GEAR AND NEO-LIBERALISM

[Last year, I wrote to a comrade to engage him on an article he had written in one of the local newspapers to engage him on one of the issues he raised, i.e. as a country, “we self-imposed a [neo-liberal] structural adjustment programme” in 1996. We reproduce the letter in two parts with the comrade’s permission..]

Part I

Dear Comrade Evaristo*

In your article, you refer to our adoption of the GEAR document in 1996 which some have derogatively claimed constituted “the 1996 class project” as “a self-imposed a [neo-liberal] structural adjustment programme”.

In this context, as in the past, I have been very keen to understand two questions, namely:

(i) what was neo-liberal about GEAR; and,

(ii) in what sense was it a “structural adjustment programme”?

I

It is obvious that to answer these questions requires an understanding of what is meant by neo-liberalism. I believe that what I cite below adequately explains what is meant by economic neo-liberalism.

In an article entitled What is Neoliberalism?, published by CorpWatch: Holding Corporations Accountable, Elizabeth Martinez and Arnoldo Garcia say:

“‘Neo’ means we are talking about a new kind of liberalism. So what was the old kind? The liberal school of economics became famous in Europe when Adam Smith, a Scottish economist, published a book in 1776 called THE WEALTH OF NATIONS. He and others advocated the abolition of government intervention in economic matters. No restrictions on manufacturing, no barriers to commerce, no tariffs, he said; free trade was the best way for a nation’s economy to develop. Such ideas were “liberal” in the sense of no controls. This application of individualism encouraged “free” enterprise,” “free” competition – which came to mean, free for the capitalists to make huge profits as they wished…

“The main points of neo-liberalism include:

1. THE RULE OF THE MARKET. Liberating “free” enterprise or private enterprise from any bonds imposed by the government (the state) no matter how much social damage this causes. Greater openness to international trade and investment, as in NAFTA. Reduce wages by de-unionizing workers and eliminating workers’ rights that had been won over many years of struggle. No more price controls. All in all, total freedom of movement for capital, goods and services. To convince us this is good for us, they say “an unregulated market is the best way to increase economic growth, which will ultimately benefit everyone.” It’s like Reagan’s “supply-side” and “trickle-down” economics — but somehow the wealth didn’t trickle down very much.

2. CUTTING PUBLIC EXPENDITURE FOR SOCIAL SERVICES like education and health care. REDUCING THE SAFETY-NET FOR THE POOR, and even maintenance of roads, bridges, water supply – again in the name of reducing government’s role. Of course, they don’t oppose government subsidies and tax benefits for business.

3. DEREGULATION. Reduce government regulation of everything that could diminish profits, including protecting the environment and safety on the job.

4. PRIVATIZATION. Sell state-owned enterprises, goods and services to private investors. This includes banks, key industries, railroads, toll highways, electricity, schools, hospitals and even fresh water. Although usually done in the name of greater efficiency, which is often needed, privatization has mainly had the effect of concentrating wealth even more in a few hands and making the public pay even more for its needs.

5. ELIMINATING THE CONCEPT OF “THE PUBLIC GOOD” or “COMMUNITY” and replacing it with “individual responsibility.” Pressuring the poorest people in a society to find solutions to their lack of health care, education and social security all by themselves – then blaming them, if they fail, as ‘lazy’.”

In 1999, the US Center for Economic and Policy Research published a paper by Robert Naiman and Neil Watkins entitled “A Survey of the Impacts of IMF Structural Adjustment in Africa: Growth, Social Spending, and Debt Relief”. They write:

“Structural adjustment programs generally require countries to adopt policies such as:

- Reductions in government spending;

- Monetary tightening (high interest rates and/or reduced access to credit);

- Elimination of government subsidies for food and other items of popular consumption;

- Privatization of enterprises previously owned or operated by the government; and

- Reductions in barriers to trade, as well as to foreign investment and ownership.”

The two questions that arise from these correct comments about economic liberalism, economic neo-liberalism and the IMF/World Bank structural adjustment programmes are:

(iii) in what part does the GEAR document advocate the policies listed by Martinez and Garcia under 1 – 5, as well as those identified by Naiman and Watkins; and,

(iv) when and in what way did the Government enunciate and implement such policies?

II

The objectives stated in the GEAR document include the following:

“As South Africa moves toward the next century, we seek:

- a competitive fast-growing economy which creates sufficient jobs for all work seekers;

- a redistribution of income and opportunities in favour of the poor;

- a society in which sound health, education and other services are available to all; and

- an environment in which homes are secure and places of work are productive.”

