[Marxism] A debate on capitalist crisis in Joburg today (between agreeable people)

[Patrick Bond]

JOE SLOVO MEMORIAL LECTURE
The Chris Hani Institute [CHI] will be hosting a public lecture as part 
of celebrating the life and times of Cde Joe Slovo, the late National 
Chairperson of the SACP and ANC NEC Member. Cde Joe Slovo was a paragon 
of our revolution and chief architecture of our nascent democratic 
dispensation. The Deputy General-Secretary of the SACP, Cde Jeremy 
Cronin, will deliver the key main lecture under the strategic topic “The 
current financial crisis and possibilities for the left”, and Prof 
Patrick Bond, UKZN Director for Centre for Civil Society will be a 
respondent.

The details of the public lecture are as follows:
DATE : Wednesday 28 January 2009
TIME : 10h30
VENUE : COSATU Hse, 10th Floor, 1 – 5 Leyds Street, Braamfontein
Issued by Chris Hani Institute [CHI]
Below is Cde Jeremy Cronin’s prepared paper:

Jeremy Cronin

Paper delivered to the Chris Hani Institute seminar on
“The current financial crisis and possibilities for the left”
28th January 2009

Introduction

In 1906 a gifted young South African studying in the United States won 
first prize in a Columbia University debating competition. His speech 
was entitled “The Regeneration of Africa” and it began with the 
assertion: “I am an African”. The speech is a remarkable lyrical hymn to 
progress. It was speaking out of a particular ideological illusion of 
the early twentieth century. The speech is dizzy with the sense of huge 
technological advances, rail-lines traversing continents, the telegraph 
system girdling the planet, steam-ships crossing the oceans. These 
advances, so the speaker believed, were finally making the world a 
single and united reality. The speech then called for an “African 
regeneration” that would ensure Africa was not left behind in this 
apparently marvellous new era that had opened up.

The prize-winning debater was Pixley ka Isaka Seme, who, less than six 
years later, was to be one of the founding fathers of the ANC. Re-read 
more than a century later, the speech remains deeply moving. But, as we 
can now see with the benefit of hindsight, its hopes were to be 
shattered and its illusions cruelly exposed by the white minority 
colonial settlement in SA in 1910, by the outbreak of a vicious 
intra-imperialist war in 1914, and by the spectacular global capitalist 
crisis that began in 1929.

The next phase of accelerated imperialist globalisation was to occur in 
the mid-1970s through to the present. Here in South Africa, in the 
mid-1990s, towards the tail-tend of this next phase of accelerated 
globalisation, an incumbent ANC leader was to invoke the Seme legacy. 
Sharing the same fundamental illusions of limitless progress, of a new 
global dawn, Mbeki was even given to styling much of his own prose on 
Seme’s youthful speech. Once again, the inability to appreciate the 
dialectical character of world capitalism’s trajectory, was to lead 
Mbeki (like Seme before him) to gravely misread the global situation, to 
imagine an “African renaissance” based on catching-up and aligning 
ourselves to the “West”, with the promise of an ineluctable, 
evolutionary way forward – “today is better than yesterday, and tomorrow 
will be better than today.”

The illusions of a young Seme more than a hundred years ago were, 
perhaps, understandable and forgivable. Can the same be said of the 
grave strategic misreadings and errors that proliferated within our own 
country and movement in the past decade? Have we sufficiently 
appreciated these errors and taken adequate corrective measures?

The world capitalist system is now in the midst of its worst economic 
crisis since the early 1930s. To be sure, capitalism is seldom free of 
crisis. There have been many crises in the recent past – among them 
Mexico 1982, Japan 1990, and East Asia 1997/8. But the current crisis is 
different in many respects. In the first place, its epicentre is in the 
core zones of capitalist accumulation – the US, continental Europe, the 
UK, and now, increasingly, Japan. It has struck at the heart of the 
financial system. Its knock-on impact across the world is, therefore, 
much more profound. Given the intensified global interconnectivity 
(compared to the 1930s), the speed and reach of the knock-on impact is 
also greatly enhanced. While some economies will continue to grow 
(notably China) but at a much lower rate (now revised down to a possibly 
optimistic 7.5% for 2009 – the lowest in nineteen years), large parts of 
the world have already entered into recession, or are poised on the 
brink of recession. Tens if not hundreds of millions of jobs are being 
lost, homes repossessed, businesses liquidated and value destroyed.

Marx was the first to provide a scientific analysis of the boom-bust 
cycle in capitalism, which he showed to be endemic to this mode of 
production. Crises in capitalism can occur as a consequence of factors 
extraneous to the accumulation process –wars, natural disasters, social 
upheavals. However, under capitalism (and in contrast to earlier forms 
of production) wars, natural disasters or social upheavals are more 
likely to be the consequences of intrinsic crises within capitalism 
rather than the fundamental causes of its crises.

The cyclical pattern of booms and busts are systemically linked to the 
fact that capitalism – unlike socialism or earlier forms of production – 
is essentially production for exchange (and therefore private profit) 
and not for social use. In other forms of production (not least 
socialism)– over-production of goods would, in principle, usually be a 
cause for celebration, but under capitalism “over-production” (i.e. more 
than the market demands – i.e. more than can profitably be sold) 
triggers a break-down in the system – a crisis of over-accumulation. 
This, in turn, requires a massive wave of destruction of productive 
capacity (in the form of retrenchments, factory closures, liquidations, 
and stock exchange collapses), in order to “clear the ground” for the 
next round of capital accumulation through growth. It must be stressed 
that under capitalism “over-production” is not the over-production of 
products that the mass of the world’s population often desperately 
needs. It is “over-production” relative to “market demand”, i.e relative 
to what can profitably be sold.[1] Capitalism, for all its dynamism and 
robustness, is a profoundly irrational system.

In recent times, liberal economists have boasted that with effective 
macro-economic modelling and management, together with some supposedly 
inherent self-correcting capacity within capitalist accumulation, we 
have been able to “transcend” the boom-bust cycles of capitalism. 
Ricardo Hausman, leader of Trevor Manuel’s “Harvard Group”, for 
instance, presented a celebrated paper in 2005 along with a fellow 
Harvard luminary. In it, they claimed that financial “dark matter” would 
prevent a big bang in the world economy. The failure to believe in this 
“dark matter”, the authors boasted, made “analysts predict crises that, 
for good reason, remain elusive.” All of these boasts now ring hollow.

Booms and busts

Over the past 500 years of modern capitalism, it is possible to detect 
three broad (but inter-linked) variants of boom and bust, of cycles of 
rise and fall:

· relatively short-term cycles of around a decade or so. In the recent 
period the global economy has gone into a slump in 1974/5, 1980/2; 
1991/3 and 2001/2. In SA the last decade of apartheid corresponded to a 
domestic downturn/recession and post-1994 we have seen a general 
economic upturn. This upturn is variously attributed to “sound economic 
policies”, and the “political miracle”, etc. While subjective factors 
like policies are not unimportant, and while the political settlement 
has been a key ingredient in this upturn, it is important to notice that 
this cyclical upturn has also had an underpinning of objectivity related 
to our particular capitalist accumulation path. This local upturn is now 
likely entering into a period of several years of downturn if not actual 
recession. We obviously make this point, in order to prepare our 
defences against what is likely to be a political discourse in the 
coming years – blame a largely “objectively” (and externally) determined 
downturn on “Polokwane populism”.

