Vol.2 No.36, 04 December 2002
The Real Fundamentals
By Margaret Legum
AIDS Day has come and gone. It focused, if nothing else, the extent of destitution in our country. Not only people dying of AIDS, not only their dependants or orphaned children, but also whole families and communities who have no income. All are hungry every day. At the same time our currency has recovered – economists’ reasons for which are the usual thumb-sucks - and our government is praised for the success of its policies. How are these compatible?
There are other anomalies. Inflation is still considered a problem, so the rate of interest remains something like ten times that in Europe and the US. How are our enterprises to compete when that is the differential in the price of money? We are told this will attract foreign money – but not, of course, investment capital, only financial capital creaming interest. It produces not one job.
We know our inflation is imported via oil and other internationally priced commodities, so interest hikes will not affect it; but we keep the rate high anyway, thus adding to inflation. The high rate is justified when our currency is falling, because we pay more for imports, and when it is rising, on the grounds that falling exports will add to inflation. Don’t ask me to explain that; ask a banker. Banks do well out of high interest rates, so they justify it every which way.
But even bankers are beginning to worry. IMF Survey reports that the September meeting of the IMF’s Monetary and Exchange Affairs Department discussed the dilemma that increasing global market integration is presenting new challenges for central banks as they seek to attain low inflation and financial stability.
This is a clue to our failure – in common with most nations – to develop our country and employ our people. Both low inflation and financial stability serve the owners and controllers of capital; and these interests control our policies. They also limit growth when they drive fiscal policy . They leave millions unemployed, and people hungry in the midst of food plenty. Fortunately the total collapse of many economies, the American recession and the failure of growth to end poverty are beginning to sow some seeds of doubt. Low inflation is desirable, depression is not – even for bankers. Hence rich countries’ low interest rates and expansion policies.
But there are other ways to grow economies by employing people. You start by defining the real fundamentals. These are food, education, health and clean water. None of these should be subject to private profit within the international market. All of them should have first call on national investment. If people are chronically sick, uneducated and unproductive, starving, dying young and bereaved as children, so is the nation. If children born to poor parents end up sick, addicted and criminal the whole society suffers.
But if people are healthy, educated and skilled, they are naturally entrepreneurial: they are motivated to do well and don’t bother with crime. They are also altruistic and they care about the natural environment. It is government’s job to invest in that kind of society. They cannot do so by making individuals pay for their health, their education and clean water, because some will be unable or unwilling to do so. Food must be bought; but if it is priced outside the means of poor people, it must be subsidised.
It is sometimes forgotten that free health, education and water were considered the sine qua non of civilised nations for most of the last century. And the first thing African states did after independence was to introduce compulsory (therefore free) education and health services. It was only the global market ideology that ended that aspiration – because international capital wants everything to be available for profit.
But our government – like others world-wide - is not making these things a priority in its investment policies. Our schools are not free – though, illogically, education is compulsory. Many children are not educated. Classes in public schools are much too large, teachers are not properly trained and supported, and schools are poorly maintained. Parents must subsidise quality. If they really can’t pay they must go through nearly impossible and humiliating hoops to prove it.
The same applies to public health: doctors and nurses are taken for granted, and facilities are run down. Free water is minimal and a huge bureaucracy administers it. Private medicine is the objective.
Meanwhile the sky seems to be the limit where public investment in tourism is concerned. Vast new airports and public highways, conference centres and casinos are the bait for an industry which provides poorly paid, often casualised, jobs; and which could be struck down by an act of terrorism or white-anted by crime. Similarly we hardly seem to count the cost of hosting international conferences and facilitating peace negotiations. These are sold to us as investment in our future as ‘a global player’ – a status deemed to bring us investment, a strong currency and influence in the places of power.
Well, they might – and they might not. Investment in people’s health and education is a much better bet. Those sectors are also job-creators. They are labour-intensive, and they deal in decent self-respecting jobs with contracts. They make a dent in the employment situation. The major problem in all this is not resources, but the public service in terms of delivery. That is well known to our government, which has had a Herculean task in creating a public service from virtually nothing. Meanwhile, we need to be innovative by facilitating civil society as part of delivery.
None of this implies retreat from international trading or investment. We need to trade, but to trade successfully we need a productively employed population. Investment will follow.
© South African New Economics Network 2007. Page generated at 09:26; 22 September 2007