Further on, the document says it contains ‘an Integrated Strategy’ and continues:

“The core elements of the integrated strategy are:

- a renewed focus on budget reform to strengthen the redistributive thrust of expenditure;

- a faster fiscal deficit reduction programme to contain debt service obligations, counter inflation and free resources for investment;

- an exchange rate policy to keep the real effective rate stable at a competitive level;

- consistent monetary policy to prevent a resurgence of inflation;

- a further step in the gradual relaxation of exchange controls;

- a reduction in tariffs to contain input prices and facilitate industrial restructuring, compensating partially for the exchange rate depreciation;

- tax incentives to stimulate new investment in competitive and labour absorbing projects;

- speeding up the restructuring of state assets to optimise investment resources;

- an expansionary infrastructure programme to address service deficiencies and backlogs;

- an appropriately structured flexibility within the collective bargaining system;

- a strengthened levy system to fund training on a scale commensurate with needs;

- an expansion of trade and investment flows in Southern Africa; and

- a commitment to the implementation of stable and coordinated policies.”

Where it deals with fiscal policy, the GEAR document says:

“Recent fiscal trends in response to the unsustainable fiscal situation that had developed by 1992/93, when the overall deficit reached 7,9 percent of GDP, fiscal policy has been informed by the following goals:

- to cut the overall budget deficit and the level of government dissaving;

- to avoid permanent increases in the overall tax burden;

- to reduce consumption expenditure by general government relative to GDP; and

- to strengthen the general government contribution to gross domestic fixed investment.”

Contrary to the neo-liberal intervention mentioned by Martinez and Garcia of cutting public expenditure for social services, near the end of the GEAR document we find the following commitment:

“For its part, the government commits itself to an accelerated increase in its contribution to social and community living standards. Most of the policy frameworks and institutional systems are now in place to ensure the following:

- the delivery of housing and related services;

- steady improvement in the quality of education;

- universal access to primary health care;

- access to land and agricultural support for emergent farmers;

- electrification of all urban areas and an increasing number of rural communities;

- reliable water supplies and appropriate sanitation infrastructure;

- improved postal and telecommunications services; and

- a broad social security net, comprising social grants and targeted welfare services.”

The foregoing, relating to the stated objectives in the GEAR document, makes it necessary to pose the questions:

(v) in what way do these objectives constitute a neo-liberal agenda;

(vi) in what way do they constitute “structural adjustment”; and,

(vii) (vii) in what way did the Government deviate from these objectives?

III

At this point I would like to mention and underline the fact that GEAR was elaborated and adopted specifically to respond to various comments made in the RDP document concerning the macro-economy.

In this regard, these are some of the relevant comments in the RDP document:

“Specific structures are necessary to implement the RDP; their functions will be…:

- to ensure a macro-economic policy environment that is stable.”

Further:

“We must finance the RDP in ways that preserve macro-economic balances, especially in terms of avoiding undue inflation and balance-of-payments difficulties.”

And later:

“It is clear that government policy and mechanisms of raising finance are crucial to the success of the RDP. If they were to cause excessive inflation or serious balance of payments problems they would worsen the position of the poor, curtail growth and cause the RDP to fail. Government contributions to the financing of the RDP must, therefore, avoid undue inflation and balance of payments difficulties. In the long run, the RDP will redirect government spending, rather than increasing it as a proportion of GDP…

“The existing ratios of the deficit, borrowing and taxation to GNP are part of our macro-economic problem. In meeting the financing needs of the RDP and retaining macro stability during its implementation, particular attention will be paid to these ratios. The emphasis will be on ensuring a growing GDP, improved revenue recovery, and more effective expenditure in order to make more resources available. In the process of raising new funds and applying them, the ratios mentioned above must be taken into account…

“There is a need for an overall foreign debt strategy. The RDP must use foreign debt financing only for those elements of the programme that can potentially increase our capacity for earning foreign exchange. Relationships with international financial institutions such as the World Bank and International Monetary Fund must be conducted in such a way as to protect the integrity of domestic policy formulation and promote the interests of the South African population and the economy.”

Quite early on the RDP document says: “Within the framework for policy represented by the RDP, the ANC will develop detailed positions and a legislative programme of government.”

GEAR was prepared and adopted to respond exactly to this directive, including the macro-economic imperatives mentioned in the RDP.

The questions that arise from the immediate foregoing are:

(viii) were the macro-economic challenges identified in the RDP neo-liberal in nature; and,

(ix) did the effort in GEAR to address these challenges constitute both “structural adjustment” and a manifestation of neo-liberal policy?

