{"id":837,"date":"2019-11-15T21:09:03","date_gmt":"2019-11-15T19:09:03","guid":{"rendered":"http:\/\/marxistworkersparty.org.za\/?p=837"},"modified":"2020-01-01T13:34:25","modified_gmt":"2020-01-01T11:34:25","slug":"sas-economic-crisis-no-way-out-for-the-working-class-under-capitalism","status":"publish","type":"post","link":"https:\/\/marxistworkersparty.net\/?p=837","title":{"rendered":"PART ONE: SA\u2019s Economic Crisis \u2013 No Way Out for the Working Class Under Capitalism"},"content":{"rendered":"\n

by Weizmann Hamilton<\/em><\/strong><\/p>\n\n\n\n

South Africa is\ngoing through its most serious economic crisis of the democratic era. What characterises\nthis crisis, probably more than any other before it, is that there is no\nsolution on a capitalist basis. The crisis has been produced by the very\npolicies the capitalist class has enforced on their executive committees \u2013 the capitalist\ngovernments worldwide, including the ANC in SA. The scientist and socialist,\nAlbert Einstein, defined insanity as doing the same thing over and over again\nbut expecting a different result. Yet this is precisely what capitalist\ngovernments are doing worldwide. SA is no exception.<\/p>\n\n\n\n

\"\"<\/figure><\/div>\n\n\n\n

Annual growth in\nGDP (gross domestic product \u2013 the total value of goods and service produced) is\nthe worst since measurements began in 1946. With every sector of the economy\naffected, analysts are in a competition to find the right words to describe the\nextent of the crisis. One analyst predicts\nthat a \u201cfinancial tsunami\u201d is about to hit:<\/p>\n\n\n\n

Record unemployment, stagnant economic growth, government debt\nlevels rocketing from 25% of GDP in 2009 to an expected 60% by the end of this\nyear. There are today more people on social grants (17,3m) than those who earn\na living. The residential property market has now moved sideways for 11 years\nand in real terms is down 23% when inflation is factored in. The JSE has just\nhad its worst 5-[year] period on record and the rand has collapsed from R6,80 [to\nthe dollar] in 2012 to around R15 today. South Africans are infinitely worse\noff today than five and ten years ago.[1]<\/a><\/p>\n\n\n\n

The retail sector\nshare price collapse is described as \u201can apocalypse[2]<\/a>\nand the mining industry is feared to be entering its \u201clast chapter\u201d[3]<\/a>.\nConstruction heavyweights Group Five\nand Aveng have applied for business rescue and one of the oldest, Murray &\nRoberts, is exiting the sector altogether. By September nine out of ten\nmanufacturing sectors had shrunk. Mall building is said to be \u201ca bubble waiting\nto pop\u201d.[4]<\/a>\nThe worst drought in a thousand years is affecting agriculture in three\nprovinces. The 127-year old Tongaat Hullett is pulling out of sugar production.\nNew investment into the economy fell 4.5% in the first quarter of 2019.[5]<\/a><\/p>\n\n\n\n

The downward trend in SA\u2019s business cycle has\ncontinued since the end of 2013, the longest downturn since 1945.[6]<\/sup><\/a>\nEconomic growth forecasts have been revised downwards for the ninth year in a\nrow. Growth in 2019 is predicted at between 0.5% and 1% and expected to persist\nat these levels. The National Planning Committee that Ramaphosa chaired calculated\nthat growth of 5.4% a year for ten years consecutively would be required to\neliminate extreme poverty and achieve full employment by 2030.  <\/p>\n\n\n\n

By September\nthis year, a shocking number of South Africans were living below the food\npoverty line. To feed a family of four a nutritionally complete basket of food,\ncosts R2,327 per month. But more than half the population live on less than R1,230;\na quarter on less than half that at R19 per day. The child support grant of\nR420 per month cannot adequately feed its 12.3 million recipients.[7]<\/a>\n<\/p>\n\n\n\n

Despite\nunemployment having reached a record 10.2 million, the jobs bloodbath\ncontinues. SAA wants to retrench 944; PRASA\u2019s job losses will reach 10,000 by\nthe end of this year; Saldanha Bay\u2019s closure will destroy 2,000 jobs; 10,000 in\nbanking; the mining industry is threatening 100,000 job losses if the carbon\ntax is introduced next year. It is abundantly clear that the capitalist class\nand its executive committee, the ANC government, have only one \u201csolution\u201d: to\nplace the burden of the crisis on the shoulders of the working class.<\/p>\n\n\n\n

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

What lies at the root of the crisis?<\/strong><\/p>\n\n\n\n

Despite hypocritical\nposturing as champions of the nation\u2019s interests, capitalists do not invest for\nthe good of the economy or the people. They invest to make a profit. But low\nwages and mass unemployment means the working class do not have enough money to\nbuy the goods they themselves produce \u2013 this is what is meant by \u201cdemand\u201d \u2013 consumer\npurchasing power.<\/p>\n\n\n\n

