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Media Centre  |  COSATU Speeches

Zwelinzima Vavi`s, input to the Chris Hani Institute`s `Futures commission on alternatives to neoliberalism`

25 June 2013

I must begin by congratulating the Chris Hani Institute and Sigtur for organising this important discussion.

Our right-wing critics often accuse socialists of failing to come up with alternative solutions to the crisis of the world capitalist system and the spread of neoliberal ideologies. That has never been true of course, but we need to take every opportunity, like this meeting, to hammer home the message that "another world is possible", that we will not suffer in silence, because there is a socialist alternative to the brutal capitalist system we struggle against.

World capitalist crisis

There is overwhelming evidence that, five years down the line, we are still trapped in the world economic crisis which erupted in 2008, and that the blame for this must be laid firmly at the door of the neoliberal, `free-market` ideologues.

After five years we can now affirm that although the Washington consensus was discredited, this did not lead to its universal rejection. What initially we thought was going to lead to expansionary policies quickly turned into governments bailing out the banks and capital, whilst ignoring the plight of their people who were suffering because of the irresponsible actions of greedy banks and firms.

In our analysis we pointed out that the global crisis exposed structural imbalances in Northern economies and saw the balance of economic power shifting to the South. Governments of the North became "effectively bankrupt" while many in South ran surpluses, reduced public debt and were lending to the North.

In the fifth year of the crisis we are all now witnesses to its devastating impact on the workers and the poor. We have record levels of high unemployment across the globe with 64 million people pushed into poverty. The youth and women have been on the receiving end of the crisis.

Today capital and the financial markets are in the driving seat, launching massive assaults everywhere, in particular in the Euro zone. Public sector jobs have been slashed and public services drastically cut. Privatisation has come back, as the state`s role is reduced and there has been a rise of precarious jobs.

Politically the European social democratic parties have been wiped out and replaced by conservative parties imposing austerity measures. In the South however, particularly in Latin America, we have witnessed the rise of progressive left governments and peoples` movements.

But the Arab Spring has become a damp squib, with most of the countries that saw youth uprisings settling for conservative and even religious conservative parties. In Syria, initially we saw its oppressed citizens occupying streets in protest against their oppression and poverty, but now in a full-scale civil war, with American and western interests jumping in to advance the imperialist agenda.

In summary, today we are not only seeing the re-emergence of the very same neoliberal economic policies, but are in the middle of the devastation caused by the austerity measures imposed after most governments went into massive debt whilst trying to save banks instead of prioritising social investments.

The ITUC`s Frontlines 2013 Report - "Ideology without economic evidence: IMF attacks on collective bargaining" - succinctly sums up the worldwide crisis we face:

"Five years since the `great recession` started, the failed policy of austerity has left a legacy of extreme levels of unemployment, rising inequality, the marginalisation of a generation of young people and the desperation of a growing informal sector where rules simply don`t apply.

"International institutions did not prevent the economic crisis; they are now failing to regulate the greed and destruction of speculative capital and prevent the next banking crisis. They are doing nothing to rethink the economic and trade model, which has caused unparalleled inequality. The global economy is no more secure today than it was five years ago."

"Collective bargaining, a cornerstone of the relationship between a worker and employer," says the ITUC, "is threatened with elimination. A fundamental global right, set by the International Labour Organisation (ILO), is being violated. Social unrest and impoverishment are seen as mere collateral damage in this attack on workers` rights, an attack which is undertaken without economic evidence that stands up to scrutiny."

In the early years of the recession, the developed countries were most affected. Some developing countries, notably China, even continued to grow their economies; African countries benefited from China`s increased demand for minerals, and there was a surge in short-term capital flowing into the continent.

Since 2012 however, as the US economy began to recover, the capital flows returned to their more traditional `safe havens`, China`s growth slowed and therefore so did the world market for minerals, which hit the mining industry in various South American countries and of course South Africa, which has a direct bearing on the current crisis in the mining sector.

This sudden exiting of speculative money out of developing economies underlines that South Africa`s current economic challenges are typical of numerous other commodity-exporting, developing countries around the world.

This dispels the myth advanced by opposition parties and business commentators that our present challenges are primarily the result of policy decisions by the South African government or actions of the trade unions.

