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written by Mametlwe Sebei
The COVID-19 pandemic has ignited a global public health crisis without precedence in living memory. The worldwide personal suffering and misery is incalculable: tragic loss of life, untold emotional torment and pain of survivors, terror and fear of starvation, enormous losses of income for many struggling for survival under lockdowns and curfews. The social and economic consequences of this pandemic are however only in their infant stages. Only after the lockdown, in the months and years to come, will the full scale of both economic and societal devastation become clear. This, in part, depends on the measures undertaken by the state.
On Tuesday 21 April Cyril Ramaphosa addressed people in South Africa regarding updated measures in dealing with the coronavirus crisis. In a country where austerity measures and “tightening the belt” has become everyday vocabulary, people viewed the seemingly sudden surfacing of hundreds of billions of rands in shock and awe. Where has this money been before the crisis, when the working class and poor have been crying out for relief to the “usual” crises of health, service delivery, housing, overcrowding, education and unemployment? Organised labour and progressives must take caution in praising the government for the newly announced relief measures, because, as they say, the devil is in the details. And there are many details left out in Ramaphosa’s latest presidential address.
The open letter from 76 economists
A group of “Left Economists”, in an open letter addressed to the president, estimated that South Africa can face up to 7% contraction in the GDP due to the corona crisis, which will leave many millions unemployed and hungry. Responding to the immense distress faced by many working class and poor during the ongoing lockdown and the impending economic slump, the ANC government has announced an economic and social relief package. Most of the measures echo the views penned in the open letter to the president, putting forward a range of Keynesian measures to pull the economy from the abyss.
As some of the authors of this letter are linked with the trade union movement, either directly or through “think tanks” that support trade union policy units, their ideas find resonance in the workers’ movement. We see this in media statements issued by both COSATU and SAFTU, and the recently established COVID-19 People’s Coalition (endorsed by trade unionists, working class community organisations, and NGOs). We, therefore, are compelled to respond.
WASP supports many of the proposals affirming demands of the workers’ movement and activists organizing in communities, and we believe they are worth fighting for as part of a fighting programme of emergency relief for workers and communities. It is however the underlying ideas of Keynesian economics – which boil down to measures taken to save capitalism – that pose an extreme danger and must be exposed and purged if we are to forge a revolutionary alternative to the ever increasing crises inherent in the decaying capitalist system.
Appeal to ‘reason’ and benevolence of the state
Capitalism divides society into two main classes, the capitalist (owners of capital, i.e. factories, banks, businesses) and the working class (who need to sell their labour power to survive). The tiny minority capitalist class gets its wealth from the labour power of the working class, in a constant and bitter struggle. They are supported and protected in this by state power, which works to maintain this massive robbery and thereby acts ultimately in the political service and class interests of the capitalists.
By failing to grasp, or at least openly approach government from this perspective, the authors of the letter commit a grave crime of ideological obscurantism and foster dangerous illusions in the possibilities of change, without the need to struggle. The most generous interpretation of the approach of the letter is that it petitions the government as an independent state organization capable of intervening in the struggle for the distribution of wealth, fairly in the interests of the working class – it must only be convinced through clear articulation of what is just. To be sure, Marxists and the workers’ movement do petition state power, but ought to always do so by means of demands that point to the fact that the state is an organised enemy class, which can only be won over to pro-working class reforms by means of organized power of the working class and struggle, not by humility and false flattery.
The brutal class character of the current state is obscured by the ruling class, as is its vicious anti-working class austerity against public healthcare and other essential services, which laid the foundations for the current disastrous public health crisis.
The manner in which the state is ‘dealing’ with the crisis can sow confusion and illusions in the working class about the cruel class aims of its measures, including the brutal lockdown – in which millions are starving without relief, water services and any possibility of social distancing in the overcrowded and unbearable squalor of working class and poor households. As we have said before, the shutdown of the economy and social distancing are absolutely vital and we have been involved in independent campaigns for the enforcement of the social distancing in working class communities, but we absolutely oppose restrictions of democratic and worker rights, police brutally and military intervention – which is being positioned against working class struggles now and in future.
The workers movement must therefore emphatically oppose this approach, as it blurs and obscures the class enemy and its main instrument of political power, the ANC government.
Marxist approach to state relief
Once the state is stripped of its constitutional disguise as an ‘independent’ organization expressing the ‘common’ interests of all and the ‘collective’ power of society, it is rightfully unmasked for the bloody anti-working class organization that it is. We must treat it with the class suspicion it deserves. The bourgeois ANC government does not intervene in the economy to the benefit of everyone.
From the standpoint of the working class, and by implication anyone speaking on behalf of it, every proposal for the relief and ultimate resolution of the crisis, is an arena for class struggle. The main aim is to redistribute the ‘profits’ expropriated by the capitalist class, which are essentially the unpaid wages of those who do the actual work of producing the goods and services in the economy – the workers. To put it differently, the demand for relief is a struggle for a social wage and not a beggary for charity from the benevolent state.