How did the ANC\ngovernment and their capitalist masters attempt to solve this problem? By making\nit easier for consumers to put money in their pockets. They inflated demand by\nderegulating the financial markets and encouraging unsecured lending from 2007\nonwards. Not only did this policy fail, it created a new problem \u2013 indebtedness.\nToday consumer debt sits at R19.2 trillion, higher than Angola\u2019s GDP. Annually,\n72% of household income is spent on debt servicing but still 10.2 million are in\narrears.<\/p>\n\n\n\n

Manufacturing\u2019s\ndecline means SA\u2019s income from exports is lower than the cost of imports creating\na deficit in the current account, undermining the Rand. To \u201csolve\u201d this problem\nthe SA Reserve Bank introduced \u201cinflation targeting\u201d. Its real aim was to prop up\nthe Rand by attracting foreign direct investment by maintaining interest rates\nat a higher level than SA\u2019s major trading partners. The SARB has stuck\nstubbornly to this policy despite interest rates having fallen to historic lows\nworldwide. Addicted to this \u201ccarry trade\u201d the policy cannot be abandoned\nwithout these parasitic inflows drying up. This would expose the deficit in the\noverall balance of payments, threatening the Rand.<\/p>\n\n\n\n

But this \u201chot\nmoney\u201d in turn created another problem. These \u2018investors\u2019 do not have the\nslightest interest in creating jobs. They want to make a fast buck by borrowing\nat low rates in the advanced capitalist countries and investing in SA\u2019s higher interest\nrates to make an overnight profit. This is why these portfolio flows are\nreferred to as \u201chot money\u201d \u2013 it leaves the country as quickly as it enters. All\nthe while manufacturing has continued to decline. Investment in the sector has\nfallen below replacement costs of worn out machinery, equipment and plant. The\ncombination of the resultant falling productivity and an overpriced Rand has left\nthe local capitalists struggling to compete on a world market in which trade\nhas fallen in any case for lack of demand. \n<\/p>\n\n\n\n

This has further\nseverely constricted demand which makes up 60% of GDP. Without demand for their\ngoods, the capitalists therefore cut back on investment, hoarding their money\nor taking it out of the country by legal and illegal means. Estimates of\ncorporate hoarding vary from R1.5 trillion to R3 trillion. Illicit capital\nflows are estimated to have reached R147 billon per year between 2003 and 2012.[8]<\/sup><\/a> A\nstudy that Treasury itself participated in found that the top 10% of the 2,000\nforeign multinationals operating in SA account for 80% of the R7 billion a year\nSARS loses in tax. The overall effect has been continued deindustrialisation. Manufacturing\u2019s\ncontribution to GDP, the bedrock of any modern economy, has declined whilst finance\u2019s\nhas risen.<\/p>\n\n\n\n

The combination\nof cuts in government spending and low wages lies at the root of the\ncapitalists disinterest in investing in SA. State expenditure accounts for\nnearly a third of GDP. A total of R70 billion of cuts to public sector spending\nhave been implemented since 2014. Wages have declined from 54% of national\nincome in 1994 to 46% today. The capitalists want to have their cake and eat\nit. They demand spending cuts but complain about the decline in government\ntenders for infrastructure projects. They demand cuts in public sector wages\nand social spending but the retail bosses complain that the slow-down in social\ngrant increases has led to lower demand for their goods. The capitalists and\ntheir government resemble a starving animal feeding itself on its own entrails.\n<\/p>\n\n\n\n

Analysts say\nthat the lack of investment is due to a fall in business confidence reported by\nthe South African Chambers of Industry to be at the lowest levels since 1985. But\nthe problem is not the psychology of the capitalists. It lies in the laws of\nthe capitalist system itself. Capitalism is based on profit which is made\nthrough the unpaid labour of the working class. To make a profit the capitalist\nmust pay the worker as little as possible. But the worker is also a consumer.\nTo enable the worker to buy commodities the capitalists should pay as much as possible.\nThe capitalists cannot do both. Under capitalism, this contradiction is\nirreconcilable.<\/p>\n\n\n\n

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

What would a rating agency downgrade mean?<\/strong><\/p>\n\n\n\n

Hardly a day\npasses without the capitalists screaming that ratings agency Moody\u2019s, the only\none of the three that has not downgraded SA to junk yet, is poised finally to do\nso. Moody\u2019s November decision to reduce SA\u2019s outlook to negative is said to be a\nfinal written warning. Ramaphosa has three months to implement reforms they\nwarn. If there are no credible plans by the February 2020 budget, a downgrade\nto junk is said to be a certainty.<\/p>\n\n\n\n