South Africa`s systemic crisis

Before the worst world economic crisis that we speak to, South Africa was already in deep crisis as a result of its own apartheid and colonial past. In other words, the world economic crisis simply deepened the crisis, mainly because of South Africa`s underlying structural problems.

Our economy remains based primarily on the export of minerals, the domination of the mining and banking sectors and the consequent triple crisis of unemployment, poverty and inequality.

Unemployment was already at an outrageous level before 2008. Then, between 2009 and 2012 the country lost 744 000 jobs. Between the fourth quarter of 2008 and the first quarter of 2012, the proportion of the unemployed without work for more than a year rose from 61% to 68%.

Today, by the more realistic expanded definition, which includes discouraged work-seekers, unemployment stands at a massive 36.7%. This proves that on top of the cyclical, global downswing, most of South Africa`s unemployment crisis is structural.

The second arm of the crisis - poverty - is equally frightening. The 2010 Human Development Report revealed that 44% of workers in South Africa live on less than R10 a day, which only just pays for a loaf of brown bread, which currently costs R9.04.

So 44% of workers in South Africa are working for a loaf of bread a day. It is still intrinsically a low-wage colonial economy. Even though we created an estimated 1.9 million jobs between 2002 and 2007, these jobs seem to have increased rather than decreasing the levels of poverty, and since then more retrenchments have thrown even more people into poverty.

The 2002 General Household Survey reported 18% of households had social grants as their main source of income, a number that the 2007 General Household Survey says increased to 22% and has remained at this level through to 2011, making grants the second largest source of income among South African households.

Poverty inevitably leads to hunger. The 2010 General Household estimated that 24% of households have inadequate access to food. In the 2011 Survey, this figure has shown some improvement, but still showing 21% of household having inadequate access to food, which roughly translates into 10 million South Africans. And yet, after nearly 20 years after we started trying to redistribute land, we cannot produce enough food to adequately feed all our people.

The third part of the crisis - inequality - is summed up in the statistic that the Gini coefficient, which measures inequality, stood at 0.64 in 1995 but increased to 0.68 in 2008, which made us the most unequal society in the world.

The Minister of Finance has acknowledged that 50% of the population lives on 8% of national income in South Africa and recent estimates suggest that the top 5% of earners earn 30 times more than the bottom 5%.

The share of workers in national income declined from 55% in 2000 to 49% in 2008. During the crisis, the workers` share increased from 49% to 52% between 2009 and 2010, but has since fallen back below 50%. This is `reverse redistribution from the poor to the rich`.

And inequality is still very much defined along racial lines. The South African Race Relations Institute, analysing Statistics South Africa figures, show that the median salary for Africans in 2011 was R2 380, while Coloureds earned R3 030, Indians earned R6 800 and whites earned R10 000. This is the story of inequalities in South Africa.

The Freedom Charter`s demand that "men and women of all races shall receive equal pay for equal work" is yet to be realised, almost 20 years into democracy.

Two-tier services

That is a brief summary of the crisis we face in the three critical areas of unemployment, poverty and inequality. But the problem does not stop there. The crisis is reflected in the way basic services are delivered.

The government can be proud of many success stories in service delivery. Building 3 million RDP houses, distributing social grants to more than 16m people - up from 2.5m in 1998 - and providing 1.7-million patients with ARV medication in such a short time are amongst the best achievements anywhere in the world.

But service delivery for the majority, is sabotaged by the continued existence of a two-tier system of service delivery in education, healthcare and public transport, which provides top-of-the-range private service for those with plenty of money, while the still overwhelmingly black majority have to endure squalid facilities, rude service and long queues.

That is why we are so opposed to the `user-pays` principle for public services, like the proposed e-tolls, which is a classic neoliberal idea based on commodification, turning what ought to be services for the people paid for from general taxation, into commodities for sale.

So what is the alternative?

Before looking ahead, it is always worth looking back, in this case to the Freedom Charter, which contains in essence the basis for an alternative to neoliberalism long before that world had been coined. It declared that:

  • The people shall share in the country`s wealth;
  • The national wealth of our country, the heritage of South Africans, shall be restored to the people;
  • The mineral wealth beneath the soil, the banks and monopoly industry shall be transferred to the ownership of the people as a whole;
  • All other industry and trade shall be controlled to assist the wellbeing of the people."

