Vol.2 No.18, 29 July 2002
Has the Free Fox in the Free Henhouse had his Day?
In the last SANE Views (vol.2#17) Margaret Legum offered her perspective on NEPAD. Here is another contribution from Margaret, this time offering her perspective on the plunging US share market and what SA's response should be. Hers is a SANE point of view in the face of the insanity of the unregulated, global free market.
By Margaret Legum
The description of the unregulated market as 'the free fox in the free henhouse' was popular in the 1920s and 1930s - the last period of global capitalism, which led to the Great Crash. The last weeks has seen equivalent conditions developing. They arise from two events that should surely end the illusions that surround the ideology that global de-regulated capitalism is good for us.
The first is the collapse of WorldCom, following the Enron scandal, plus Xerox, IBM, Merrill Lynch et al. They reveal the corruption at the heart of corporate America. They involve not only the companies themselves, but also the accountancy, legal, and investment banking industries, found to be up to their necks in hiding the truth.
The second is the G8 Summit presented to Africa as offering the basis for collaboration with the G8 in NEPAD. We in Africa were to offer 'good governance' - transparent, honest institutions, democratically responsive - in exchange for a latter-day Marshall Plan in the form of aid and trade.
What was mooted in advance was a three-fold package. First, trade: a reduction in the barriers to Africa's exports to G8 countries, and cuts in the $1 billion subsidies to G8 farmers, which enable them to undercut African farmers. Nothing whatever was offered here.
Second, $15-20 billion was to be offered in extra debt-relief to Africa - partly to make up for the fall in commodity prices. Instead $1 billion was offered. Third, $25-35 billion was estimated as needed in aid and investment to start Africa on the process to poverty-reduction. Only $6 billion was offered by the year 2006.
Compare that to the Summit's principal handout, which was $20 billion to Russia, to help safely decommission its nuclear weaponry. Clearly a worthy cause, its pre-eminence was dictated by the War on Terrorism's need to ensure that nuclear devises do not leak from Russian establishments.
We in Africa need to get smart about what the American model offers us, and what we can expect from rich countries. 'We have undertaken a policy of very substantial macroeconomic reform. But the rewards are few.' So says our Finance Minister Manuel. He did not add that that policy of reform derived from advice given us by the rich countries, which have substantially benefited by our compliance. We, by contrast, have lost employment, capital and the right to set our monetary, fiscal and exchange rate policies so as to suit our own developmental needs - which are not the same as those of the G8.
And to what end? Make no mistake: global connectedness ensures we all go down when the American bubble bursts. Do we want that degree of dependence? And do we really think the type of capitalism we are now seeing in the West is superior to any other? Don't get me wrong. There is only one sensible way for prices to be set - through the market mechanism. And there are substantial benefits to trade. But there are many versions of economic relationships that can offer both. It is the unregulated free market, the enforced compliance with one model of economic development, that leads to corruption, monopolies, the triumph of the strong and the dependence of the weak.
Government regulation is always needed to protect the weak from the strong. That is what governments are largely for - to ensure the fox is unable to take advantage of the domesticated hens. That is why we have rules in any human endeavour - to pre-empt the law of the jungle. Regulation is civilised.
Moreover, it is time we accepted that the rich democracies cannot and will not defy their agricultural lobbies or their steel workers or any other source of votes so as to give our exports serious markets. Chinese garlic has already attracted tariffs of 400%; the Japanese impose 1000% tariffs on rice. Of course they do. Their own electorates are more important to them than ours. And despite huge increases in wealth, aid flows have fallen from 0.8% of GDP in the 60s to 0.1% in 1999 - in response to pressures in rich countries.
South Africa should abandon illusion. We must reclaim our diversity and self-responsiveness. We need to restore the barriers to trade which have disadvantaged us, and thus protect our labour-intensive industry until it is ready to compete globally. We need to deny access to our markets - for goods and capital - to outsiders unless and until they offer us equally valuable access to theirs. We need to tell them we will believe the benefits when we see them. Until they are able and willing to take on their sectional interests we must give our full attention to the interests of our own people. That will restore some of our power.
© South African New Economics Network 2007. Page generated at 09:32; 22 September 2007