These shorter term cycles, and their national/regional characteristics 
are related to the particular features of a national/regional economy, 
including its positioning and insertion within the global capitalist 
economy, and, therefore, they are not unrelated to longer-term cycles in 
the world system

· These long-term cycles at a global level are sometimes called 
“Kondratieff” cycles – after the economist who first noted and analysed 
them. Over the past 500 years there has been a remarkably consistent 
cyclical pattern, occurring roughly over 50 year periods – with booms 
and growing profit occurring over a 25 year period, followed by another 
25 year period or so of generally diminishing rates of profit, of 
deepening crisis and decline. The present long-term cycle in the world 
capitalist system began in 1945, with the upswing reaching a turning 
point around 1970/3. Since then, globally, we have been in a long 
downturn – somewhat longer than normal, partly because 
capitalist-aligned economists and central banks and multi-lateral 
institutions (like the IMF), believing that they had finally “beaten” 
recession forever, introduced a range of interventions which we can now 
see have simply temporarily displaced the epicentre of crisis into 
semi-peripheral regions, thus delaying and deepening the full-blown 
crisis in whose midst we now are.

Finally, there is another, often even longer term cyclical (or rather 
rise and fall) tendency within capitalism:

– The geographical shift in hegemony. Marx, Lenin and others following 
them have demonstrated how capitalist development is characterised by 
high degrees of combined and uneven development. It is a global system 
characterised by geographical zones of various importance within the 
accumulation process – core zones, semi-peripheral zones, and marginal 
or peripheral zones. Within this hierarchical system there is a tendency 
for a single zone/region or country to emerge as the dominant hegemon. 
Over the past 500 years, if we are to begin in what was still largely 
mercantilistic capitalism, the hegemonic centre of capitalist 
accumulation has shifted from the Italian city-states (notably Genoa), 
to the Netherlands (mid-17th century) and to Britain. Since 1870, the US 
has positioned itself as a challenger to British hegemonic domination, 
and since 1945 the US has been the uncontested dominant capitalist 
power. The emergence of a hegemonic power is usually characterised by a 
greater productive and technological dynamism than its rivals. In its 
declining years (and the decline might last for a long period), core 
centres of production shift to other localities, and the economy of the 
waning hegemonic power is increasingly characterised by 
“financialisation” – the increased investment of surplus out of 
production (and therefore out of job creation and wages) into 
speculative activity. This pattern is evident in all hegemonic 
societies, and since the early 1970s, as US hegemonic dominance has 
begun to wane, a ballooning financialistion process has been evident 
there, manifest in many things including a dramatic widening in the gap 
between the share of surplus going to profits and that going to wages.

In addition to these three “rise and fall” patterns typical of 
capitalism, there is a fourth factor that needs to be borne in mind when 
considering the current crisis in the global capitalist system.

Approaching the bio-physical and geographical limits to capitalism?

The capitalist accumulation process is premised on ever-expanding growth 
and the illusion of limitless resources. However, there are absolute 
limits to capitalist production and reproduction (and, indeed, to any 
form of human civilisation). There is now a well-established scientific 
consensus that our present global economic trajectory is leading human 
civilisation towards catastrophe – with the depletion of non-renewable 
natural resources, the destruction of the environment, global warming 
and, therefore, the bio-physical preconditions for human survival. 
Capitalism and formerly existing socialism both shared the illusion of 
limitless natural resources available for ever-expanding exploitation. 
Today, socialist Cuba is setting an important example of an entirely 
different approach to sustainable development. On the other hand, while 
many leading politicians in capitalist countries are beginning to 
express grave concern about the future of our planet –denialism; or 
market mysticism (somehow the hidden hand of the market will find a 
solution); or a cynical, even genocidal, social Darwinism (“don’t worry 
there will be losers but there will also be winners”); or hopelessly 
inadequate piecemeal reforms remain the order of the day.

In addition to the bio-physical limits to capitalism, there are also 
struggle-determined potential limits to the expanded reproduction of 
capital. Capital needs constantly to intensify and expand its 
exploitation of labour power – it does this in several ways, forcing 
workers to work longer hours; increasing the productivity of labour 
through technological advances; or attempting to roll back the social 
wage (for example, the welfare state). The relative success of any of 
these profit-maximising interventions depends on the ability or 
otherwise of labour and popular forces in general to resist the 
intensification of exploitation. Critically in the current era of 
“globalisation”, various forms of geographical displacement have also 
been key factors in this pursuit of the expanded reproduction of 
capital. In particular, in the current era, capital has relied to a 
considerable extent on lowering the cost (to capital) of the 
reproduction of labour power by relying on Third World survivalist and 
peasant economies to carry much of the burden of this reproduction. Thus 
we have seen the vast expansion in the last decades of variously coerced 
and regulated forms of mass migrancy (whether “cheap labour”, or the 
“brain drain” from the Third World). Or, the flip-side of the latter, 
through the geographical displacement of production to new localities 
where labour is “rightless” and “disciplined” in various ways (this 
happened with the flow of FDI into apartheid SA after 1963, Brazil under 
the military junta from the mid-1960s, and Chile from 1973 under 
Pinochet, and, under a somewhat different reality, it has been a key 
feature of Chinese growth in the last decades).

However, as in South Africa, or Brazil, or South Korea in earlier 
periods, and as is now happening in China,[2] it tends to take a 
generation or so for workers to organise (or regroup and re-organise) 
for better wages, working conditions and social wage measures. In the 
coming period, the intensifying class struggles unfolding within China, 
and within the Chinese state and ruling party itself, will have a 
decisive impact upon the chances of a re-configuration (or otherwise) of 
the global economy.

The present crisis – “a perfect storm”

The present global crisis is particularly severe because it involves the 
confluence in differing degrees of all four of the systemic factors 
considered above:

· short-term cyclical downturns, converging with

· a longer-term downward trend, coinciding with

· a global hegemon now in full decline; all shadowed by

· the already detectable impact of approaching bio-physical and perhaps 
social limits to the expanded reproduction of capitalism.

For around 100 years (1870 to 1970) the US witnessed an unprecedented 
trend of rising productivity and rising real wages for the working 
class. This economic reality lies at the basis of the “American dream”, 
and of the “consumerism” and relative passivity of the US working class 
– a car and a suburban home being the epitome of the American “way of 
life”. Since the early 1970s, the US’s hegemonic domination has been 
challenged by Japan and the Asian Tigers and some key European economies 
- leap-frogging in terms of technological and industrial plant 
investments, rendering US industrial plant (fixed investments) 
increasingly unprofitable. This has led to US capital moving to other 
locations OR moving into increasingly speculative financial activities. 
At the same time, US mass consumerism has been kept afloat through 
increasing credit, despite declining real wages since the early 1970s.

Export-oriented Asian (especially Chinese) manufacturers and Third World 
oil producers became the production sites while US consumption propped 
up global market demand. The US has been running huge current account 
deficits – by 2006 the US current account deficit was at $800bn (or 6% 
of GDP). China, conversely, has played a crucial role in financing this 
US deficit, and therefore US consumption. China has now accumulated the 
world’s largest foreign exchange reserves ($1.9 trillion, at least 
$650bn of which is in US treasury bonds). In theory, China could pull 
the plug on the US economy, but a move to sell these assets would 
further damage China’s export industries, giving us a situation which 
some economists have described as a “mutually assured economic 
destruction” capacity on both sides.

This symbiotic but unsustainable reality premised on growing US 
consumption was further propped up by a variety of “creative” financial 
instruments developed largely by the US financial sector. Among these 
were “sub-prime loans” – housing loans to those who basically could not 
afford them, in which the initial interest rate was sub-prime, but with 
the interest rate escalating over the duration of the mortgage on the 
assumption that as the borrower progressed career-wise so there would be 
an increased capacity to pay instalments. (Note that this is not very 
different from many BEE deals – in which black “investors” acquire 
shares on loan, on the assumption that the shares will always go up and 
they will be able to repay the loan). These sub-prime loans were then 
“diced and sliced” (i.e. mixed up with other more viable loans) and sold 
on by the direct mortgage institutions to banks and other financial 
institutions.

