About this site

This resource is hosted by the Nelson Mandela Centre of Memory, but was compiled and authored by Padraig O’Malley. It is the product of almost two decades of research and includes analyses, chronologies, historical documents, and interviews from the apartheid and post-apartheid eras.

Reconstruction and Development during structural crisis

How much can be done before the markets' sabotage the RDP?

The Reconstruction and Development Programme is in danger of being undermined by government's attempt to please "the markets". Patrick Bond argues that every attempt to please the markets is simply taken as a sign of weakness, and an opportunity to further undermine the programme.

If one way to think about reconstruction and development is as theatre, SA's capitalist economy remains a bad set on which to stage the democratisation process. The economy's playwrights, directors and lead actors continue to blunder through a flawed script, through miscues and through missed lines. In spite of the fresh-faced enthusiasm of some, as a collective elite they remain stuck in a rut, unable to move the audience, sensing the growing alienation, fearing the same loss of legitimacy experienced by those who acted before, unable to manage minor crises bubbling up everywhere, and therefore seemingly unable to avoid an impending disaster. The rut they are in is a classical capitalist crisis.

This crisis has been in evidence since the late 1960s, globally, and since the early 1970s in SA. It is usually measured by variables such as job creation and percentage of the workforce unemployed, rate of growth of Gross Domestic Product, indebtedness, and a large number of poverty indicators, all of which confirm that the average South African is worse off now than two decades ago.

Although the crisis has affected the world economy extremely unevenly, SA's experience is not unique. SA's new economic managers are now facing exactly the same difficulties in coming to grips with the challenges of "neo-liberalism" (the free market ideology) that all economic bureaucrats across the world now face.

What is unusual about SA, though, is the stirring attempt by a broad cross-section of society to articulate mass-popular (and especially working class) interests - through the RDP and through daily work-place, community and household struggles - which could fundamentally shape the way the crisis plays itself out. Implementation of those aspects of the RDP promoted by the left, in particular, remains not only feasible in financial and logistical terms, but would also place SA on an enviable "growth path".

Such a growth path, it has been argued in the pages of the AC more than once, would not only give the masses of people access to goods and services that were earlier denied, but would do so in a manner consistent with socialist principles: basic needs to be met not on the basis of privilege (based on commodity exchange) but as a human right; increasing degrees of worker and community (and women's) control over an increasingly decentralised economy; increasing economic activity within the sphere of co-operative and public ownership; non-racial, non-sexist systems of production, exchange and consumption; environmental sustainability; and so forth.

Such principles resonate within - if not throughout - the RDP. But the forces of reaction are also encouraged by other parts of the RDP, as well as through wilfully misreading or simply ignoring the details. Hence the RDP continues to be claimed by all and sundry as their Liberation Proclamation. For the big mining houses, "liberation" is spelt "liberalisation" (trade and financial decontrol, deregulation, lower taxes and the like). And for social democratic centrists, liberation is a win-win utopia of social contracts based on harmony between the classes.

Whose RDP, whose White Paper?

More recently, an RDP White Paper was produced, which "establishes a policy-making methodology and out-lines government implementation strategies within the framework provided by the Base Document" (the original RDP). Here arises a danger: the "framework" may be kept intact, but the RDP's details especially those where the left made a strong stand could get lost in the process. The White Paper in no way contradicts the Base Document, but its emphasis is on government implementation as opposed to reaffirming the original RDP's concrete policies and programmes (aside from those in the economic sphere).

What this means, according to re-actions ranging from big business to Cosatu to the press, is that the White Paper contains a tasty menu of options for governance, but considered as a whole this menu feeds the appetite of big business for conservative economic policy, adds a bit more meat to centrist bones, and saves only some rather sparing side-dishes for the left. Here, for example, is a Business Day editorial (8 September): "Minister Jay Naidoo's technocrats want to foster new, business-like attitudes towards the management of government and state-backed projects... The central government has realised that a business-like approach is needed at all levels of the RDP if the private sector is to play its willing part."

