Johnson’s track-record as a futurologist is pretty dismal – Response to RW Johnson’s ‘The coming showdown’.
21 May 2020
RW Johnson has penned yet another RWJ classic. You can almost hear the drum-roll, the roaring MGM lion as his title appears: ‘The coming showdown. Part One’ (Politicsweb, 19 May 2020). Johnson loves these breathless introductions. His 2016 book was titled ‘How long will South Africa survive? The looming crisis’. This time we are pitched into a Western movie shoot-out. ‘We are all strolling slowly’, he writes, ‘towards the gunfight at OK Corral which will settle it all.’
Johnson’s track-record as a futurologist is pretty dismal. Back in the 1980s in an earlier edition of ‘How long will South Africa survive?’, he concluded that if the apartheid regime mobilised sufficient repression, it could rule South Africa well into the 21st century.
So what are Johnson’s current predictions? South Africa is about to be hit by a debt tsunami and an inevitable IMF ‘bail-out’. A structural adjustment garrotting of our country awaits, Johnson writes with approval and much evident glee. This looming IMF ‘bailout’, we are told, is an ‘existential issue’ for the ANC. But ‘for the SACP and COSATU it is probably a survival issue.’ The Alliance is about to be buried up on Boot Hill.
On the one hand, in the style of apartheid-era police ministers, having, as always, greatly exaggerated the influence of the SACP (‘The SACP has for decades now provided the ANC with its agenda’), he is now, again as always, also predicting the Party’s imminent irrelevance.
Johnson has been doing this since at least the 1980s.
Is there any point in responding once again? Possibly not. But there are, arguably, two areas that might usefully be unpacked – Johnson’s revisionist narrative of the past 30 years, and the service he does in revealing the real motives behind his, and many others’, active urging that South Africa take out a low interest COVID-19 related IMF loan.
For Johnson the post-1990 world into which a democratic South Africa was about to arrive was a ‘closed international political community’ ruled by naked market competition. The only hope for so-called emerging economies like South Africa was (and is) in his view to enter into a race to the bottom to attract private investment in a competition with all of the others. In this bleak world view, we need to strut our stuff on the global pavement with the lowest possible wages, with the least corporate taxation, with the most liberalised financial markets, with the absolute minimum of regulation (including, presumably, environmental regulation), and by slashing the public sector work-force (including, one assumes, all of the health-workers and what’s left of municipal sanitation workers that we are now suddenly realising in the midst of the pandemic are so essential).
The ANC-led government from 1994 onwards, Johnson writes, failed to appreciate any of this. In fact, although coming at it from a very different angle, the SACP has long argued that there was considerable naiveté in some leading ANC circles in the 1990s about the realities of the global situation in the midst of a then (but now faded) triumphal, ‘end of history’ neo-liberalism. All of the sentimental talk about a rainbow nation and the transformation of Nelson Mandela (formerly described by Thatcher as a terrorist) into a celebrated icon encouraged many local illusions. Leading figures in the ANC expected the imminent rolling out of Marshall aid to our supposedly ‘unique’ democracy. Africa was said to be on the threshold of a renaissance, with Thabo Mbeki the shuttle diplomat between our continent and the West.
Johnson has a very different reading of all of this. He claims: ‘South Africa under the ANC thumbed its nose at the West, despite the fact that its major trading partners and investors came from there.’ Really? Let’s remember the first big lurch towards state capture – the crippling multi-billion rand arms deal concluded in 1999. Who were the big players in this sordid and hugely wasteful affair?
Apart from the corrupt, the venal, or the naïve local political players, they were, amongst others, a French-German consortium for submarines, a British-Swedish consortium for fighter jets, and an Italian helicopter manufacturer. It was all funded at extortionate rates by major Western banks – Barclays Bank of England for the BAE Hawk and the BAE/SAAB fighter jets; Commerzbank of Germany for the purchase of four frigates and three submarines; Société Générale in France for the Thomson CSF combat suites for the German frigates; and Mediocredito Centrale in Italy which backed the purchase of 30 Augusta helicopters.