Although there\nis undoubtedly an element of propaganda in the capitalists doomsday prophesies,\nthe working class must be prepared for the possibility. A downgrade could trigger\na flight of capital of possibly as much as R300 billion, a collapse of the\nRand, and then a massive hike in interest rates to prop it up. This would\nplunge the economy into a deep recession.<\/p>\n\n\n\n

The capitalists can,\nand will of course, take their money and run, as many of them are openly boasting.  For the working class a disaster would turn into\na catastrophe, dragging the middle class down into their ranks. The rate of\nliquidations and bankruptcies and mass unemployment will accelerate. The higher\ninterest rates would ripple throughout the economy resulting in higher prices\nfor basic commodities, furniture, car and house repossessions due to defaults\non loan repayments. House repossessions already stand at 10,000 a year. Inflation\nwill target the working class even more viciously than it has throughout the\nlifetime of this policy for which, SARB governor, Lesetja Kganyago has won the\nprize of Central Banker of the Year from his international counterparts. It\nwould, in other words, solve absolutely nothing economically.<\/p>\n\n\n\n

At present the\ngovernment borrows R850 million every working day to finance the R57.5 billion\nbudget deficit. A downgrade would result in SA being kicked out of the FTSE World\nBond Index compelling the government to offer even higher rates to borrow the\nmoney to finance the deficit. With interest on debt already the biggest item in\nthe budget, borrowing could climb to R1 billion a day or more.<\/p>\n\n\n\n

To pull SA back\nfrom the edge of the \u2018fiscal cliff\u2019 and prevent a default on its debt, Ramaphosa\nis being urged to tighten the noose of \u2018fiscal consolidation\u2019 around the necks\nof the masses. This means cuts in government spending of R150 billion over the\nnext three years, and \u2018structural reforms\u2019, such as full or partial\nprivatisation of SOEs starting with SAA and Eskom. The most deafening hysteria is\non the public sector wage bill which has risen to 46% of budget spending. \u2018Savings\u2019\nwill be achieved by cutting at least 30,000 government and 16,000 Eskom jobs; a\nfreeze or cut in wages and benefits.  In\naddition the bosses are demanding an end to non-payment for electricity to\nrecover, for example, the R17 billion owed by Soweto residents. Mboweni insists\nthat e-tolls should be paid.<\/p>\n\n\n\n

The \u201creforms\u201d\nthe capitalists are demanding show that they are fully committed occupants of\nEinstein\u2019s lunatic asylum. They want a repeat, only more aggressively, of the\nvery same polices that have wreaked havoc with the economy and working class\nliving standards.<\/p>\n\n\n\n

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

Can economic recovery be stimulated?<\/strong><\/p>\n\n\n\n

There is growing\ncriticism of government policies from those who believe the capitalist system\ncan be managed more rationally. Amongst the most vocal critics of SA\u2019s\nneo-liberal economic policies is Duma Gqubule:<\/p>\n\n\n\n

For years, the Treasury has been buying time, telling us things will\nget better if we take its medicine of austerity and structural reforms. When\nthe medicine does not work, it doubles the dose \u2014 as with the \u201cnew\u201d strategy\nand austerity measures \u2014 or repackages the ingredients.<\/p>\n\n\n\n

Correctly arguing that SA has an aggregate\ndemand problem, he denounces the idea of simultaneously introducing a stimulus\nand continued austerity as an \u201coxymoron\u201d \u2013 mutually contradictory. Echoing\ncalls for an end to inflation targeting, he makes various proposals including funding\nthe SOE deficits from the surpluses in the Government Employees Pension Fund,\nUIF and SA Reserve Bank freeing the government to increase spending on e.g.\ninfrastructure, thus encouraging firms to invest, stimulate consumption\nspending, investment and jobs.<\/p>\n\n\n\n

These are not\nnew or particularly original ideas. Far from lower interest rates and\nquantitative easing (printing money) encouraging capitalists to invest, create\njobs and thus stimulate economic growth, in the major economies, this \u2018easy\nmoney\u2019 was used to buy back shares in their own companies, boosting share\nprices and outlandish bonuses for these \u201cachievements\u201d without jobs, and buying\nrival companies. <\/p>\n\n\n\n

A global\ndepression was averted, but not the underlying contradictions of capitalism. Economic\ngrowth has been weak, failing to return to pre-2008 levels. Most new jobs are\nprecarious and low paid.  Inequalities have\nwidened to historic levels. Demand has remained flat as has investment.<\/p>\n\n\n\n

The new IMF head,\nKristalina Georgieva, warned that the world is in a \u201csynchronised slowdown\u201d, with\nslower growth expected across nearly 90% of the global economy. She said central\nbanks use of low interest rates to boost activity had led to a build-up\nof corporate debt. There is a risk of a $19 trillion default in the event\nof a major economic downturn and half of the world\u2019s top ten banks would\ncollapse.[9]<\/a><\/p>\n\n\n\n