The collapse of the sub-prime market has been the catalyst of the 
present all-round crisis. It has seen one of the top four investment 
banks in the US, the 100-year old Lehman Brothers collapsing, and other 
banks and the mortgage lenders (Fanny Mae and Freddy Mac) having to be 
rescued, often through nationalisations. The dicing and slicing of 
sub-prime and other toxic loans has meant that major financial 
institutions in the US and Europe, in particular, have no idea of what 
they are sitting on. This has led to a reluctance of banks to lend to 
each other, and liquidity in the real economy has dried up. Major global 
manufacturers (like Nokia, for instance) can still access cash from 
banks, but their hundreds of small suppliers cannot get loans and 
production across the globe is being impacted. On top of this, demand in 
the US and Europe is in recession, and this is impacting heavily on 
major global manufacturers, like China where there have already been 
hundreds of thousands of retrenchments. The Indian government is 
predicting 10 million job losses in its export industries over the 
current year.

In many respects we are in uncharted waters, and no-one can say for sure 
exactly where it is all headed. There are, however, a few basic 
predictions we can make:

* There will not be any significant short-term recovery;

* Although the world capitalist system is in a grave crisis – it would 
be naïve to assume that capitalism will simply collapse, or that the 
crisis will spontaneously give birth to a better world;

* The relative decline of US economic supremacy (which has been slipping 
since the mid-1970s) has now been greatly accelerated. The US will 
probably still emerge as the most powerful economy, but the world will 
have become significantly more multi-polar.

* While multi-polarity offers possibilities, potentially more breathing 
space and alternatives, for the global South, it is the people of the 
South who will bear the burden of the crisis. For instance, as the core 
capitalist economies focus on their own crises and their own stimulus 
packages, already paltry development aid is diminishing; trade 
protective barriers are going up; FDI is pulling out of much of the 
South; premiums on international loans have increased; and portfolio 
investments are even more disinclined to bet on the South. It is not 
just the core capitalist economies that are retreating out of the South. 
For instance, more than 60 Chinese mining companies have left the DRC’s 
Katanga province in the past two months as mineral prices collapse, and 
100 small Chinese operators are said to have left Zambian mines (Jeffrey 
Herbst & Greg Mills, “Africa’s left to face commodity price storm 
largely on its own”, Business Report, Jan 22, 2009)

* It is possible that dynamic developing economies like Brazil, India 
and China may be partially de-linked (de-coupled) from the recession, 
but none will escape its impact. China, with its US oriented, export-led 
growth strategy will face very serious challenges

South African challenges - From the “unthinkable” to the “unmentionable”

The global economic crisis presents the left with major possibilities 
but also serious challenges. Here in South Africa, transformation of our 
productive economy has become all the more necessary. But it will also 
become more difficult as declining global demand for our exports will 
impact on jobs and on state fiscal resources.

We will also encounter an intensified ideological battle, from those 
outside of the ANC, and indeed from within the ANC itself. With their 
backs to the wall, but with massive resources, our resident neo-liberals 
of all stripes are fighting an ideological battle to prevent any 
sensible, democratic debate opening up within our country on economic 
policy evaluation and change.

We have been here before. In the critical 1994-1996 period, a similar 
ideological battle was waged to capture the new government’s economic 
policy agenda. This included demonising, caricaturing and belittling 
alternative perspectives, especially when they came from the SACP and 
COSATU. It also included constant threats about what “global markets” 
would do to us if we dared challenge anything in the neo-liberal gospel. 
This theme was repeated over and over.

And that is exactly what is now being repeated – except last time, we 
were being told there were no alternatives to the Washington consensus. 
Now, we are being told that the crisis of this very same economic agenda 
is so great, that we had better not risk changing anything.

This was exactly the parting shot from the outgoing deputy finance 
minister, Jabu Moleketi, speaking in the week before the October 2008, 
alliance economic summit. He told the London Financial Times that it 
would be “suicidal” for South Africa to change economic policies: “Any 
sudden policy shifts by South Africa’s new leaders would be ‘suicidal’ 
for a country whose economy survives at the mercy of foreign investors, 
according to one of the architects of the recent years of stability.” 
(October 7, 2008)

Notice the sleight of hand in this sentence. On the one hand, we are 
told that our economy has achieved “years of stability”, and on the 
other, we are told it “survives at the mercy of foreign investors”. What 
kind of stability is that? But according to one of our architects of 
stability, cde Moleketi, the seas are so choppy now that we shouldn’t 
try to turn our ship around. Typical of this line of reasoning is a 
caricature of what we are actually attempting (supposedly “a total 
U-turn”). What we are arguing for is exaggerated, the better to be able 
to demonstrate our “lack of wisdom”.

We might be inclined to ignore all of this, if it were not likely to 
impact on parts of the ANC and government. But, unfortunately, this is 
not something we can take for granted.

Consider an interview with Minister of Finance, cde Trevor Manuel, 
conducted by the London Financial Times in the immediate aftermath of 
the same mid-October Alliance economic summit. Clearly referring to the 
main resolutions from the summit, cde Manuel speaks dismissively: “We 
need to disabuse people of the notion that we will have a mighty 
powerful developmental state capable of planning and creating all manner 
of employment. It may have been on the horizon in 1994 but it could not 
be delivered now. The next period is likely to see a lot more 
competitiveness in the global economy. As consumer demand falls off 
there will be a huge battle between firms and countries to secure access 
to markets." (28 October 2008)

Manuel exaggerates and implicitly ridicules the resolutions of Polokwane 
and the Alliance summit on the developmental state. (Interestingly, when 
talking to the local media, he has been more restrained). He then says 
that a major job creation programme led by a developmental state “may 
have been on the horizon in 1994 but it could not be delivered now.” In 
other words, it is no longer possible to contemplate serious state-led 
job creation programmes because of the crisis in the global economy.

But what was cde Manuel saying a few years back when there wasn’t the 
global crisis? In 2000 he told the Sunday Independent: “I want someone 
to tell me how the government is going to create jobs. It’s a terrible 
admission, but governments around the world are impotent when it comes 
to creating jobs.” (9 January 2000).

Then it was NEVER possible, now it is NO LONGER possible! A few years 
ago change of economic policy was supposedly “unthinkable” – now it’s 
“unmentionable”.

“But is it affordable?”

A variant of the “unthinkable/unmentionable” argument which was deployed 
hostilely against the RDP in the mid-1990s and which we are encountering 
once more in regard to the ANC’s 2009 election manifesto is the tired 
refrain: “it is all very noble, but is it affordable?” Indeed, the 
affordability of a strategic programme is not irrelevant. And yes, 
indeed, the global economic crisis will impact on South Africa. There 
may very well be fewer fiscal resources available to government in the 
coming years as declining profits hit tax revenue. Our existing social 
security net, which we are committed to expanding, will likely come 
under increasing pressure as global recession hits South African jobs.[3]

We have to be realistic about these and other related challenges. But 
what we absolutely must not allow this time around is that the “but is 
it affordable?” refrain should be used to deflect us off our strategic 
and programmatic DIRECTION.