All those demands are anathema to the neoliberals, who claim that `the market` is the answer to all our economic problems. The common thread in the Freedom Charter is the need for a strong, democratic, developmental state which must intervene to direct the economy to serve the people. That surely is the alternative to neoliberalism!

COSATU, the SACP and now the ANC - in terms of its Mangaung resolution calling for `the 2nd Phase of the Transition` - are fully committed to a radical economic transformation of the economy, which must include decisive state intervention in strategic sectors.

This must also include strategic nationalisation and state ownership, and the use of a variety of macro-economic and other levers at the state`s disposal, which can be deployed to regulate and channel investment, production, consumption and trade to deliberately drive industrialisation, sustainable development, decent employment creation, and regional development, and to break historical patterns of colonial exploitation and dependence.

Such policies are already agreed, at least on paper, in the Industrial Policy Action Plan, the Infrastructure Development Programme and at least parts of the New Growth Path document. If fully implemented these could create a modern, economy, based on manufacturing industry, rather than the export of minerals, which could create new, decent and sustainable jobs at the level we need.

Out biggest challenge however is that sections of the state - in the Treasury and the Reserve Bank - are reading off a different script. They are still wedded to the neoliberal policies adopted under former president Mbeki, embodied in the misnamed Growth, Employment and Redistribution programme adopted in 1996, which did the exact opposite to what its name suggested. It created neither growth nor employment and only redistributed from the poor to the rich.

Part of the alternative therefore has to be a radical overhaul our macro-economic policy, in line with the radical economic shift which we all agree needs to happen.

The Treasury, which constitutes the biggest obstacle to the government`s economic programme, needs to be urgently realigned and a new mandate given to the Reserve Bank, which must be nationalised.

All state owned enterprises and state development finance institutions and the National Planning Commission must be given a renewed mandate, to realign the NDP and aspects of the New Growth Path, in line with the proposed radical economic shift.

Urgent steps must be taken to reverse the current investment strike and export of South African capital. There is currently at least R1, 2 trillion lying idle in social surplus, created by the workers` labour, which capitalists are refusing to invest. These measures need to include capital controls and measures aimed at prescribed investment, and penalising speculation.

Linked to these economic changes, we must speed up the introduction of comprehensive social security, the National Health Insurance system and the transformation of our education system.

We have to wage war against corruption, which stems from the extension of neo-liberalism into the state, with the use of tenders and outsourcing of services to illegally enrich a few crooked individuals. The neoliberal market economy permits anything that makes a profit.

The key problem however is implementation. We can issue congress declarations and conference resolutions, government white papers and election manifestos with perfect alternative policies. But unless we mobilise the masses on the streets and work with government to start putting their words into deeds, we will change nothing and the neoliberal hegemony will continue to rule over us. That is the challenge we face today.

What if we don`t succeed in our chosen path?

This seminar is being held in the middle of great difficulties in COSATU and in our country. Yesterday we were in a bilateral discussion with the SACP, discussing these challenges. We are all in agreement that capital has gained confidence as it smells blood. The bourgeoisie are sensing that the government has its back to the wall, with the growing economic crisis which we have already spelt out in some detail.

They are pushing for a South African kind of austerity measures. They have staged a coup, in that their economic vision is now enshrined in the country`s National Development Plan. Capital, assisted by the untransformed media, is pushing for the rolling back of the state`s role in the economy and deregulation in the labour market.

The forces of change have somehow been weakened. COSATU is experiencing the worst forms of divisions in its entire history that have weakened it politically and organisationally. One of the reasons behind these divisions is the uneasiness created by our interpretations of the conditions of the working class.

Some are beginning to ask serious questions about the direction of our revolution as it reaches its second decade. Others are beginning to question the adequacy of the foundations of our political policy and the instruments we have chosen to transform the society.

Marikana has happened and the police tell us that between 2009 and to date there have been 3000 service delivery protests.

Unity of the Alliance has somehow also been affected by these difficult times facing the working class.

To me it appears that if we don`t succeed to engineer the much-talked-about second phase of radical economic transformation, the divisions in the people`s camp and in the country will continue to deepen.

This South Africa challenge is a mirror of what is happening all over the world.

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