SANE Views

Vol.1 No.11, 24 September 2001

No Way to Run a Railroad

By Margaret Legum

Last week's devastating demonstration of U.S. vulnerability surely invites radical re-thought across the board. There is, for instance, no military outlet for the urge to revenge. Killing Afghanis would be about as satisfying as a two-year old 'smacking the naughty floor' when he falls. The only effective solutions are long-term, complex and require a paradigm shift. They are about depriving terrorist movements of the oxygen that they need to sustain support.

In the meantime, we surely need to think about defending ourselves in South Africa from our involvement in a global economic system that step by step reduces our capacity to control our own affairs to meet our own objectives. The prospect of the tidal waves that would follow a collapse on Wall Street is only the most extreme example of our helplessness. When the rand falls we must accept this is a function of our 'emerging market' status, speculators' jitters over our 'region', or/and market problems in South America. We have no control over these factors. Nor can we protect ourselves from the risk to tourism on which we place increasing emphasis for growth.

Surely this is no way, as they say, to run a railroad. We continue to subject ourselves to this dependence on global markets for one reason only - we have been threatened by the Washington Consensus that we will be 'punished by the markets' if we do not link our economy to the world economy. It insists that we compete internationally by freeing our trade and our capital, so that our economy is open to theirs in all respects. This process has steadily drained our substance, reduced employment, sucked out capital and left large areas cashless. Millions of our people are starving, millions more working for less than it takes to sustain healthy life, most of the rest of us living with constant anxiety.

Exaggeration? A function of poor government? Only a continuation of what went before? Let's look at that.

First, it is only since the end of apartheid that we have been 'globalised'. So what have we gained by trying to compete in world markets? Some of our consumer goods are cheaper than they would be in a more protected market. There is more variety in our shops than otherwise. Our own capital-owners have access to world markets. Some of our producers have access to world markets; but by no means all, because the rules of trade are being made by the rich countries and not by us. That's it. That is what we gain.

What do we lose? We lose the right, which all successful countries have had, to protect our industries while they are globally uncompetitive. We lose the right to keep our home-grown capital at home, where it can work for us. We lose the right to decide how employed people are treated, since this is regarded as labour 'inflexibility'. We lose the right to regulate how enterprise uses our natural resources. We lose the right to subsidise food, water and other essentials. We lose the right to determine what should be a public service and what subjected to market forces. We lose the right, in other words, to mandate our own democratically elected government.

What has that meant for our economy? It has meant steadily rising unemployment, because some of our enterprise has been wiped out. It has focussed export-led enterprise, which is always capital-intensive and labour-shedding. It has meant jobless growth. It has magnified the movement from dying rural areas to cancerous slums. It has created obedience to the ideology that everyone must pay for everything from water to health to education. It has deprived the government of obvious strategies like putting money and work into the hands of unemployed people by public works to create desperately needed facilities. We have lost food security to the reign of agri-business.

And it has insisted we lie to ourselves. We have had to pretend that people do not pay for water and energy and rent because they do not want to, despite clear evidence that they do not have the money. We have pretended that poor people could get jobs or create businesses if only they were better educated - though we know that every country, including our own, has unemployed educated, skilled and enterprising people. Above all, we comfort ourselves with the mantra invented in Europe 25 years ago, that there is no alternative to this system and that in the end it will benefit everyone.

The last of these costs - self-delusion - must surely now give way in the face of the potential chaos that could result from the fallout from the daggers buried in the heart of the American establishment. Make no mistake, it is not 'the Americans' who have sucked us into this toxic system: there are millions of Americans who suffer its effects, through poverty, insecurity, alienation, and death. Before 'business as usual' begins to take hold we should now go back to the drawing board.

And where was that? The original drawing board was cast aside when GEAR was invented in obedience to the then 'end of history' triumphalist and expansionist Western hegemony. It distracted us from our key objective of redistribution and the spread of economic power - not just from White people to Black, but from the cities to the rural areas, from the vast corporations to illiterate communities. That was our vision. All of our people would benefit economically from our political liberation. That means decentralisation.

The global market, by contrast, centralises power, both political and economic. From poor people to rich, from poorly resourced places to developed places, from South to North. Small business is eaten by large, and large business survives by mergers and acquisitions. That is why the focus on small business within the global market is a shibboleth. Another is the saving power of FDI - foreign direct investment. Such as we have received, subtracting the flight of our own capital, has been hardly worth talking about - though this was the prize for which every sacrifice has been made.

We need a new paradigm - economic development focussed on local, regional and national growth. It has become clear that a serious world recession is on the cards. All governments will have to focus on domestic demand to drive their economies. Export-oriented growth cannot succeed as global demand declines: inward domestic demand oriented growth will have to replace it. That means protecting producers and widening demand through redistribution of wealth. Malaysia has already done this, and other 'emerging markets in the east are considering such a switch.

This new focus in South Africa will have the additional advantage for the government of healing its rifts with its Alliance partners. It would start with precautionary control over our exchanges, a review of protective tariffs and a decision to put redistribution of incomes - creation of domestic demand - above all other considerations. I doubt if 'the markets' will at this moment have the stomach to 'punish' us. Let's take the gap.