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/marxistworkersparty.net\/index.php?rest_route=\/wp\/v2\/pages"}],"about":[{"href":"https:\/\/marxistworkersparty.net\/index.php?rest_route=\/wp\/v2\/types\/page"}],"author":[{"embeddable":true,"href":"https:\/\/marxistworkersparty.net\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/marxistworkersparty.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=1195"}],"version-history":[{"count":3,"href":"https:\/\/marxistworkersparty.net\/index.php?rest_route=\/wp\/v2\/pages\/1195\/revisions"}],"predecessor-version":[{"id":1275,"href":"https:\/\/marxistworkersparty.net\/index.php?rest_route=\/wp\/v2\/pages\/1195\/revisions\/1275"}],"up":[{"embeddable":true,"href":"https:\/\/marxistworkersparty.net\/index.php?rest_route=\/wp\/v2\/pages\/1186"}],"wp:attachment":[{"href":"https:\/\/marxistworkersparty.net\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=1195"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}