This is what happened in the mid-1990s to the RDP. The affordability 
argument was used to intimidate comrades in government (and was used, in 
turn, by some in government). In the name of “finding the resources” to 
“deliver” on “RDP promises”, the RDP programme was dumbed down into a 
list of “delivery targets”. GEAR effectively replaced developmental 
transformation as the key priority, making stabilisation and 
re-stimulation of essentially the same century-long growth path the 
priority. “Development” was turned into earnest endeavours at 
re-distribution out of growth, while the stabilised and moderately 
stimulated growth proceeded to reproduce all the systemic features of 
racialised underdevelopment that had characterised this growth path for 
the better part of a century.

This time around we are making it very clear that it is decent work and 
sustainable livelihoods (and not 6% growth, or some other arbitrary 
figure) that will be the key indicator of progress or otherwise. This, 
in turn, will require the marshalling of our resources around a 
state-led industrial policy that prioritises the transformation of our 
productive economy. Key features of this industrial policy must include:

* Breaking the suffocating grip of private monopoly cartels in the 
mineral, energy, finance, chemical, and agro-processing sectors – in 
order to ensure a more balanced development of small and 
medium-enterprises with a capacity to create jobs;

* Achieving a better balance between production for export and 
production for our national and regional markets; this will include 
ensuring that trade policy is governed by industrial policy (and not the 
other way around);

* More effective strategic coordination of energy policy – to ensure 
greater national energy sovereignty and long-term sustainability, with 
as rapid as possible greening of our economy

* Paying much greater attention to national (and regional) food security

* The consolidation of our SOEs and Development Finance Institutions, 
ensuring that their strategic development mandates are aligned and clear.

* Reconfiguring the state apparatus to ensure that there is effective 
(and participatory) planning in all spheres, that budget allocations are 
determined by strategic and planned priorities, that macro-economic 
policy is shaped according to our developmental priorities, and that the 
professionalism and technical capacity of the state is significantly 
improved.

* Our industrial policy and broader developmental strategy should not 
just be “national” in character, but it should also deliberately embrace 
a Southern African regional and even South-South dimension. Many 
capitalist forces around the world can be expected to respond to the 
global crisis with a dog-eats-dog mentality, with an each one for 
themselves approach of the kind that cde Manuel is predicting in his 
Financial Times interview quoted above (“The next period is likely to 
see a lot more competitiveness in the global economy. As consumer demand 
falls off there will be a huge battle between firms and countries to 
secure access to markets.”). While this trend is already evident, there 
are also inspiring alternative examples from which we should learn and 
emulate where possible – foremost among them the ALBA process in Latin 
America and the Caribbean.[4]

Integral to our developmental agenda, and in order to buttress the 
priority of job creation and sustainable livelihoods, we are further 
identifying four other areas requiring prioritised systemic 
transformation if we are to ensure sustainable transformation – 
health-care, education, rural development and community safety. These 
are not add-ons, but integral components of a developmental path to 
systemic transformation.

It might be that deepening global recession and its impact upon our own 
economy will have consequences for the scale and the time-frames for 
meeting our strategic developmental priorities. As we proceed, we need 
to monitor and evaluate outcomes and likely forward progress on a 
continuous basis. And we need to make whatever adjustments might be 
required. What we absolutely must NOT do this time around is to 
compromise on our strategic DIRECTION and on our systemic 
TRANFORMATIONAL objectives

To keep focused on our strategic development agenda, we need also to 
engage actively in a critique of what remain dominant illusions about 
our present national reality.

MYTHS ABOUT THE SOUTH AFRICAN ECONOMY

Central to the neo-liberal campaign to block serious economic debate and 
policy evaluation in our country is a series of inter-related myths 
about the state of health of our economy.

Myth number one: “over the last decade South Africa has witnessed 
‘unprecedented’ growth”

It is true that since 1994 there have been 14 years of successive 
growth. Between 1994 and 2003 this growth averaged 3%. Between 2004 and 
2007 it averaged 5%. It is now likely to dip again to 1%, if not down to 
negative growth and recession.

While sustained if moderate growth is not a negligible achievement, we 
should remember that it is growth relative to the deep ditch into which 
white minority rule had finally driven the economy by the early 1990s. 
In the last decade of apartheid, there was either zero or negative 
growth for most years. To produce growth out of this low-point did not 
necessarily require rocket science.

Moreover, a decade of growth is far from being “unprecedented” as is so 
often claimed. Between 1963 and 1973, the apartheid economy grew for a 
full decade at an average of 7-8%. As this apartheid-era growth should 
remind us, economic growth on its own doesn’t tell us who is benefiting, 
or even whether a high growth rate is a good or a bad thing for the 
majority.

Myth number two: “we have managed our economy well since 1994”

The last decade and a half has coincided with a huge surge in global 
growth. In particular, over the last years there has been a major 
commodity boom that has benefited most of our key exports. With a 
prolonged global recession now in sight, and with slackening demand for 
commodities, we have to ask ourselves whether we have used the boom 
years to place our economy on a sound, sustainable and more equitable 
basis? Or have we largely squandered the opportunity?

An honest answer would have to admit that, in many respects, we have 
lost opportunities that may not return. The changed global reality does 
not make change impossible, it makes it all the more necessary. But 
transformation will now be more challenging in many respects.

Myth number three: “all the basic economic fundamentals are in 
place…(and shouldn’t be tampered with!)”

The smug complacency about what has been achieved over the past 
decade-and-a-half is, basically, a class complacency. For South African 
monopoly capital in general the past 15 years have been a period of 
great profitability, of a widening gap between their executive salaries 
and the wages they pay their workers. It has been a decade of 
opportunities to disinvest out of SA.

For workers, however, the past 15 years have seen retrenchments 
initially soar and then level off into largely jobless growth. 
Unemployment peaked close to 40% and is now stuck around 33-35%. There 
has also been wide-scale casualisation, so that those in employment 
often find themselves below the radar screen of progressive labour 
market legislation. The past 15 years have also seen widening income 
inequality, making SA one of the worst performing countries in terms of 
the GINI coefficient measurement of income inequality. However, 
important social programmes (including grants, low cost housing and 
water and electricity provision) have helped to lessen absolute levels 
of poverty.

The idea that economic “fundamentals” can be reduced to a few 
macro-economic indicators, while ignoring unsustainable levels of 
unemployment and inequality, is a class-biased assumption.

Myth number four: “owing to sound economic management, South Africa is a 
safe haven in the current global turmoil”

In its 78th Annual Report, published in June 2008, the Bank of 
International Settlements rated South Africa (along with Turkey, the 
Baltic states, Hungary and Romania) as one of the states most at risk in 
the current turbulent global reality. Of course, the fact that the BIS 
made this finding should not necessarily lead us to accept it as gospel 
– the BIS failed to remotely predict the impending scale of bank failure 
in the US. But the BIS report should certainly give us pause for thought.

The BIS finding was based in particular on SA’s precarious current 
account situation (the difference between our export earnings and import 
expenditures). Since the June report, our current account deficit has 
worsened. In October 2008 our trade deficit widened to R7,1bn, largely 
as a result of a R2,2bn increase in imports of machinery and electrical 
appliances. On a cumulative basis from January to September the deficit 
stood at R62bn compared with R55bn in the same period last year. The 
fact that South Africa has become a net food importer for the first time 
ever is a further aggravating problem.

It is hard to predict exactly what the short and medium-term global 
turbulence holds in store for our current account deficit. The rand is 
tending to depreciate against the dollar and euro and this will improve 
our export competitiveness – but the global downturn will lessen demand 
for our exports. The global downturn has brought the price of oil down 
to levels last seen two years ago, but this decline is partly off-set, 
in turn, by the declining value of the rand.