This was not exactly neglect of ‘Western trading partners’, and, notwithstanding more recent Russian nuclear suitors and palm-greasing Chinese rail companies, the Western trading partners have not exactly been dumped. Think of the Spanish Vossloh engineering company responsible for palming off locomotives with a cool R620-million price-tag to PRASA. They were locomotives that had been intended for another country and that were too high for our own rail system.
I am not suggesting that every South African engagement with Western trading partners is equally fraudulent and ruinous, but I am asserting that Johnson’s claim that the ANC government snubbed its Western trading partners for China, Russia, and, more improbably, Iran, Cuba and Venezuela is simply laughable. Entirely just political solidarity with Cuba, condemnation of the US’s regime change agenda in Venezuela and its sanctions against Iran are one thing, the hard realities of global trade are another.
There is much more awry in Johnston’s narrative of the past two South African decades. From 1994, he tells us, the ‘ANC accepted the economy as it was: nothing was nationalised and all the major players in the economy remained as they were.’ Johnston then immediately contradicts this statement by complaining about excessive ANC interference exerted on all the ‘major players’. But this claim is wrong for entirely other reasons. All the major players in the economy did not remain as they were. Part of the implicit elite economic pact that shadowed the more open democratic constitutional settlement involved the sweeping liberalisation of the financial markets which was at the heart of the 1996 GEAR package.
All the major corporates that had been bottled up in South Africa and forced into multi-sectoral conglomerates as a consequence of economic and financial sanctions grabbed the opportunity in a massive flurry of capital flight out of the country. Some of it was now legal, much of it illicit. Dual listings, tax havens, transfer pricing and the headlong financialisation of what had once been mining and manufacturing giants all contributed to this massive loss of investible South African wealth.
According to the most comprehensive study of this, capital flight as a percentage of GDP rose from an average of 5.4% per year between 1980 and 1993, to 9,2% between 1994 and 2000, and averaged 12% between 2001 and 2007, ‘finally peaking at a staggering 20% in 2007.’ (Sam Ashman, Ben Fine and Susan Newton, ‘Amnesty International? The nature, scale and impact of capital flight from South Africa’, Journal of Southern African Studies (Vol. 37, No. 1, March 2011). This was the true post-apartheid dividend the authors wryly remark.
Johnston may well be right that ‘the Zuptas were responsible for massive capital flight’, but their endeavours were amateurish in comparison to what was accomplished by the Old Mutuals, Anglo Americans, SASOLs and the like.
BEE policies are another major gripe that Johnston has: ‘Companies…were forced to give away large proportions of their equity in order to bring in BEE partners’. The SACP has been a consistent critic of the significant diversion of potentially investible surplus into highly indebted (these were not give-aways) BEE shareholdings. Writing in 2010 Jenny Cargill estimated that at least R500 billion had been ‘invested’ in allocating shareholding to black groups. By her reckoning this compared to the less than R150 billion invested in housing and land reform at the time (Trick or Treat. Rethinking Black Economic Empowerment, 2010).
But who initiated this process? Was it the ANC government? In fact, it was the very hard-done-by corporations with whom Johnston empathises. In the early 1990s, years before the 1994 democratic transition and many more years before BEE charters, some of the major corporations in South Africa were courting politically-connected black South Africans with directorships, shares, senior internships, and finishing school stints at Goldman Sachs.
This was clearly an attempt to reconstruct the ANC and to open doors to what would soon be ‘the new political reality’. These enticements proved attractive to some (perhaps many) within the emerging elite. Much of the subsequent turmoil and corruption-driven factionalism within the ANC can be traced back to these early beginnings when being an ANC official, or carrying a business card that implicitly said ‘No experience, no capital, but has the ear of this Minister X, DG Y, or premier so-and-so’, suddenly brought financial reward.
But to get back to the heart of Johnston’s article – the SACP and the IMF. Johnston tells us that South Africa’s salvation lies in prostrating itself before a full-blown IMF structural adjustment programme. Either that or just ‘keep printing more money to pay for everything’ and risk ‘a Zimbabwe-style outcome of capital flight and hyperinflation.’ Johnson’s historical amnesia includes forgetting that in the second half of the 1990s it was Zimbabwe that was being praised by our local economic mainstream media for its embrace of an IMF structural adjustment programme (SAP).
