Across the world, capitalist economics is in tatters. As always happens in a mega-crisis on a scale of that brought on by the Covid-19 pandemic, governments and central banks are breaking ‘rules’ that in stable times they insist are immutable.
Many countries in the developed world are adopting economic policies that would have had Milton Friedman turning in his grave: there is a heady combination of quantitative easing, unprecedented fiscal stimuli, including cash transfers to millions of workers who have lost jobs and incomes, and even a consideration of vouchers to all adults and children in the UK for spending on local retail and hospitality firms.
But it is not just capitalist economics that is being upended: claims that neoliberal capitalism can underpin a fair and safe social system are now near impossible to defend.
The most visible failing is how years of underinvestment in public health services has left countries unprepared for preventing and treating Covid-19, a pandemic virus that infectious disease experts warned was inevitable.
But now that Covid-19 is here, it has also laid bare the deep and desperate inequalities that have developed in every society. As has been pointed out by Jeffrey Sachs and many others, those most vulnerable to severe illness and death are the poor and minorities, people who, even though they are on the front line of essential services, are always last in queue for adequate housing, healthcare and education.
The disparate impact of Covid-19 on deaths and disease in black, Asian and minority ethnic (BAME) communities in the UK and black people in the USA is shocking. But whichever country you look at, it’s the poor who are paying.
On the other hand, compared to Britain or the US the New York Times has pointed out that those European countries that preserved social security and public health systems from neoliberal fire sales have proved much better able to weather the economic and social disruption caused by efforts to control the virus.
The worst hit countries in the world are those where deregulation and the evisceration of the state has had the freest rein; Brazil, US, UK, Russia, India – and now South Africa. On the other hand, social security systems and social solidarity have added resilience to Covid-19 defence strategies.
Capitalism is on trial and in words of Adam Tooze, “Coronavirus has shattered the myth that the economy must come first”.
That makes it all the more unacceptable that, despite President Cyril Ramaphosa’s oft repeated promise to “forge a new economy in a new global reality”, Tito Mboweni, his Finance Minister, is holding fast to the fundamental premises of discredited austerity economics – premises that have now been so thoroughly discredited that even the august British Financial Times has warned that the “virus lays bare the frailty of the social contract” and called for a “reset”.
South Africa’s supplementary Budget, delivered on June 24, was necessitated by the Covid-19 crisis and lockdown. Ostensibly its purpose was to enable the various social relief measures that President Cyril Ramaphosa had announced on 21 April – the (initially) widely commended R500-billion “stimulus package”.
However, in the two months between 25 April and 25 June, it seems that the Treasury did all in its power to turn a bounty into a morsel.
After the Budget was presented to Parliament it was sharply criticised by the Budget Justice Coalition, a group of more than 20 respected civil society organisations that work on socio-economic rights. They warned: “This Budget deepens austerity by proposing wide-ranging cutbacks in critical government programmes.” (A more detailed analysis, here, showed its impact on GBV. health, education and grants.) A heterodox group of economists, the Economists Initiative, suggested in a letter to Parliament that it be rejected in its totality by Parliament, to which Tito Mboweni unfortunately responded:
“It is not a good idea for professional economists to unwittingly involve themselves in things they know nothing about: policy and politics.”
A week later, on 1 July, in submissions to the Parliamentary Portfolio Committee on Finance, the Budget was described as “economic suicide”. Gilad Isaacs, from the Institute for Economic Justice (IEJ),claimed that:
“… instead of R500-billion, the Budget presents a net increase to non-interest spending in the current year of just R36-billion, less than 1% of GDP”.
This claim has not been refuted by the Treasury.
Isaacs and others pointed to a number of “changes” to the package that had been announced by the President as well as to clawbacks in allocations to grants: R9-billion has been taken away from the special Covid-19 grant, for example, justified on the ludicrous grounds that there had been insufficient demand. Critics also pointed to reprioritisation – which amounts to cuts – in other departments budgets, citing:
- R2.1-billion taken from long-term school projects.
- R4.6-billion taken from transport investment.
- Almost R10-billion taken from higher education.
Added to this, the Public Service Accountability Monitor and BJC claim that of the R21.9-billion the President announced for health, less than R2-billion was new money.
In a submission made by a large number of civil society and academic groups working on food and agriculture, a contrast is made between the R5.6-billion increase in the police and armed forces budget and cuts of over R2-billion to the Department of Agriculture, Land Reform and Rural Development (DALRRD).
The writers suggest that:
“The Budget appears to anticipate and prepare for food riots rather than rededicating resources to growing clean food in an environmentally sustainable manner, which implies an enormous increase in small-scale ecological farming, as advised by the United Nations Food and Agriculture Organisation and called for in the Sustainable Development Goals, which the government has endorsed.”
This follows an admission by the DSD that food parcels have reached only 12% of those who need them.
But it is not only civil society that is unhappy.
Although its language was more demure, the Parliamentary Budget Office (PBO) warned of negative implications of cutting R230-billion from public expenditure at this time. The PBO told the Finance Committee that “government’s response cannot rapidly pivot to a return to fiscal consolidation … we have to accept that the Budget deficit and debt to GDP ratio will grow and have to remain higher for a number of years”.
However, the tragedy is not just that it appears that SA is still dancing to Moody’s tune. It is that the first casualty of responding to the Covid-19 crisis by prioritising the markets rather than people, debt repayment rather than despair, is the Constitution. Our supreme law is a contract, signed by Madiba, that the South African state would henceforth be “founded” on “human dignity, the achievement of equality and the advancement of human rights and freedoms”.
That contract is being broken.