In short, our current account deficit – which basically reflects on our 
failure to drive an aggressive industrial policy programme particularly 
in manufacturing and agriculture over the last 15-years – will remain a 
serious point of vulnerability.

Myth number five: “our financial sector is healthy”

Although our own financial institutions appear to be well regulated and 
have not been as severely exposed to toxic loans as their international 
counterparts, they have not been entirely immune either. Standard Bank 
has some exposure to derivative share-holdings, and Old Mutual lost over 
$1,4 billion when its shares in Bear Sterns turned out to be almost 
worthless. Hopefully, these remain limited cases.

But can we boast of a healthy financial sector when we have had one of 
the world’s worst housing price bubbles? When household debt has 
quadrupled to more than R1,1 trillion in the past five years? When more 
than 6 million South Africans can’t pay their debts? When, in the first 
quarter of 2008, South Africans spent 82,3% of their income servicing 
household debt, compared to 60,2% in 1998? And when 6000 vehicles and 
2000 homes are now being repossessed every month?

In assessing the health of our financial sector there is another reality 
that is often politely overlooked – the impact of narrow BEE deals. Many 
of these deals involved complicated financial gearing, in which an 
emerging elite (without capital savings) was provided with shares that 
they would, supposedly, repay out of the gains the shares would 
“inevitably” make. After all, “the stock market would always travel 
upwards” in the wonderful new SA and world in which we were now living. 
According to some sources, around 80% of these BEE deals are now “under 
the water”. BEE beneficiaries are unable to repay the debt on their 
shares – at least not within the prescribed time as agreed. This will 
impact upon the liquidity of firms, and it is debt that will, in many 
cases, also be passed into our banking sector. If this kind of BEE 
wheeling and dealing had had any serious transformational impact then, 
as a country, a deepening debt that will impact upon all of us might be 
excusable. But narrow BEE has been a deliberate side-tracking of serious 
transformation.

Myth number six: “the choice is between no-change or imprudent 
macro-populism”

We cannot be imprudent, but nor can we be complacent about where our 
economy is. We must reject the false choice of either an unsustainable 
welfarist “macro-populism”, on the one hand, or “no change”, where, 
supposedly, government continues to implement “prudent macro-economic 
policies”, while the markets do the rest.

Our problems are structural. We have to transform the systemic features 
of our persisting growth path that is reproducing the crises of our 
society – unemployment, poverty, inequality, skills shortages, 
diminishing food security, excessive and unsustainable energy 
intensiveness, and current account vulnerabilities. These crises impact, 
in turn, on other major headaches, including crime levels and 
unsustainable household indebtedness.

Too often the debate on economic policy is reduced to the wisdom or 
otherwise of inflation targeting or a small budget deficit. These are 
important issues that, no doubt, need prudent handling. But they are 
subsidiary matters.

At the Alliance economic summit we agreed that our key priorities need 
to be job creation, major improvements in education, health-care and the 
criminal justice system, and serious rural transformation. These key 
priorities must not be handled as trickle-down welfarism, but as 
integral components of a state-led industrial programme that transforms 
our excessively commodity-based export-dependent and capital-goods 
import-dependent growth path. This is neither a dramatic abandonment of 
macro-economic prudence, nor is it a complacent sitting on our hands, 
hoping the markets will somehow solve everything.

Myth number seven: “thank God”

When South African financial institutions appear to be less vulnerable 
to the sub-prime crisis than institutions elsewhere, when things are not 
as bad as they might be, we are asked to believe that something 
miraculous has occurred. Consider a recent speech delivered at the 
University of Pretoria by Richemont and Remgro chairperson, Johann 
Rupert. He told his audience:

“I am a proponent for the abolition of exchange controls but I must 
agree with finance minister Trevor Manuel that we were saved by foreign 
exchange controls. Certainly some of my banker friends and fund managers 
would also have been seduced by the higher yields available in the 
sub-prime and other markets. So for once, thank God for foreign exchange 
controls.” (Business Times, October 26, 2008)

It is possible that we have benefited from divine favours in the recent 
past. It would be remiss not to acknowledge that cde Manuel has resisted 
the big-bang removal of exchange controls constantly advocated by the 
media’s “economic specialists”, by big business circles, and by the DA 
and IFP in parliament. However, in line with GEAR commitments to 
progressively remove exchange controls, the Minister of Finance has 
introduced no fewer than 26 relaxations of exchange controls over the 
past 8 years.

The residual presence of some exchange controls in SA isn’t particularly 
due to divine intervention or to the Minister of Finance. Instead it has 
a great deal to do with protracted struggles from within the ANC, and 
especially from the SACP and COSATU in opposition to the hasty and 
excessive liberalisation measures that were introduced from the mid-1990s.

In particular, the SACP-led Financial Sector Campaign eventually 
compelled hostile Treasury Department officials to deal legislatively 
and otherwise with our financial institutions and their unwise lending 
inclinations. The Credit Act and the extension of banking to a wider 
internal market were the results of the campaign.

It is now conceded by many mainstream commentators that both these 
measures (along with exchange controls) have played a key role in 
protecting our banks from the global crisis. Thanking God is a way of 
obscuring the role of popular mobilisation in impacting positively on 
economic policy.

Johann Rupert might not want us to remember this fact. But we should 
never forget. The transformation of our productive economy and broader 
society cannot depend upon a developmental state alone, it critically 
requires popular participation, popular mobilisation and popular 
monitoring and evaluation.

NOTES
[1] Cf. Marx: “The word over-production in itself leads to error. So 
long as the most urgent needs of a large part of society are not 
satisfied, or only the most urgent needs are satisfied, there can of 
course be absolutely no talk of an over-production of products – in the 
sense that the amount of products is excessive in relation to the need 
for them. On the contrary, it must be said that on the basis of 
capitalist production, there is constant under-production in this sense. 
The limits to production are set by the profit of the capitalist and in 
no way by the needs of the producers. But over-production of products 
and over-production of commodities are two entirely different things.” 
Marx, Theories of Surplus Value.

[2] “Unemployment and the economic slowdown could cause massive social 
turmoil in China, a leading scholar in the Communist Party has said. 
‘The redistribution of wealth through theft and robbery could 
dramatically increase and menaces to social stability will grow,’ Zhou 
Tianyong, a researcher at the Central Party School in Beijing, wrote in 
the China Economic Times. ‘This is extremely likely to create a reactive 
situation of mass-scale social turmoil,’ he wrote. His views do not 
reflect leadership policy but highlight worries in elite circles about 
the impact of the economic slowdown. Mr Zhou warned that the real rate 
of urban joblessness reached 12% this year and could reach 14% next year 
as the economy slows. China's annual GDP growth has already slowed to 9% 
in the third quarter, from 10.1% in the second. Some forecasters see 
growth slowing to 7.5% next year. The government has launched a stimulus 
package and cut interest rates to boost the economy. Last month, China's 
top planner warned that the economic slowdown in China could fuel social 
unrest. Zhang Ping, head of the National Development and Reform 
Commission, said the impact of the global crisis on China's economy was 
deepening. ‘Excessive bankruptcies and production cuts will lead to 
massive unemployment and stir social unrest,’ he said.”. (“China ‘faces 
mass social unrest’”, BBC News, 5 December 2008 – www//news.bbc.co.uk)

[3] “The Unemployment Insurance Fund (UIF) is paying out about R300 
million a month to beneficiaries, up from R250m a month last July, and 
claim figures are expected to rise by at least 15 percent this year”. 
(“UIF payouts set to rise”, Business Report, Jan 21, 2009).