SA\u2019s\nneo-Keynesians (followers of Modern Economic Theory) are therefore calling for\nSA to imitate polices that have failed in much more powerful economies. They\nignore the historical conditions that created the post-World War II economic\nboom and the high levels of government intervention, social spending and wage\nrises that accompanied it (coinciding in South Africa with the period of \u2018High\u2019\nApartheid). Ultimately, the boom undermined itself as the iron laws of\ncapitalist economics reasserted themselves with a vengeance.<\/p>\n\n\n\n

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

Way out<\/strong><\/p>\n\n\n\n

Today the wealth\nexists to end mass unemployment and poverty. The problem is that the commanding\nheights of the economies of the world are privately owned and production takes\nplace for private profit. This barrier can only be overcome by the overthrow of\ncapitalism and the socialist transformation of society \u2013 replacing private\nownership by social ownership and organising production for social need.<\/p>\n\n\n\n

The world\neconomic crisis has undoubtedly produced differences of opinion amongst the\ncapitalists as the attack on the ECB\u2019s negative interest rates by the German\nBundesbank CEO shows. They are in a panic. Johann Rupert says the possibility\nof an uprising by the masses keeps him awake at night. But they differ not over\nthe need for capitalism but how best to manage it. The only force with an\ninterest in, and the capacity for, the socialist reconstruction of society is\nthe working class. But the working class must be organised for mass struggle\nand armed with a socialist programme.
<\/p>\n\n\n\n

\n\n\n\n

[1]<\/a> \u201cHit by a Financial Tsunami<\/a>\u201d, Magnus Heysteck, Biznews<\/em> (16 October 2019)<\/p>\n\n\n\n

[2]<\/a> \u201cSA\u2019s Retail Apocalypse: How\nRetailers Lost Their Game<\/a>\u201d, Adele Shevel and Marc Hasenfuss, Business\nDay<\/em> (5 September 2019)<\/p>\n\n\n\n

[3]<\/a> \u201cGold Street is where SA\u2019s Mining\nHistory Goes to Die<\/a>\u201d, Ana Monteiro and Felix Njini, Fin24<\/em>\n(20 June 2018)<\/p>\n\n\n\n

[4]<\/a> \u201cMall Mania: A Bubble Waiting to Pop<\/a>\u201d, Joan Muller, Business Day<\/em> (30 May 2019)<\/p>\n\n\n\n

[5]<\/a> \u201cBusinesses\nBalk at Spending on Fixed Assets<\/a>\u201d, Karl Gernetzky, Business Day<\/em> (27 June 2019)<\/p>\n\n\n\n

[6]<\/a> \u201cSouth Africa Stuck in Longest\nBusiness-Cycle Slump Since 1945<\/a>\u201d, Prinesha Naidoo, Bloomberg<\/em> (27 June 2019)<\/p>\n\n\n\n

[7]<\/a> \u201cMore than Half of South Africans\nLiving on Less than R41 a Day<\/a>\u201d, BusinessTech<\/em>\n(8 October 2019)<\/p>\n\n\n\n

[8]<\/a> \u201cR147 Billion Lost Through Money\nIllegally Leaving SA<\/a>\u201d, Sarah Evans, Mail &\nGuardian<\/em> (16 December 2014)<\/p>\n\n\n\n

[9]<\/a>\u201cNew\nIMF chief calls for united effort against global slowdown<\/a>\u201d, Sarah McGregor,\nBusiness Day (8 October 2019)<\/p>\n","protected":false},"excerpt":{"rendered":"

South Africa is going through its most serious economic crisis of the democratic era. What characterises this crisis, probably more than any other before it, is that there is no solution on a capitalist basis.<\/p>\n<\/div>","protected":false},"author":1,"featured_media":843,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[1],"tags":[],"class_list":["post-837","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-comment"],"aioseo_notices":[],"acf":[],"brizy_media":[],"_links":{"self":[{"href":"https:\/\/marxistworkersparty.net\/index.php?rest_route=\/wp\/v2\/posts\/837","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/marxistworkersparty.net\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/marxistworkersparty.net\/index.php?rest_route=\/wp\/v2\/types\/post"}],"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=837"}],"version-history":[{"count":10,"href":"https:\/\/marxistworkersparty.net\/index.php?rest_route=\/wp\/v2\/posts\/837\/revisions"}],"predecessor-version":[{"id":850,"href":"https:\/\/marxistworkersparty.net\/index.php?rest_route=\/wp\/v2\/posts\/837\/revisions\/850"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/marxistworkersparty.net\/index.php?rest_route=\/wp\/v2\/media\/843"}],"wp:attachment":[{"href":"https:\/\/marxistworkersparty.net\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=837"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/marxistworkersparty.net\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=837"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/marxistworkersparty.net\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=837"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}