South Africa was advised to emulate Zimbabwe’s example. It was this ruthless SAP that crippled Zimbabwe’s productive economy and which led directly to the populist land grabs in the early 2000s, which in turn further crippled what was left of the country’s formerly productive (if dreadfully, racially skewed) commercial agriculture. Zimbabwe’s hyper-inflation was not directly the product of printing too much money, but rather a massive supply-side collapse, causing retail hoarding and spiralling prices for a diminishing supply of scarce commodities.
It is just such a supply-side collapse on a global scale, and not ‘emerging’ economy public debt, including South Africa’s, that is now deeply pre-occupying many key international institutions, including the IMF. Which is why the IMF and World Bank have developed low interest COVID-19 related loan facilities.
It is why the IMF leadership and Europe and African states favoured an expanded issuing of Special Drawing Rights – the IMF’s synthetic currency which is not a loan but a claim recognised by all IMF members (including of course South Africa) on each others’ holdings of reserve currencies. It was a call blocked by the US. In mid-April the IMF also announced a debt standstill for 76 of the world’s poorest countries. In short, in the midst of the Covid-19 pandemic the IMF is considerably to the left of RW Johnston.
None of this is about charity, but (and on this Johnston is right) the globalised capitalist economy is deeply inter-locked with value chains spanning the hemispheres. Productive collapses in far-away geographies can impact negatively and rapidly on the advanced economies which are themselves taking massive strain.
What, then, is the SACP’s position on the IMF which Johnston contrives to so misunderstand? First, there is history. The IMF and its fellow Bretton Woods multilateral institution, the World Bank, were key instruments in spurring a post-World War 2 capitalist recovery in war-torn Western Europe and Japan under the broad hegemony of the US. This was partly in response to the emergence of a new, rival super-power the Soviet Union, and partly a lesson learnt from the aftermath of World War 1 when defeated powers like Germany were forced into penury and national humiliation with the harsh imposition of reparations. This, in turn, was the seed-bed for the emergence of fascism and the inevitable plunge into an even more ruinous world war.
By the late 1960s, with their capitalist First World mission largely accomplished, these Bretton Woods institutions receded into the background. Then in 1973 the OPEC cartel imposed a huge hike in oil prices. A glut of petrodollars flowed particularly into private European banks from Middle East oil producers. The private banks, awash with cash, lent lavishly and unwisely to much of Latin America, Asia and Africa. By the late 1970s this Third World debt had become unpayable.
This was the cue for the repurposing of the IMF and World Bank. They were dusted off and wheeled out to rescue private European banks. Structural adjustment programmes became the means for extracting debt repayments from an already impoverished Third World, in fact, they were what helped to perpetuate their very Third World-ness.
In the midst of the COVID-19 pandemic none of this history should be forgotten. Nor is it past history. The current IMF-imposed gutting of Ecuador’s public health funding (to mention just one example) is having a devastating impact in that country. But, Johnston will rightly object, the IMF’s low-interest COVID-19 loan instruments are not entwined with a full-blown structural adjustment programme. Nonetheless, all that is still subject to IMF macro-economic framework review. IMF’s Article IV statements already indicate their conditionality for accessing its low interest finance. In our case, the latest IMF Article IV statement (January 2020) includes cutting the public wage bill, and other austerity measures. The SACP has urged caution.
One of South Africa’s relative strengths is that our public debt is overwhelmingly rand-denominated. The proposed IMF low-interest loan is dollar denominated. In coming years the rand-dollar exchange rate may significantly deteriorate making a seemingly low-interest repayment now much stiffer later. Failure to meet repayment could then trigger the full blitzkrieg of IMF structural adjustment requirements.
And this is exactly what Johnston wants. For him, his passionate advocacy of a low-interest IMF loan is not about finding resources to manage the immediate crisis of a global pandemic. It’s the baited hook with which he hopes to reel us in.
Cde Jeremy Cronin is a member of the SACP Central Committee and its Political Bureau.
This article first appeared in the SACP journal, Umsebenzi Online.