[4] See Shawn Hattingh: “At present, there are four full member states 
of ALBA: Bolivia, Cuba, Nicaragua, and Venezuela. There are four 
observer states in ALBA -- Ecuador, Uruguay, the Dominican Republic, and 
St. Kitts -- who will become full members in the near future. ALBA 
rejects neo-liberalism and aims to forge a path away from "free" trade. 
ALBA itself has a wide range of guiding principles and has the following 
objectives:

* To promote trade and investment between member governments, based on 
cooperation, and with the aim of improving people's lives, not making 
profits.
* For member states to cooperate to provide free healthcare and free 
education to people across the ALBA states.
* To integrate the ALBA member's energy sectors to meet people's needs.
* To create alternative media to counterbalance the US and regional 
neo-liberal media and promote an indigenous Latin American identity.
* To ensure land redistribution and food security within the member states.
* To develop state-owned corporations.
* To develop basic industries so that ALBA member states can become 
economically independent.
* To promote workers' movements, student movements, and social movements.
* To ensure that projects under ALBA are environmentally friendly”

(ALBA: Creating a Regional Alternative to Neo-Liberalism?”, Feb.2008, 
www.monthlyreview.org/mrzine/hattingh070208

***

Comments on
“The current financial crisis and possibilities for the left”
Paper by Jeremy Cronin, presented to the Chris Hani Institute’s Joe 
Slovo Memorial Lecture, 28 January 2009
Comments by Patrick Bond, University of KwaZulu-Natal Centre for Civil 
Society (pbond at mail.ngo.za <mailto:pbond at mail.ngo.za>)

This is a fantastic paper, one of the most coherent and visionary of 
texts I've read about the contemporary situation, showing full 
cognizance of the processes of capital accumulation, world system 
formation and ecological crisis, as well as mapping out some of the 
implications for South African Left praxis. However, in these brief 
comments, I hope to contribute to the debate in three ways. First, I do 
have some minor quibbles with comrade Jeremy's analysis; second, I'd 
like to forcefully agree and extend his description of foundational 
processes in crisis formation and displacement; and third, there are a 
few more substantial augmentations to suggest for prescriptions 
associated with South Africa’s independent left.

This text (revised from a version in Umsebenzi last month) follows 
several from the SACP that appear to be ever stronger in their critiques 
of capitalism’s core processes, of which two are perhaps most important: 
the 1998 Alliance analysis of the economic crisis in which the deep 
theory of overaccumulation crisis was flagged; and the 2006 Bua Komunisi 
analysis of South African capitalism’s internal contradictions. In both, 
the disappointments for diverse independent leftists (of which I count 
myself a member) were largely in the programmatic arena. But this was 
prior to the Polokwane conference at which a few major initiatives of 
the left were announced as ANC policies, leaving those arguing for a 
socialist project within the Alliance with increased confidence. Such 
confidence, as Cronin says, is ebbing because of the drum-beat of fiscal 
discipline that has accompanied the crisis. In this context, let me 
begin by taking up just a few points in the text to cajole and to applaud:

1) What are we up against? Quibbles

JC: "Once again, the inability to appreciate the dialectical character 
of world capitalism’s trajectory, was to lead Mbeki (like Seme before 
him) to gravely misread the global situation, to imagine an “African 
renaissance” based on catching-up and aligning ourselves to the “West”, 
with the promise of an ineluctable, evolutionary way forward – “today is 
better than yesterday, and tomorrow will be better than today.”"

PB: I imagine the most hostile remark a Marxist given top marks at the 
Lenin Institute in Moscow could receive is "undialectical". I think 
there's something worse reflected in Mbeki's analysis though, especially 
in its full-on endorsement of technology-driven globalisation (of the 
sort that is found in such a banal form in NEPAD for instance, written 
in 2001, after the East Asian crisis and the quite Marxish 1998 
pronouncements by the Alliance on that crisis). That is a return to 
modernisation theory as the basis for undergirding neoliberalism, as we 
saw in ASGISA, namely the sense that microfinance is the missing link, 
the energy that can bring "dead capital" to life in the De Soto sense. 
In a collection of political economic texts CCS produced last year, you 
can find David Masondo's tough critique of the revived modernisation 
strategy and my own attempt to unpack ASGISA's faith in finance. (A 
cheeky query: did the SACP fall for this in some sense, in the promotion 
of access to capitalist bank credit for a small sliver of the working 
class, instead of promoting the kind of bank nationalisation as a form 
of public utility, as some influential voices in the Western left such 
as Leo Panitch are now doing? The SACP's Financial Services Charter 
campaign work and Mzanzi bank account victories now deserve a 
fundamental rethink, with not only regulation but a much more profound 
attack on financialisation and consumer indebtedness now feasible.)

JC: "To be sure, capitalism is seldom free of crisis."

PB: Though the word ‘crisis’ is very common amongst South African 
activists (just check the names of numerous campaigns and 
organizations), there is a ‘chicken little’ critique leveled against 
classical Marxism for remarks of this sort (e.g. by Doug Henwood and Sam 
Gindin against yours truly). So I don't think this is an appropriate 
statement if we think of the word "crisis" in terms of a disruption to 
the reproduction of a social system (the way Robert Cox sometimes put 
it). In that sense, the self-correcting features of capitalism which 
could deal with the ordinary short business cycle run into much more 
serious problems when the longer K-cycles begin to have an impact. It is 
here we should reserve our use of the word "crisis", and acknowledge - 
as Cronin does - that periods like 1945-73 were not ones of "crisis" at 
the global scale. Once it destroys enough overaccumulated capital, the 
system can reassert the underlying dynamics of accumulation and fully 
"resolve" its crisis tendencies, we have learned again and again. Cronin 
is correct that we have not witnessed that process since the early 
1970s, though with some $25 trillion in fictitious paper values now 
wiped off the world's balance sheet in recent months, at least it's 
possible to consider the financialisation displacements now impossible, 
so that the real work of restructuring underlying systems of industrial 
production may begin in earnest.

JC: Crises in capitalism can occur as a consequence of factors 
extraneous to the accumulation process –wars, natural disasters, social 
upheavals.

PB: Ah, but which of these is truly extraneous to capital accumulation? 
(Ok, many natural disasters like the 2004 Tsunami – but as Naomi Klein 
points out, ‘disaster capitalism’ is able to profit from such events, 
not just face destruction.) The challenge is to identify ways that the 
uneven/combined nature of the capitalist system pushes and pulls capital 
accumulation into different circuits and spaces of capital, a huge 
undertaking. (For this task, I especially recommend recent books by John 
Bellamy Foster and Fred Magdoff, David Harvey, Robert Brenner, Ellen 
Meiksins Wood and Joel Kovel, to name a few.) At that stage it should 
become possible to connect the dots, and show how WW1 and WW2 were 
geopolitical reactions to capitalist crisis, and how Katrina and 
Africa's worsening drought/flood cycle are internal (not exogenous) 
reflections of accumulation dynamics.

JC: ... under capitalism “over-production” (i.e. more than the market 
demands – i.e. more than can profitably be sold) triggers a break-down 
in the system – a crisis of over-accumulation. This, in turn, requires a 
massive wave of destruction of productive capacity (in the form of 
retrenchments, factory closures, liquidations, and stock exchange 
collapses), in order to “clear the ground” for the next round of capital 
accumulation through growth. It must be stressed that under capitalism 
“over-production” is not the over-production of products that the mass 
of the world’s population often desperately needs. It is 
“over-production” relative to “market demand”, i.e relative to what can 
profitably be sold. Capitalism, for all its dynamism and robustness, is 
a profoundly irrational system.