IV

The comments above extracted from the RDP document also relate to the important issue of the National Debt, and say, among others:

“The existing ratios of the deficit, borrowing and taxation to GNP are part of our macro-economic problem…There is a need for an overall foreign debt strategy.”

It is in this context that we must understand the observation from the GEAR document cited above which explains that part of Government fiscal policy since 1994 had been “to cut the overall budget deficit and the level of government dissaving (and) to avoid permanent increases in the overall tax burden…”

GEAR also sought to sustain these policy positions exactly to ensure that democratic South Africa does not fall into a debt trap which would oblige her to appeal for assistance from the IMF, which would inevitably impose a real neo-liberal structural adjustment programme on the country.

With the budget deficit having reached almost 8% of GDP it was obvious that very quickly the country would arrive at the point where it would have to spend such large sums on servicing the debt – paying the money lenders – arising from this high deficit, that little would be left in the budget to discharge the Government responsibilities to the people.

Part of the “left” critique of GEAR focused on the matter of the reduction of the budget deficit, seeing this as yet another manifestation of exactly the kind of infamous “structural adjustment” which had historically been imposed on the countries of the South by the Bretton Woods institutions.

Below I will reproduce a fairly long excerpt from Karl Marx’s Das Kapital, Vol 1, which appears in the Chapter entitled “Genesis of the Industrial Capitalist”.

I apologise for the length of this extract but I think that it needs to be studied carefully especially by those who define themselves as belonging to the “left”.

The extract deals with the matter of the National Debt and its relationship not only with the matters of the budget deficit and taxation as mentioned in the RDP, but also with the very issue of the development of capital and the attendant impoverishment of the working people and the liquidation of the petty bourgeoisie.

It therefore seemed very strange to some of us that “the left” could be wedded to even larger budget deficits which lead directly to the growth of the National Debt, which has the consequences which Marx eloquently identified.

Marx wrote:

“The system of public credit, i.e., of national debts, whose origin we discover in Genoa and Venice as early as the Middle Ages, took possession of Europe generally during the manufacturing period. The colonial system with its maritime trade and commercial wars served as a forcing-house for it. Thus it first took root in Holland. National debts, i.e., the alienation of the state – whether despotic, constitutional or republican – marked with its stamp the capitalistic era. The only part of the so-called national wealth that actually enters into the collective possessions of modern peoples is their national debt…Public credit becomes the credo of capital…

“The public debt becomes one of the most powerful levers of primitive accumulation…The state creditors actually give nothing away, for the sum lent is transformed into public bonds, easily negotiable, which go on functioning in their hands just as so much hard cash would…

“At their birth the great banks, decorated with national titles, were only associations of private speculators, who placed themselves by the side of governments, and, thanks to the privileges they received, were in a position to advance money to the State. Hence the accumulation of the national debt has no more infallible measure than the successive rise in the stock of these banks, whose full development dates from the founding of the Bank of England in 1694.

“With the national debt arose an international credit system, which often conceals one of the sources of primitive accumulation in this or that people. Thus the villainies of the Venetian thieving system formed one of the secret bases of the capital-wealth of Holland to whom Venice in her decadence lent large sums of money…A great deal of capital, which appears today in the United States without any certificate of birth, was yesterday, in England, the capitalised blood of children.

“As the national debt finds its support in the public revenue, which must cover the yearly payments for interest, &c., the modern system of taxation was the necessary complement of the system of national loans. The loans enable the government to meet extraordinary expenses, without the tax-payers feeling it immediately, but they necessitate, as a consequence, increased taxes…

“Modern fiscality, whose pivot is formed by taxes on the most necessary means of subsistence (thereby increasing their price), thus contains within itself the germ of automatic progression….Over-taxation is not an incident, but rather a principle. In Holland, therefore, where this system was first inaugurated, the great patriot, DeWitt, has in his “Maxims” extolled it as the best system for making the wage labourer submissive, frugal, industrious, and overburdened with labour…

“The great part that the public debt, and the fiscal system corresponding with it, has played in the capitalisation of wealth and the expropriation of the masses, has led many writers, like Cobbett, Doubleday and others, to seek in this, incorrectly, the fundamental cause of the misery of the modern peoples.”

Of particular note in this extract is that Marx, among other things, wrote:

“The public debt becomes one of the most powerful levers of primitive accumulation…In Holland, therefore, where this system was first inaugurated, the great patriot, DeWitt, has in his “Maxims” extolled it as the best system for making the wage labourer submissive, frugal, industrious, and overburdened with labour.”