"Business-like"? Will intended beneficiaries of government programmes therefore be marginalised by "cost recovery" principles, and will exploited public sector workers - especially women - be further oppressed in the zeal for cost-cutting?

Perhaps, but a progressive reading of the White Paper strategy is also possible, namely that smashing many of the most objectionable features of the apartheid state - the National Intelligence Service is a good example - can only be accomplished using the variety of tools now celebrated by Business Day and big business. These tools include zero-based budgeting (requiring departments to continually justify their expenditure rather than basing simply on historical spending), a restructured and rationalised civil service (to promote productivity and accountability), new inter-governmental fiscal relations (to force lower tiers of government to function more responsibly), new plarming frame-works and business plans, Presidential Projects (to highlight new priority areas), and the RDP Fund (as a carrot to draw resources and personnel into new areas).

Even that siren-song of Thatcherism, "fiscal discipline" (meaning lower levels of government spending), has a progressive ring to it when one considers its potential for chopping really dumb state subsidies (like Mossgas or the monies going to incompetent white farmers), ending the obscene racial bias in the allocation of state resources, curtailing defence spending, derailing the gravy train, forcing an end to conspicuous consumption such as first floor elevators and English-crafted silver in presidential residences, and the like'.

This is the theory, anyway. In practice, whether such tools can be used as wedges to crack open the apartheid state and to then panel-beat politicians and bureaucrats into shape, may depend upon whether "Jay Naidoo's technocrats" can multiply (they're now rather few and far between).

For on the one hand, the left may breathe a sigh of relief that the overall political objective of governance is not to pad the bureaucracy with a new petty-bourgeois class of civil servants, as Zimbabwe did. But on the other hand, the existing bureaucrats will do their best to frustrate our roving bands of wedge-wielding RDP officials. Indeed the bureaucrats will probably catch on as quickly to the lean-mean White Paper rhetoric as did big business to the RDP's basic needs arguments, and will learn how to make the right noises and avoid threats to their survival.

Even if we discount the prospect of internal sabotage by state bureaucrats, the fate of the RDP and of the White Paper may depend upon three fundamental strategic choices made with little or no public input, which - based on the rhetoric and the realities of restructuring over the first hundred or so days - give a certain amount of cause for alarm.

One choice was to succumb very early on to the tyranny of the markets", which demand and receive obedience on crucial matters of economic policy but which appear disdainful of offering anything useful in return. A second choice was to endorse the idea of "incremental housing" - also known as toilets-and-asmall-pile-of-bricks-policy - rather than embrace the RDP's Affordable Housing for All campaign. A thirdchoice was the overemphasis on local government as a vehicle for both political activity and for RDP delivery.

But in this paper I shall focus on the first.

The tyranny of the markets

The markets", as they are impersonally known, are the real cause of unrealistic expectations. Claims as to their infallibility are now being found wanting across the globe. Bill Clinton discovered their irrational power in February 1993 - a month into his presidency - when he tried to implement his public works, infrastructure, reindustrialisation and social programme campaign promises. At a stormy White House meeting, Clinton was refused permission to go ahead by the crew of financiers he had recruited to his finance ministry from the investment banks, who in turn blamed their ex-colleagues in New York for not giving support to the new order. Clinton's response: "I can't believe my whole programme is being sabotaged by a bunch of fucking New York bond traders."

Those same bond traders were the subject of the following recent report in The Wall Street Journal (30.9.94):

"A flurry of statistical releases showed the US economy continuing to perform strongly. The most painful (sic) news for the markets: new-home sales surged a strongerthan-expected 9,7% in August. In addition, second-quarter gross domestic product was revised upward from 3,9% to 4,1% and initial jobless claims fell 11,000. Bond traders shuddered at the economic reports, sending the benchmark 30-year US Treasury bond's yield as high as 7,87% at one point."