PB: Well said. The implications of this analysis go very far in taking 
us away from mere Keynesianism - the Northern elite's momentary current 
ideology of rhetorical preference (even if not yet the ideology of 
practice), though apparently not feasible in the South, if Trevor Manuel 
is to be believed. There is some discussion at the global scale - 
perhaps best articulated in the January 2009 issue of Development 
Dialogue journal issued by the Dag Hammarskjold Foundation - about 
"post-neoliberalism", but I don't see it yet, for the reasons that 
Cronin has specified. The deeper crisis of capitalism we face will 
require much more than what Walden Bello has over-generously labeled 
"Global Social Democracy" (I believe Bello incorrect in suggesting we 
have passed through the neoliberal stage - that extremist version of 
macro and micro economic policy will continue to return to haunt the 
world's poor and working people, and environment.) If we pose the 
problem in these deep-rooted ways (Cronin's description is excellent), 
then we see that the way out of overproduction is in the first instance 
deflection of the inevitable devalorisation of overaccumulation of 
capital (defensive maneuvres) combined with the socialisation of markets 
(our Left offense, as we have accomplished through brilliant social 
struggles with respect to anti-retroviral medicines in SA and to some 
extent water here in Johannesburg). This is the agenda of the SACP, 
reflected in the wonderful slogan "Socialism is the Future, Build it 
Today". But is that slogan truly informed by a deep-seated critique of 
capitalist market irrationalities? This is the opportunity to declare 
socialisation not only desireable in "the Future" but absolutely 
necessary "Today", because of capitalist crisis tendencies.

JC: In SA the last decade of apartheid corresponded to a domestic 
downturn/recession and post-1994 we have seen a general economic upturn.

PB: A quite complex process was underway from 1984-94 that no one has 
properly dissected, in my view (though Charles Meth made a good start in 
the early 1990s in his debates with the SA Regulation School, and Martin 
Legassick's excellent contemporary economic analysis has a fine 
historical sweep). There were far too many political interventions from 
above and below to characterise it as easily as does Cronin, especially 
given that from 1989-93 we witnessed the longest depression in SA's 
history. The factors we need to better incorporate and that cannot be 
summed up in a sentence would include:

a) sustained overproduction especially for white consumer markets by the 
early 1970s;

b) the range of labour-related rigidities and social irrationalities 
that SA capitalism suffered because of its apartheid shell;

c) the desire of english-speaking capital (and the Ruperts too!) to 
escape SA, which they did through capital flight and overseas purchases 
until September 1985 when it became more difficult and expensive in part 
because of exchange controls and in part because of international 
opprobrium against SA capital; and certainly not least,

d) resurgent class and community struggles from below.

If these factors are at the core of our analysis, it becomes easier to 
see how an unsustainable accumulation process has occurred from 
1999-present, based largely upon expansion of the credit system and 
momentarily-successful commodity exports which together began to 
generate the fabled 5% GDP growth rates of the 2000s. But at the same 
time, with this foundation, we can see how the underlying problems of 
the SA economic structure worsened throughout the period of "general 
economic upturn". Macroeconomic policies (as well as microdevelopmental 
strategies which emphasised markets) here were central, reflecting a 
power shift to capital ("the 1996 class project"). Another important 
factor in the recent "upturn" has been the bubbling of real estate 
prices, which from 1997-2004 grew more than three times faster than the 
US, including in our own 'subprime' township markets. This in turn 
reflects an uncomfortable fact we cannot but mention in this room today: 
Joe Slovo's housing policies (designed by Billy Cobbett with important 
pressures from the old Urban Foundation and the World Bank) explicitly 
recommodified township housing ("normalisation of the markets" in the 
words of the 1994 Housing White Paper), so that the Kuznets real estate 
cycle went into hyperactive mode once the earlier round of housing 
devalorisation (1989-98) had played itself out.

JC: [we are entering] a period of several years of downturn if not 
actual recession. We obviously make this point, in order to prepare our 
defences against what is likely to be a political discourse in the 
coming years – blame a largely “objectively” (and externally) determined 
downturn on “Polokwane populism”.

PB: This is a point that needs to be defended in much greater detail, 
especially with the resurgent hype about Trevor Manuel's successes in 
macroeconomic management (in Financial Mail and M&G reviews of Pippa 
Green's new biography, but more generally).

JC: MYTHS ABOUT THE SOUTH AFRICAN ECONOMY

PB: I have a few more quibbles:
* Myth one: Did "growth" really occur? If it had been measured 
correctly, in a way that calculates the depletion of natural resources, 
then no. Correcting SA GDP in this way, even the World Bank acknowledges 
that the economy - including its stock of nonrenewable natural assets 
(mainly minerals) - actually shrinks each year.
* Myth two: the massive upturn in commodity prices from 2001-08 was not 
simply a missed opportunity, it is extraordinary how little the mining 
houses here reflected the huge profits on their books and in GDP 
contributions. This is probably a result of the way they were allowed to 
internationalise their operations starting with DeBeers in the early 
1990s but accelerating with so many other offshore deals done since 1994.
* Myth three: if we measure profits properly within economic 
fundamentals, we'd see a major increase in financial and decline in 
manufacturing activity, which is one of the most important problems in 
capitalism globally.
* Myth four: on current account vulnerability, the crucial factor Cronin 
neglects is the outflow of capital to London thanks to the 1999-2001 
permissions that Manuel gave to Anglo, DeBeers, Old Mutual, SAB, Didata, 
Mondi and other corporations to externalise their financial 
headquarters. That is a critical area for reversal, via exchange controls.
* Myth five: on the health of the financial sector, would this not be a 
good chance to ask auto-critically about SACP theory/practice in 
relation to access by the black working class to credit? What, indeed, 
is the basis for an appropriate system of capitalist credit flows to 
townships and rural areas, given that finance invariably amplifies 
uneven/combined development? Each circumstance is different, but some 
guidance on how we might turn the myth upside down by socialising 
finance would be welcome.
* Myth six: why not embrace the choice: "between no-change or imprudent 
macro-populism", and then redefine macro-populism to incorporate the 
kinds of policies we want on the Left, and turn away from the Gono-style 
policies we don't? Why not take advantage of the way that the beastly 
Lawrence Summers now must confess "We are all Keynesians" and then 
establish the controls necessary to have a major upsurge of state 
spending without either inflationary damage to poor people's budgets and 
capital flight?
* Myth seven: no quibbles here...

2) Uniting on analysis

The words below are powerful and deserve amplification. I have no real 
quibbles, aside from desiring more detail about "combined and uneven 
development", that evocative phrase (of the unmentionable Leon Trotsky 
in his 1906 work on permanent revolution). This is for the simple reason 
that what David Harvey terms "accumulation by dispossession" - which in 
our SA phraseology corresponds to the "articulation of modes of 
production" (popularized by SACP theorist Harold Wolpe) in which 
capitalism superexploits precapitalist social relations - is an ever 
more important part of profitability, a factor not disturbed much by the 
current capitalist crisis (even if the commodity price collapse has 
slowed dispossession in some sites, like the Copperbelt, as Cronin 
observes). Our rereading of the works of Rosa Luxemburg is especially 
useful, as her SA and African analysis holds up well today (Jeff Guy 
pointed out in a CCS seminar in 2006), and the Luxemburgist analysis is 
also the best South-North rendition on the question of imperialism.

