PRETORIA – Early in April 2020 and right in the middle of the coronavirus inspired global crisis, South Africa’s richest man Johann Rupert commented on Financial Times: “This isn’t just a pause, it’s an entire reset of our economic system.” What this statement indicates is that people must get worried about what is coming their way.
The voice of capitalism in their backyard has sounded a big warning.
As with all other crises from wars to economic depression, the capitalist class is rubbing its hands in glee. Capitalism is about to drive at a faster gear than before and all signs are there. If the financial sector-dominated South Africa was deemed awful, it is about to undergo a drastic change for the benefit of Rupert, Nicky Oppenheimer, Patrice Motsepe and the rest of ultra-rich individuals. But it is sad news for just about all people.
To appreciate the extent of how things are turning for the worst, it is important to understand the workings of the capitalist system. This article doesn’t bash capitalism nor it is not anti-capitalism but seeks to show that big capital (very large corporations and banks) flexes its might.
As South Korean economist and author Ha-Joon Chang says, “there are many ways to do capitalism”. It is almost certain that South African capitalism is among the worst in the world together with the Anglo-American system – and maybe Chinese capitalism in the other extreme end. Other successful nations, particularly in the Scandinavia, Japan and parts of western Europe, could be exemplary to many developing countries, but to a lesser degree.
The biggest challenge is that global capitalism in its nature is too problematic since it is about wealth extraction and exploitation of resources from weaker countries located in certain regions of the world. Without this kind of arrangement, the system with its super-strong institutions wouldn’t be the world’s foremost and dominant form of economic organisation.
Nevertheless, South Africa and other African countries are founded on this exploitative model of wealth creation for a few, and its modus operandi has not changed a bit many years to date. South Africa is a capitalist country but very few people really understand in detail what this means. The country’s capitalist economy thrived under colonialism and apartheid, and some say it is doing even much better under democracy. South African corporations have grown in strength (wealth) not just in terms of money but also in size and reach.
Just 30 years ago, the term “multinational corporation” wouldn’t be associated with a sole white-led, pariah state in the southern tip of Africa. Today, some of the South African-born companies are listed or incorporated in overseas capitals and do business in all corners of the globe. Apartheid capital now supplies goods and jobs across Africa and other countries that opposed the brutal apartheid state. That’s the nature of the business.
On the other hand, the standard of living for ordinary people in South Africa continues to worsen. Unemployment is estimated at an astronomical 29.1 percent, the government collects less money in taxes, and the gap between the richest and the majority of the population is growing each day. As poverty worsens, millions of people continue waiting to understand the democracy that South Africa supposedly became in 1994.
German sociologist Max Weber once asked: “How are freedom and democracy in the long run at all possible under the domination of highly developed capitalism?” This question is as relevant today as when it was asked more than a century ago. Undoubtedly, democracy continues to be great for capitalists and the same cannot be said about livelihoods of millions in South Africa. And others would also argue that the spread of apartheid capital in Africa also detriments the socio-economic development of countries due to the presence of the likes of Shoprite, MTN, Standard Bank, et al.
This is living proof that South Africa isn’t alone in this dilemma. American historian and author Michael Parenti explains that the history of capitalism has been about great prosperity as it is about great poverty. Normally, the existence of so much wealth and grinding poverty, as seen among and within countries, is often seen as an unfortunate juxtaposition of two extremes.
Parenti argues that this is actually not the case since there is a dynamic healthy relationship between these two conditions. “The wealth of the few rests in the poverty of the many,” he argues. The Randlords like slave masters in the US and upper classes in England needed slaves and serfs in poorly paid workers, indebted people and taxpayers. Many of the rich today generated their wealth from the mass exploitation of people.
However, exponents of free markets contend that the capitalist system is what a country such as South Africa needs to prosper. Although practical evidence suggests otherwise, Parenti damns modern capitalists as people who “avoid talking the truth about themselves …” He says they over-rely on what he calls “self legitimising myths” such as equal opportunity, self-reliance, rags-to-riches anf fair play.
These views are sponsored by “owners” of the world. Big capitalism doesn’t refer to all small corner shops and many businesses that have been sacrificed during the lockdown but it is what many others would call the Davos club. Russian political theorist Vladimir Lenin dealt with the topic of these corporates when he said, “ten million small businesses count for nothing but a few giant cartels count for everything”.
Lenin did not necessarily dismiss the importance of the much-vaunted and praised small businesses but he was illustrating the dominance and power of these large firms. These firms affect or influence every aspect of human life from what people eat and drink to shaping general perceptions of society about many issues. But what is critical is to understand why big capitalism continues to be not only relevant to human life but also how it justifies its existence.