We should therefore always be clear when we make demands or proposals. Who will they benefit and how? Most importantly, who will pay for these measures and how should they be made to pay for it?
Who benefits from relief measures?
To contain the social and economic collapse, the authors of the letter proposed wide-ranging interventions for immediate relief and to sustain private industry. The most fundamental of these proposed measures, beside food parcels and other relief measures, are wage subsidies, tax relief, loan guarantees and quantitative easing (introducing new money into money supply) measures to stimulate spending and in this way bolster the economy.
In his 21 Apriladdress, Cyril Ramaphosa has certainly obliged them. As part of his Covid-19 economic and social relief package, he pledged ‘R500 billion bailouts’ based on measures along the lines proposed in the open letter. These include R41,6 billion in wage subsidies, R100 billion in cash payments to companies to save jobs, and R70 billion in tax relief, as well as a further established R200 billion loan guarantee facility and R80 billion in massive repo rate cuts (the interest rate at which the South African Reserve Bank (SARB) loans money to the commercial banks).
Although these measures are as comprehensive as could be expected of the state in the current capitalist framework within which they operate, the package is woefully inadequate and in no way represents any break with the neoliberal austerity programme. Not only does it fall short of the R1 trillion package COSATU proposed at NEDLAC, the package is also not really R500 billion worth of ‘stimulus’. Most of the funds are existing funds such as R40 billion from UIF, R130 billion from reprioritising an existing R1,95 trillion budget and 40% of it, R200 billion, is loan guarantees, not actual loans and/or investments. Apart from these, there are unprecedented quantitative easing measures initiated by SARB which, besides 200 basis points cuts in the repo rate to a record low of 4,25%, has unlocked R540 billion by lowering liquidity requirements for the banking industry.
WASP opposes these proposals. As the government bailout blatantly shows, these measures are not only meant for rescuing capitalism in general as was the stated aim of Keynes (after whom Keynesian economics are named), but invariably means using public funds to bail out private business. State power will be wielded to plunder the working class while bolstering big corporate profits.
Even where they appear to be bailing out workers – such as guaranteeing workers’ wages – we still oppose these measures on the basis of private ownership. As with the government measures, the authors effectively propose redirecting public money away from the essential services for the poor in order to pay wages owed by big corporations. These corporations then go on to make profits off the labour of these workers.
The working class is in effect made to pay twice: firstly, by attacks on their working conditions as many of them would not get reduced wages, and secondly, through the increasing cuts to services. To be sure, WASP is fighting for workers to be paid fully during the lockdown whether they are working or not, but we demand that the cash reserves of big corporations and dividends paid to their shareholders be used to pay workers. At most, state support should be limited to small businesses on the basis of a proven need, opening of books, and overseen by workers.
A quick glance at the package makes it clear that whilst the lion’s share of the R500 billion goes to big business, only a pittance is available to the working class and the poor. Less than R100 billion will be spent on fighting COVID-19, expanding municipal services like water, transport, etc. and emergency relief for the poor and small businesses. The same government, which has preached that small businesses and entrepreneurship are solutions to the unemployment and poverty crisis in the country, is providing only an additional R2 billion to the R100 million they spend thus far on ‘SMMEs, spaza shops and informal economy’ compared to hundreds of billions for big business.
Who pays for these measures?
Where these ‘relief’ funds come from is also telling. R130 billion will be from “reprioritizing” of the current budget – which is a nice way to describe savage cuts to spending on housing, education, and other public services essential to the working class. The remainder is to come from government managed funds like the Unemployment Insurance Fund (UIF), Public Investment Corporation (PIC), and be raised from the International Monetary Fund (IMF), World Bank, and BRICS bank amongst others.
While opposing loans from the IMF, World Bank and other international financial institutions, some of the authors have in a separate letter to the Minister of Finance proposed raising funds from the PIC.
WASP argues that, without calling for nationalization of the businesses threatening job losses, this proposal, like the current government package, means risking pension funds of public servants and workers’ savings for unemployment insurance on the speculative activities on which most of these corporations will be using these funds. Most importantly, WASP opposes raiding and plundering workers funds to perpetuate private ownership of the economy and the profiteering of big corporations based on the wage slavery of the working class.
Although the authors oppose the IMF and World Bank loans, it is only on the basis that these are foreign loans that would take the money out of the economy and compromise the country’s “sovereignty”. WASP also opposes IMF and World Bank loans, but we argue that loans from local private banks are no different.
The entire banking industry operates on the basis of the same principle, no matter its national status. Foreign ownership of the debt is not the main problem. Foreign debt has been in decline recently, in addition to record outflows of R57,5 billion in sales of foreign-held bonds in 2018 in anticipation of downgrading of South African public debt to junk status. With an estimated further bond sales of R96 billion upon the downgrade, according to the market strategists Credit Agricole, foreign debt has been plunging below 40% of the country’s bonds. This has changed nothing in so far as the public debt is concerned, which has continued to skyrocket.