JC: The present long-term cycle in the world capitalist system began in 
1945, with the upswing reaching a turning point around 1970/3. Since 
then, globally, we have been in a long downturn – somewhat longer than 
normal, partly because capitalist-aligned economists and central banks 
and multi-lateral institutions (like the IMF), believing that they had 
finally “beaten” recession forever, introduced a range of interventions 
which we can now see have simply temporarily displaced the epicentre of 
crisis into semi-peripheral regions, thus delaying and deepening the 
full-blown crisis in whose midst we now are... while many leading 
politicians in capitalist countries are beginning to express grave 
concern about the future of our planet – denialism; or market mysticism 
(somehow the hidden hand of the market will find a solution); or a 
cynical, even genocidal, social Darwinism (“don’t worry there will be 
losers but there will also be winners”); or hopelessly inadequate 
piecemeal reforms remain the order of the day... The geographical shift 
in hegemony. Marx, Lenin and others following them have demonstrated how 
capitalist development is characterised by high degrees of combined and 
uneven development. It is a global system characterised by geographical 
zones of various importance within the accumulation process – core 
zones, semi-peripheral zones, and marginal or peripheral zones. Within 
this hierarchical system there is a tendency for a single zone/region or 
country to emerge as the dominant hegemon... it is the people of the 
South who will bear the burden of the crisis. For instance, as the core 
capitalist economies focus on their own crises and their own stimulus 
packages, already paltry development aid is diminishing; trade 
protective barriers are going up; FDI is pulling out of much of the 
South; premiums on international loans have increased; and portfolio 
investments are even more disinclined to bet on the South.

3) South African challenges

PB: I think Cronin misses two essential challenges for the SA left: 
withstanding the particular pressures of the Bretton Woods Institutions, 
now resurgent with ‘Washington Consensus’ logic thanks to their 
relegitimation in South Africa (a R50 billion Eskom loan for coal-fired 
power plants) and probably globally in coming weeks thanks to Barack 
Obama; and the inability of SA’s neoliberal bloc to change world 
conditions (as witnessed today in Davos where president Kgalema 
Motlanthe and Trevor Manuel will again exert zero pressure for genuine 
global financial governance, in the wake of their apathetic role in the 
G20 in Washington). The first pressure was felt on October 22, when 
hundreds of pages of IMF reports were dumped on South Africa, 
overwhelming our slovenly business press corps. The five key points made 
in the most important report, the Article 4 Consultation, are:

* The SA government should run a budget surplus
* SA government should adopt privatisation for "infrastructure and
social needs" including electricity and transport
* SA Reserve Bank should maintain existing inflation-targeting and raise 
interest rates
* SA Treasury and Trade Ministry should remove protections against
international economic volatility, especially financial and trade rules
* SA Labour Ministry should remove worker rights in labour markets,
including "backward-looking wage indexation" to protect against inflation

Reports from Davos today already mirror the sense we have from the 
November meeting of the G20 (the major financial economies): SA will 
play deaf and dumb to the needs of Africa, for massive debt 
cancellation, reparations and an end to capital flight. Those needs 
cannot be doubted, yet the only real pressure SA is known for applying 
is to extend African membership on the boards of the Bretton Woods 
Institutions. This has been an extremely difficult job, even though the 
IMF and Bank desperately relegitimation, and the main question to be 
asked is, “so what if Africa gets another seat or two?” (Especially if 
the likes of Manuel and his allies across Africa determine the agenda.)

In contrast, showing genuine Third World financial leadership, the 
Ecuadoran government recently led the world with a debt default based on 
the premise of Odious Debt (SA remains in conflict with Jubilee SA and 
Khulumani over precisely the same principle in the US apartheid 
reparations lawsuits). And the Venezuelan government has called for the 
closure of the IMF (as did Joseph Stiglitz in 2002) and has catalysed a 
Bank of the South to operate outside the logic of “sound banking 
principles” (meanwhile in mid-January, Manuel agreed on a 17.5% 
ownership in a $25 billion “African Investment Bank” destined to run 
precisely on “sound banking principles”, according to the founding 
documents). Our economy lost $6 billion when the currency crashed in 
October 2008 after Mbeki’s office released Manuel’s resignation letter, 
so once again SA’s vulnerability to world finance – and so far untried 
ability to reverse this through tightened exchange controls – was 
revealed as a huge challenge, which the left has not really joined so 
far. In other countries, excellent protests have been recorded against 
the neoliberal project that has intensified because of the world 
financial crisis (most recently in Iceland of all places), while South 
Africans retain what I believe to be the world’s highest protest rate 
per capita (far higher than China’s) yet have not connected the dots 
between their micro problems and the ongoing influence of IMF logic. 
Booting out the IMF consultants who make Article 4 recommendations in 
direct contradiction to what their boss, Dominique Strauss-Kahn, has 
been saying (he advocates a 2% increase in deficit spending 
‘everywhere’), would be a good first step.

JC: [critique of Moleketi] Typical of this line of reasoning is a 
caricature of what we are actually attempting (supposedly “a total 
U-turn”). What we are arguing for is exaggerated, the better to be able 
to demonstrate our “lack of wisdom”.

PB: But why NOT a total U-turn? Why not the demands of Keynesianism as 
against neoliberalism and monetarism? Why not a (non-subimperialist) 
African continental orientation and major inward push to change wealth 
and income relationships so as to revive markets for basic-need goods 
and services? Why not a full U-turn on the kinds of international 
relations - free trade, repayment of apartheid debt, inviting TNC direct 
investment - that made SA so vulnerable over the years? Why not a U-turn 
on unemployment and inequality, and on reliance upon the market in so 
many ways?

JC: We have to be realistic about these and other related challenges. 
But what we absolutely must not allow this time around is that the “but 
is it affordable?” refrain should be used to deflect us off our 
strategic and programmatic DIRECTION.

PB: Affordability is a factor in the ideological debates with Treasury 
and the bourgeois press. But I think it will be in the micro 
interventions - of which probably the National Health Insurance proposal 
will be most contested - that the Left must firm up its critique of 
market processes and outcomes. On anti-retroviral medicines and water, 
we have come a very long way from a decade ago, when insisting upon 
locally-produced, decommodified AIDS drugs and Free Basic Water supplied 
by a municipality (not a Paris company) were sacrilege.

JC: ... it is decent work and sustainable livelihoods (and not 6% 
growth, or some other arbitrary figure) that will be the key indicator 
of progress or otherwise. This, in turn, will require the marshalling of 
our resources around a state-led industrial policy that prioritises the 
transformation of our productive economy.

PB: All of these strategies are excellent as transitional demands but 
hang on, there are just as rich a set of economic strategies emanating 
from the radical social movements and labour that deserve building upon, 
in addition to the AIDS medicines and deprivatised water that the 
Treatment Action Campaign and Anti-Privatisation Forum have won. What 
about land? Housing? Free education? Larger quantities of free municipal 
services with greater local and national cross-subsidies? A Basic Income 
Grant? Radical changes to the SA state's pro-corporate environmental 
policies on biofuels, biopiracy, timber, fishing and especially climate? 
And reparations for apartheid debt? These are all the actually existing 
campaigns by social movements, churches and labour which we need to 
promote and support where appropriate. The Party has been weak in its 
acknowledgement much less solidarity with these campaigns (and vice 
versa), so let's figure out ways to reverse our lack of unity in the 
crucial period ahead.
In addition, we need to always get back to a Left programmatic synthesis 
and, of course, to analysis. With the SACP and Diakonia, our Centre is 
now discussing how to generate a reading circle beginning next month, to 
tackle Das Kapital, Luxemburg's Accumulation of Capital and contemporary 
texts. I will propose to the broad church of comrades from the Party, 
the liberation wing of the faith/justice movement and our independent 
left community and intellectual stalwarts who take part, that this text 
of comrade Jeremy is our first read. Thanks very much for it, and for 
the chance to comment on it with the full respect it deserves.