Large corporations perpetuate so many “untruths” that have found a way to the DNA of modern humankind. Parenti calls these untruths myths, and one of them is the argument big corporations generate prosperity or material well being of people.
In his book “23 Things They Don’t Tell You About Capitalism” (2010), Chang states: “Living standards in Sub- Saharan Africa have stagnated for the last three decades, while Latin America has seen its per capita growth rate fall by two-thirds during the period.” Notwithstanding this evidence, big capitalism defies logic by presenting itself to have all the solutions people need. It is uncommon to see names of large corporations mentioned alongside such popular terms as corporate social responsibility, job creation, and growth. Together with this, is the idea that foreign direct investment (FDI) is what countries need to prosper. This is based on the assumption that there is no better thing than a market system and that it is most productive and beneficial in human history.
Mighty big capitalism also perpetuates ideas that the government should not create nanny states by attending to the needs of the poor. How often do some people criticise the government for providing social grants and housing to the needy? As part of this thinking, there is a belief that “the poor are the authors of their own poverty”. Even after the recent announcement that social grants will be temporarily increased and that the unemployed will get some money, the objection is that the poor should start being self-reliant and stop living on handouts.
However, capitalist societies have short memories in that they quickly downplay their greed and agendas that keep millions below the poverty line.
What is also funny is that it is not the poor who drain the fiscus but it is large private corporations that benefit most from government support. As an illustration, a large chunk of the R800 billion will go to large business. Up to R500 billion released by the SA Reserve Bank (SARB) will go to banks. R100 billion is earmarked for ‘jobs and economy’ and R70 billion for tax relief.
Only a fraction of this large stimulus is meant for social spending. All this is in addition to tax breaks, loans and different types of subsidies and support in-built in budgets of the government and its agencies. For example, the state through the Public Investment Corporation (PIC) and its other development finance institutions invests billions in listed and non-listed companies.
Private corporations get about R800 billion each year in humongous contracts with the state. Those who favour a larger role of private companies create a myth that governments are incapable of providing public goods and or services since they are inefficient and also lack skills.
How often do free-market advocates say the work of the government needs to be “business-like”? This is almost laughable considering a large number of businesses such as Steinhoff or Stutterfords and millions more go bankrupt every year, leaving millions of people without jobs.
Edcon Group got a lifeline of R2.7 billion from the PIC in a bid to “save R140 000 jobs”. The troubled retailer doesn’t make front pages like state-owned entities (SOEs). Also, does it mean a cabinet minister should earn an average R50 million per annum – like Steven Koseff (Investec), Sim Tshabalala (Standard Bank) or Johan Burger (FirstRand) – as opposed to the R2.5 million he earns today? In South Africa, an average low-end worker in the private sector barely takes R2 000 home a month, while the minimum wage stands at R3 500. Yet, private firms are said to be about fairness and prosperity.
Furthermore, nobody answers who will take care of public services that so many people need including education and healthcare. At about R65 000 a year, there is no reason for private schools and hospitals to be expensive compared to public counterparts. Only when Eskom has gone through full privatisation that many people will realise how much they will pay for electricity.
Besides the problems associated with some of the state institutions, they offer the services need at much more reasonable prices than private companies. Big capitalism wants to remove this benefit from the people and throw families into a lion’s den full of hungry private companies.
Another argument suggests that companies deserve to be supported because they provide jobs – the word “jobs” has become the biggest insult to people who are seen as objects for capitalists to make money. Moreover, what is least spoken about is the fact that most of the tax collections come from personal income tax (39 percent) and sales tax (25.6 percent), and corporations pay the least tax (15.8 percent). Even philosophers such as Karl Marx and Fried Engels commented about ‘dynamic productive energy’ of capitalism as far back as the 1800s.
In recent years, economic dissidents including Joseph Stieglitz and Chang have sought to demystify untruths about capitalism and its subset of free markets. Chang disputes that free markets exist and this goes to the heart of what essentially is all about. His idea is that governments always direct economy but that is only true for only a handful, powerful countries. Big Capitalism runs the show and determines economic outcomes, and engages in illicit capital flows. Not even international has instruments to deal with uncanny conduct of multinational corporations and their subsidiaries.
Big capitalism always plans everything to happen in its favour through Big Bang events and crises. These include recessions, Greek debt crisis, US depression (1929-41), inflations and US subprime crisis as well as wars. All these crises are not unfortunate and natural events but they are carefully planned to benefit corporations.