Instead of borrowing money, WASP argues that the government should renounce all debt except for the portion that the state owes to the savings and investments of workers and small businesses. A 99% special tax for the super wealthy will still allow Nicky Oppenheimer, and Anton Rupert, to each retain the R1 billion they offered in charity, in exchange for the remaining R99 billion of their R100 billion estates, which, along with others, can be used to compensate workers funds invested in public debt.
Quantitative Easing only aggravates the problem
Quantitative easing is also not a viable solution to the economic downturn, especially due to the crises of oversupply and overcapacity across the economy. This merely underlines the undeniable contradictions of capitalism, including its inescapable tendency for overaccumulation of capital – as inevitable under capitalism, as death is to life. Liquidity is not a factor in the current crisis. If anything, there is too much of it as a result of similar measures in the 2008/9 Great Recession. It will serve to create enormous public and private debt, in addition to the widespread and excessive speculation.
Following the 2008-9 crash, ecentral banks and treasuries the world over injected large sums of cash into the financial markets, and rolled out bailout packages like the current ones. For a whole period, quantitative easing saved big business, drove stock markets to record highs, and through hugely increased debts, the economic meltdown was pushed further down the road. But the hopes that QE will trickle into the real economy and save jobs and industries are delusional. , Because the markets were bloated then, as they are today, there was no outlet for profitable investment. This is the reason South African capitalists are hoarding R1,4 trillion cash in an investment strike and capital formation (investment in new factories, machines and equipment) stagnated. Lack of outlets for profitable investments is also the reason corporations like Pamodzi Gold used R300 million received from the IDC (State-owned bank) bailouts in 2009 to pay its shareholders and directors, before liquidating the company, leaving workers to vultures like Aurora to strip the mines of the remaining assets.
A familiar story
The working class has been down this road before. We know that it led to even bigger crises than the ones the capitalist class tried to avert.
Measures being undertaken by the government and cheered by the economists are like a medication that cures the illness by killing the patient. The Reserve Bank buying treasury bonds can, at best, be a short term measure that will resolve nothing. QE effectively means printing more money and there is no such thing as free money. That it could “work” in the US – for the profiteers and speculators, not the workers – had to do with the exceptional standing of the US dollar as international reserve currency, which means all countries holding dollar reserves subsidise US imperialism. Its value is therefore not entirely linked with the performance of the US economy. Also, the “success” of these measures are entirely relative and can only last in the short term, as cost of living skyrockets, while wages stagnate.
Printing money to hand cash to speculators can further displace the equilibrium in the financial markets and cause serious inflation. WASP does not oppose inflation like rightwing market fundamentalists. We oppose these measures because they will erode the value of workers’ wages and savings, in order to print cash for banks, speculators and other rich parasites.
Working class alternatives
As an alternative, we are fighting for the nationalization of the finance industry including commercial banks and massive private funds in the economy in order to expropriate the R1,4 trillion cash hoarded in banks by big corporations, to instead be used for a massive public works programme. It can be utilized to build decent houses, schools and classrooms to enable social distancing, clinics and hospitals, etc.
Most importantly, worker-controlled public ownership of the finance industry would allow mobilization of the vast savings and surplus capital into productive investment in agriculture and industrialization. This would enable production of adequate food, and manufacturing capacity to produce sufficient PPEs, medical equipment and public transport to combat COVID-19 and equip us against future pandemics.
Workers, as the only class with organized power at the point of production, must fight to achieve this. The working class must take over businesses threatening closure and job losses to force nationalization from below – through factory, mine and land occupations. Working in support of the education and organization of workers’ and community struggles is the pressing task of the hour for anyone yearning to combat the COVID-19 pandemic and fundamentally change society.
It should be without question that the state invests in public spending, those who argue that grants are merely creating a “dependency syndrome” are effectively saying people should be left to suffer, even when they had no hand in creating the crisis. However, we have no illusion that bailouts are sustainable. Capitalism, with profit making as its driving force, likes to play a “cross that bridge when I come to it” game, and when the crisis is over, it’s business as usual – exploitation and looting continues.
The above measures, in addition to nationalization of the other sectors of the economy under the democratic control and management of the working class would form a basis for a democratically planned economy and socialism, for which the working class must organize, unite and struggle. Workers control will make sure the economy is planned and a response to crises such as pandemics and climate change take place early and swiftly. Most importantly, responses would value the lives of everyone, and not be informed by profit motives, as we see in the reopening of economies worldwide – including Ramaphosa’s latest (23 April) announcement that South Africa will gradually reopen business, made on the same day as our highest cases of infections and deaths to date were announced.