The questions which arise from the foregoing are:

(x) did Marx merely presage what was later to emerge as neo-liberal structural adjustment when he warned against sustained budget deficits which lead to the emergence of the onerous National Debt, with its consequences; and,

(xi) does the fact that the Bretton Woods institutions have on many occasions, as part of neo-liberal structural adjustment, imposed the task to reduce budget deficits, mean that maintaining high budget deficits is ‘always the progressive thing to do’?

PART II

V

During the whole period when GEAR has been challenged “from the left”, the assertion was made that GEAR sought to replace the RDP.

I am certain that there is no rational presentation that can be made to prove this assertion. Alternatively there is no credible argument that can be presented which shows that in the policies and programmes Government actually implemented, once GEAR was adopted it abandoned the pursuit of the RDP objectives.

The 1996 GEAR document as approved by the Cabinet said:

“A strategy for rebuilding and restructuring the economy is set out in this document, in keeping with the goals set in the Reconstruction and Development Programme. In the context of this integrated economic strategy, we can successfully confront the related challenges of meeting basic needs, developing human resources, increasing participation in the democratic institutions of civil society and implementing the RDP in all its facets.”

In May 2001, Alec Erwin, then Minister of Trade and Industry, said:

"The need to create employment and a better life for our people is the central objective of the economic policy of this government. The Reconstruction and Development Program (RDP) remains the basic policy framework to achieve this objective. The Growth, Employment and Redistribution (GEAR) program is the associated macroeconomic strategy used. At the beginning of this year the President announced an Action Plan to Accelerate Growth. This action plan marked an increased emphasis on macroeconomic reform to further increase investment…"

Further, in an article headed “No Contradictions between RDP and GEAR”, published in ANC Today Vol. 6 No. 31, 11-17 August, 2006, then Finance Minister, Trevor Manuel, wrote:

“The 50th National Conference of the African National Congress held in Mafikeng in December 1997 adopted a definitive resolution on economic policy. This resolution included a clause that read: "Conference reaffirms that our macroeconomic framework policies must be directed to advancing the RDP [Reconstruction and Development Programme]. We are not pursuing macro balances for their own sake, but to create the conditions for sustainable growth, development and reconstruction. The strategy for Growth, Employment and Redistribution (GEAR) is aimed at giving effect to the realisation of the RDP through the maintenance of macro balances and elaborates a set of mutually reinforcing policy instruments."

“This important clause settled an exceedingly important debate in the ranks of the ANC. The Growth, Employment and Redistribution strategy (GEAR) could not displace the RDP, but its correct implementation could effect the realisation of the RDP. In recent weeks, it has once again become fashionable to attempt to suggest that the adoption of GEAR was an endeavour to bury and replace the RDP. If cartoonists are unaware of the facts, they might be forgiven. The same cannot hold true for the leadership of the ANC or its Alliance partners.”

The National Treasury Annual Financial Statements for the year ended 31 March 2013 included a Report on the RECONSTRUCTION AND DEVELOPMENT PROGRAMME FUND.

National Treasury said:

“In 2013, government adopted the National Development Plan (NDP), a development vision to put the economy on a new growth strategy. The NDP sets out an integrated strategy for accelerating growth, eliminating poverty and reducing inequality by 2033. The NDP will build on the successes of the Reconstruction and Development Programme (RDP), which was adopted by South Africa at the dawn of democracy to address the basic needs of the people to create an equal society. The RDP objectives included providing all citizens with water, electricity, sanitation, jobs, housing, education, social protection, quality healthcare, clean environment, public transport as well as adequate nutrition.”

Thus though the RDP Fund was retained, the RDP Ministry which controlled this Fund was closed down in March 1996. The reason for this was that some of the Ministries were not carrying out the critical work of fundamentally restructuring their budgets to reflect the changed nature of the South African State and society.

These were essentially maintaining the apartheid structure of their budgets, and therefore their disbursements. They used the much smaller allocations from the RDP Fund, rather than the much larger resources in their budgets, to show some progress in terms of addressing the RDP objectives.

All the immediate proceeding statements place the RDP at the centre of all major Government economic interventions since 1994.

Some questions arise from this, these being:

(xii) were all these statements wrong, and if so, in what way were they wrong; and,

(xiii) if they were not wrong, does this mean that the RDP itself was a neo-liberal vision, which would inevitably result in a “self-imposed structural adjustment”?

VI

There is no doubt that our economy faces very serious challenges which must be resolved with the necessary urgency. These include the issues of poverty, unemployment, low growth rates and inequality.