Translation: "We in the bond market are worried that there is too much growth, which strengthens the power of labour and productive capital relative to financiers, and also threatens a revival of inflation. Therefore, whenever we see evidence of robust economic activity, we raise interest rates to try to snuff it in the bud."

The "fucking bond traders" have been just as hostile to the new South African government, leading even seasoned, conservative bureaucrats like State Expenditure director-general Hannes Smit to complain publicly about the lack of tolerance. It doesn't seem to help that the Government of National Unity is bending over backwards to send the "right" signals to "the markets" - a motley crowd of "Business SA" lobbyists, financiers and financial economists, Anglo American excutives, Business Day editorialists, stock market chancers and low-grade public relations specialists who decide whether ANC leaders have finally embraced neo-liberalism.

What are the signals? An independent Reserve Bank is encouraged to continue setting ridiculously high interest rates; fiscal discipline becomes more extreme; the already export-biased trade policy veers to the right of the General Agreementon Tariffs and Trade; and industrial policy becomes geared to "picking the winners" and to deinclustrialising those sectors - like textiles and autos - which cannot stand the heat of international trade.

Those signals are the basis for complaints that the White Paper (and the Green Paper before it) contains Thatcherite elements, yet this is only half the problem. What is really being constructed here is a so-called Catch-22, which works - or rather doesn't work - as follows.

The more the Government of National Unity succumbs to "the markets"' demands in hope of spurring investment and job-creation, the more "the markets" feel confident about their real agenda, which remains oriented to capital flight and financial speculation (as opposed to investment and production). Indeed "the markets" are to-clay so confident, so smug, that they are unwilling even to contemplate the idea of a grand social contract sometimes mooted by centrists in government, labour and oppressed communities.

The more "the markets" run roughshod over the new politicians and bureaucrats, the more government kowtows to their most fanciful demands: Convert the finrand into commercial rands so I can get my money out of here! Deregulate the petrol markets! Liberalise trade, and drop the tariffs so I can import my machinery or textiles or steel for less than I'm paying for the locally-made stuff! Privatise state assets! Limit housing policy to a subsidy for a toilet and a small pile of bricks!

The more the government kow-tows to these demands, the less real investment occurs, the less money is kept within the country, and the fewer jobs are generated. The more dangerous this situation becomes, the more "the markets" scream for more concessions. The more the capitalists scream, the more government seems willing to give... It goes on and on in a classic Catch 22.

The tyranny of capital is evident in the recent economic indicators. Reflective of continuing crisis is the balance of payments - how much SA spends abroad on goods, interest payments and other expenses in relation to how much it earns from trade and investment - which has gone from bad to perilous, thanks largely to an increase in luxury goods imports. Even the trade surplus SA enjoyed through the harsh late 1980s to early 1990s siege years has vanished.

As for foreign investment - so anxiously awaited by ready mandarins, rolling out the red carpets for multinational corporations - there appears to be practically none, not even the parasitical financial investments which flooded the stock market in January 1994 and then gradually ebbed out again. Interestingly, foreign financiers moan about SA's monopoly capitalist structure just as much as the South African left. It prevents foreigners getting access to stock market shares and market opportunities.

And capital flight - a telling indicator of local business confidencehas not been reduced sufficiently for SA to accumulate sufficient foreign reserves so as to dismantle exchange controls. Getting rid of the finrand remains big capital's most steadfast demand. Reserve Bank Governor Chris Stals is philosophically committed to the task, but apparently wants to surprise the markets and so is publicly cautious on when exchange controls can go.

Inflation also appears to be heading back into double digits, but not - as bourgeois economists would have you think - because of rising demands by workers for the fruits of liberation (in the form of either wages or higher consumption levels). Instead, inflation still has too many "cost-push" (not "demand-pull") factors associated with monopoly market power and non-wage costs. Corporate salary and benefit pack-ages, for instance, remain ridiculously high in relation to the wage bill.