The Covid-19 crisis, which started as a health matter, is now an economic crisis like a war. As in situations of war, individuals are distracted from their daily economic grievances and hardships to listen to large corporations, represented by Bill Gates and the big pharma, promising how they will save them from a deadly virus. “A free-market is a system that can never settle with itself,” says Parenti. So, it survives on bubbles and bursts. Parenti says corporate crimes and crises that humans are forced to endure are not the irrational departures from a rational occurrence but come from an irrational, brutal system.
British economist John Maynard Keynes once remarked: “Capitalism is the astounding belief that the most wickedest of men will do the wickedest of things for the greatest good of everyone.” Drivers of capitalism are not known for their good hearts, sacrifice and sharing. They are therefore the last persons to talk about seemingly altruistic concepts “inclusive growth” and “fair trade”. These are topics that come from frozen hearts and discussed in the bitterly cold and notorious Swiss resort town of Davos.
What is regrettable is that South Africa’s political system and parties are in the service of uncaring corporate South Africa. This means that countries including South Africa would integrate condescending language created by big capitalism in their political vocabulary on economic matters.
Contrary to popular belief, the so-called leftist Economic Freedom Fighters (EFF) and South African Communist Party (SACP) are shackled in the heavy chains of corporates, and so are the likes of African National Congress (ANC) and Democratic Alliance (DA).
Just looking at their manifestos for 2019 elections these political parties made their profession to capitalism and its vagaries. All of them carried one message about jobs: EFF (our land and jobs now), ANC (jobs for all) and DA (economic growth and jobs). This could only mean one thing, they are not concerned about poverty and starvation but they have to deliver a message that people were objects for exploitation by their funders in Sandton and Stellenbosch. Mind you, no politician or political party has the knowledge or means to create a single job, but only corporations do.
So, all the talk about jobs doesn’t have the welfare of people in mind. It is capitalism at full play using political rhetoric and sloganeering. This is, unfortunately, the case for all countries, after all the whole world is capitalist and poor. Where capitalism thrives and incomes increase for corporations, but just next door there is massive poverty.
The world’s poverty grows faster than anything one can imagine. Notwithstanding the staggering $2.5 trillion stimuli, Forbes magazine reports that a whopping 16.78 million people have filed for temporary unemployment benefits in the US alone. Globally, this figure is probably 10-fold and increasing considering that many people don’t have social protection.
Basically, the struggle in South Africa at the moment is about whether the country should follow in the footsteps of the US and Britain by allowing the country degenerate into a “social democracy” that would provide for its citizens during the coronavirus crisis and beyond. The idea is that any stimulus package should be designed to protect people from the harshness of the virus on the demand side, and also that more money should be spent to increase output. This is a balanced view that does not gain favour in economic orthodoxy.
On the side of ultra-capitalists, there is agitation to roll-back spending on social expenditure, hence the insistence that South Africa should pursue structural reforms amid the recession, downgrades, and now Covid-19.
Almost cynically, the rationalisation for reforms is that they are needed in order to kickstart investments, economic growth and job creation. It is said in order to achieve this some of the key steps must entail lowering the public service wage bill, selling off state assets, increased competition, etc.
Therefore, grand capitalism favours recessions because corporations stand to gain from it. Parenti says, “recessions may be bad the for masses but they definitely tame labour”. For example, labour unions at SAA are prepared to settle for nothing. Individuals are miserable after companies triggered force majeure clauses to reduce salaries. Big Capitalism is excited at prospects of getting labour for cheap, and this will mean a reduction in wages that ultimately result in higher profit margins.
If one needed to make a guess, all South African companies wish they could freely hire illegal immigrants because they come a little cheap. Finance minister Tito Mboweni gave a glimpse of what is desired, although he stated the opposite to get people excited. Mboweni’s “new economy” will advance labour legislation reforms that will favour locals for jobs but he mischievously omitted to state at what cost.
Rupert is indeed correct the South African economy is going to be even much more concentrated with fewer smaller players. Large corporates are, therefore, not going to waste the double-whammy of recessions and Covid-19. Martin van Staden once observed that as South Africa “hurtles toward adopting a state-centric property model, with the state being the ‘custodian’ of all land”. Clearly what this implies is that market fundamentalists yearn for total control of everything from land and human labour.
Anyone who still believes that land reform will take place has to think twice because big capitalism isn’t interested. Present conditions of recessions and coronavirus were deliberately caused to help big capitalism the biggest winner.
The problem with what is likely to befall South Africa, and the world, is going to be accentuated by most economists with their straight-jacket approach, which Chan likens to a hammer, that they use to solve challenges facing countries. South Africa is guilty of producing these this single type of an economist.
The biggest loser is a man in the street.
Si ya yi banga le economy!
Based in Pretoria, Siyabonga Hadebe is an independent commentator on socio-economics, politics and global matters.
By Siyabonga Hadebe