The human rights in our Constitution are more than promises, they are justiciable, and “all law or conduct” (including economic conduct) is meant to be consistent with their realisation. It is at a moment of deep crisis like this that the socio-economic rights protections contained in sections 24 – 29 of the Bill of Rights are most needed by the poor.
Yet, in Tito Mboweni’s Budget it is those most dependent on human rights protections, the poor, the unemployed, and those without the buffer of wealth and savings (i.e. black people who are still apartheid’s enduring legacy) who must make the greatest and hardest sacrifices as we go through the “narrow gate”.
People who are already hungry, unemployed or receiving poverty wages are now expected to add paying for the burden of Covid-19 to their already heavy debt of State Capture, corruption, inequality and institutional mismanagement.
Mboweni’s approach is not about “protecting our children’s inheritance tomorrow”, as he claims, it is about stealing today’s lunch money, literally.
The fallacy Tito Mboweni uses to justify violating rights goes like this: to remain attractive for foreign investment and to avoid the risk of a sovereign debt crisis, South Africa must do all it can to cut its debt to GDP ratio. To do this it must deliberately catalyse a man-made famine so as to arrive at a period of prosperity. When prosperity returns, there is a better chance that the rich will invest again and there will be a trickle-down in taxes and jobs.
However, a heterodox swathe of economists dispute this, including Nobel economist Joseph Stiglitz. This is not the place to unfold their arguments, although consultation and a public debate about what is needed to create a constitutionally compliant economic policy is desperately needed. But it is a time for speaking the truth to the powerless about what this economic policy portends.
In its statement, the BJC expressed concern “about the increasing dishonesty from government in how the Budget is presented”. They say that “by seeking to disguise glaring fault lines in the budget proposals, government is undermining the moral high ground that was available to claim at the outset of the pandemic”.
So let us posit, in plain language, what the Budget – and the economic pathway the Treasury and Cabinet are set upon – means for the majority of South Africans.
Unless a different path is adopted:
- It means an indefinite period of unemployment – at 10.7-million people now at its highest rate ever, but well on its way to reaching 50%.
- It means declining capacity and quality of healthcare services, and very little likelihood of a catchup to losses sustained in HIV, TB, maternal and child health as a result of the Covid-19 lockdown.
- It means a continuation of poor-quality schooling, that leaves young people deprived of possibility, libraries and the ability to lead in the fourth industrial revolution.
- It means an indefinite period of hunger and disease.
- It means despair, civil war in our gang and crime-ridden communities and ongoing femicide and gender-based violence.
- It means not fixing our water, food and energy systems and not rising to the challenge of the climate crisis.
- It means rising and deepening inequality.
These are not polemical exaggerations. They are facts. If all of these “meanings” are added together it means the end of the social contract, an acute regression on the rights that the Constitution calls the “cornerstone of democracy”.
Ask yourself, what happens to a house if the cornerstone crumbles?
Based on the above, it’s clear that at least on what lawyers would call a prima facie level the Budget is unlawful. It regresses on human rights; it increases inequality; it fails to utilise all available resources; it turns immediately realisable rights into distantly – if ever – realisable rights; it wasn’t consulted properly; it is contrary to a host of international treaties South Africa has ratified, and it’s contrary to how the United Nations is recommending that countries respond to Covid-19.
When a law fails on so many counts, it fails to be scrutinised by a vital part of the Constitution, dealing with limitation of rights which requires, among other things, that limitations are based on “human dignity, equality and freedom” and that there are not “less restrictive means to achieve the purpose”. If there are other ways to raise revenue, reduce debt and protect rights then in my book the Budget would fail the test of legality.
Protecting the cornerstone
Do we want to go down the route of conflict and litigation?
Now is the time to engage meaningfully, not mischaracterise or use scaremongering with those you differ with. Critics shouldn’t just be dismissed as part of the “Left, Left” (as Peter Bruce did in his column this week); not all opposition is “ideological”; sharp criticism is not “unpatriotic” at a time when millions of lives already face destruction.
Both sides may have a case. It’s incumbent on us to find a new way forward.
There is, however, another gate that leads down another path, the outlines of which I tried to sketch out in a Maverick Citizen editorial (From Locking Down to Scaling Up) on 2 June.
Ours is a participatory democracy and the Constitutional Court has made it clear that wherever people’s rights are affected, consultation is a constitutional requirement.
South Africa is not bankrupt. We have substantial financial resources available, capacity and a vast, unutilised labour force; we have ideas and innovators; plans are being developed at Eskom around renewable energy that could have huge potential if they are permitted to get off the ground; Covid-19 has already released great positive energy, led to institutional reform.
We need to harness this.
Social justice should not just be a problem left for civil society; it is a problem for all of society, including business. Solidarity and human rights is a political choice; if we choose it’s opposite, we should at least be open about it and ask the majority of the population whether under these circumstances they still want to be part of the game.
But if consultation fails, expect that this Budget will be challenged by every peaceful means possible, including through litigation by those groups that champion the rights of the most vulnerable in society. That, after all, is what our courts are for.
A line has been crossed. Civil society, especially social justice organisations who work to realise rights and work on behalf of the poor, need to realise this.
No amount of single-issue campaigns and litigation over individual sections and subsections of the Constitution will alter this. If this economic pathway is not reversed, campaigns will change into struggles for a little less deprivation and degradation, rather than the prospect of substantive equality that once animated our democracy.
That’s a different ball game and with Covid-19 making every choice a stark one, South Africans must now make up their mind what values they stand for. DM/MC
Mark Heywood is the Editor of Maverick Citizen.