It's not all bad news, of course. The all-important fixed capital investment (plant, equipment and machinery) indicator is up, yes. But after more than four years (early 1989-late 1993) of the country's longest-ever depression, this is only to be expected; after all, net fixed investment fell into the negative range as machines wore out faster than they were being maintained, much less replaced with new and better equipment.

And the surge in imported capital goods - which in good times indicates that local capitalists are buying state-of-the-art machines from abroad - may be illusory, since the bulk of it was in the form of transport equipment, which in turn was spurred artificially by the Numsa strike

The point here is that none of these indicators suggest that SA is on any kind of growth path. A group of bourgeois economists warned in the Financial Mail recently that the present recovery may well peter out by the middle of next year.

And that compels us to return to the problem of longer-term capitalist crisis. After all, since the mid 1970s, the rate of economic growth per person has been less than zero, and will continue to be negative in per capita terms through the end of this year. Although 1995 and 1996 might witness growth in excess of the 3% rise in population (which we would naturally expect following such a severe downturn), to hope that this will continue during the ravages of GATT- as the White Paper does - is naive.

I believe that the basic problem underlying this crisis is what can be termed the "overaccumulation" of capital. This is Marx's explanation for the overproduction of certain goods - especially, in SA, luxury commodities traditionally consumed by whites - in relation to the ability of people to pay. Overaccumulation tendencies are always present under capitalism, and they periodically bubble up to the surface (from the early 1970s), giving rise to other symptoms of crisis: unused plant and equipment; huge gluts of unsold commodities; an unusually large number of unemployed workers; and the rise of speculative financial markets, particularly in shares and real estate.

The left in SA, and indeed across the world, has responded to overaccumulation with two different strategies, which although contradictory have sometimes merged into a single programme (as in the RDP or the Brazilian Workers' Party recent campaign programme). One faction - associated here with COSATU's Industrial Strategy Project - calls for increased competitiveness so that SA's glut of luxury manufactured goods can be sold to the world market. (This, in my view, is quite naive, and the recent conflicts between Minister of Trade and Industry, Trevor Manuel, and trade union leaders like Ebrahim Patel and Enoch Godongwana reflect the growing tensions over competitiveness.)

The other faction stresses that massive economic distortions, particularly in poor and working people's access to basic needs, goods and services (housing and services, health care and education, land, transport, clothing, basic appliances, and so forth), should be addressed through internally-oriented economic policies which, on occasion, will have to rudely snub the imperatives of international capitalism.

In this spirit, if the RDP aims to achieve integrated development, that would require linking production and consumption, work-place and community, as has never happened before. It would imply that certain consumer goods never produced in SA - such as environmentally friendly mass transit, people's cars and bicycles - would be considered lead candidates for statesupport. It would entail the sort of massive state public investment programme called for in the RDP (and envisaged even by the World Bank), but which in practice is being held hostage by "fiscal discipline" (ironically, a World Bank report last November permitted the government debt to GDP ratio to rise from the present 6,8% to 12% in the near-term, while in contrast "the markets" on Diagonal Street are demanding a reduction to 6,5%!). But it would not be a statist RDP, for it would also encourage local communities to become involved in production of construction materials for local building campaigns.

It would ensure that, as the RDP itself states, government will "provide some subsidies as a catalyst for job creation programmes controlled by communities and/or workers, and target appropriate job creation and development programmes in the most neglected and impoverished areas of our country."This is the RDP at its finest, calling for creative alternatives to conventional economic wisdom, alternatives that unleash local energy and focus on use-values, not merely the exchange-values so precious to neo-liberalism.

Above all, in my opinion, to contest the tyrrany of the markets would entail the wholesale adoption of RDP basic needs programmes such as Affordable Housing for All. But, holding the Government of National Unity to such campaign promises will apparently take a good deal of popular protest, if housing is any indication.

This resource is hosted by the Nelson Mandela Centre of Memory, but was compiled and authored by Padraig O’Malley. Return to the Nelson Mandela Centre of Memory site.