It would therefore obviously be correct to say though important gains have been made since 1994, nevertheless we are still confronted by very many and very serious socio-economic challenges.

All of us must therefore strive to answer the question – what is to be done?

This requires a very sober-minded critical analysis. Similarly it demands realistic proposals fundamentally to achieve the objectives contained in the RDP. It is within this context that we should assess and understand the objectives contained in the National Development Plan.

It is very obvious that instead of responding properly to the two interrelated tasks we have mentioned, some in our country have decided to blame everything on allegedly neo-liberal economic policies – using the label neo-liberal as a swearword rather than as an outcome of serious analysis!

On August 30, 2015 City Press published an article by Mondli Makhanya entitled “SA's economic outlook: Bad news and really bad news”.

Among others the article says:

“Stellenbosch University’s economic management dean, Stan du Plessis, who painted a bleak picture of the country’s immediate prospects, said a big question that had to be answered was why private corporations were not investing in business expansion. While low demand and the absence of skilled labour had been cited as some of the reasons in recent years, the deterioration of the political climate had emerged as the key reason corporations were not investing in growth.

“Quoting research done by the university’s Bureau for Economic Research, the rate of businesses citing the political climate as an excuse had gone from about 20% in 2005 to 75% in 2013, and currently stood at just under 70%.

“While they had no specifics about the meaning of “political climate”, policy incoherence came up as a major issue for businesses’ decision makers.”

More recently, on September 17, 2015, the fin24 website carried an article entitled “SA firms hoard cash in indictment of economy.” Among other things the article said:

“Corporates in Africa’s most industrialised economy are so negative about future growth prospects that they’re sitting with record amounts of cash in the bank, according to Stanlib Asset Management, South Africa’s third-largest manager of domestic mutual funds.

“Investment by businesses has stagnated as confidence languishes near its lowest in almost four years and President Jacob Zuma’s administration struggles to reignite an economy expanding at the slowest pace since the 2009 recession…

“There aren’t many compelling reasons to be retooling plants or spending money on machinery or buildings.

“A 50% depreciation in the currency against the dollar since 2011 has made imports more expensive, while an electricity shortage, persistent strikes and the risk of slowing demand from China and sluggish economies in Europe have depressed some of the benefits to exports from the weakening rand, contributing to a contraction in the $366bn economy in the second quarter.

“Companies had R689.4bn on deposit in South African banks at the end of June, compared with R671.5b in November, according to data compiled by Stanlib from South African Reserve Bank (Sarb) data…

“The blueprint, created by former Finance Minister Trevor Manuel, (the National Development Plan), sets out how the country can boost growth to 5% by 2019 and create 6 million jobs.

“Companies are instead looking abroad. Truworths this week announced it started talks to buy Office Retail Group, a UK fashion footwear chain.

“That would add to a list of overseas takeovers by South African companies, including this year’s $1.2bn acquisition of British fashion retailer New Look by Brait SE and The Foschini Group's purchase of UK clothing chain Phase Eight. Woolworths bought Australian chain David Jones for about $2bn last year…

“You can, through policy, influence how corporates deploy their money, but unfortunately that’s not happening,” Lings said. “This is purely business concerned about current economic conditions in the country and making actual choices not to spend more money.”

In simple words, Mr du Plessis and fin24 are saying that the private sector, which, by far, owns the largest volume of investible capital in our country, is not investing in the economy. And the incontrovertible reality is that there can be no economic growth and development without investment!

The private sector risk aversion mentioned in the two articles we have cited, which is based on persistent pessimism about the future of our country, is not new but has been a persistent factor impacting adversely on our economy since 1994.

What has happened as indicated by the figures cited by Mr du Plessis is that over the years the level of this pessimism has grown quite significantly.

Instead of repeatedly throwing around the neo-liberal swearword, perhaps a serious assessment should be made about the impact of this private sector “investment strike” during the years of the implementation of the RDP and GEAR policies.

This assessment might even help to answer what is obviously somewhat of a conundrum – that what are supposedly neo-liberal policies have evidently resulted in generating a private sector investment strike!

In this regard we must also pay some attention to the view taken in both the RDP and GEAR relating to the forces which would drive the reconstruction and development these programmes visualised.

Among other things the RDP said:

“The RDP will foster a new and constructive relationship between the people, their organisations in civil society, key constituencies such as the trade unions and organised business, the democratic government, and the workings of the market…

“The democratic government, the trade union movement, business associations and the relevant organisations of civil society must cooperate in formulating economic policy…We aim to achieve a dynamic balance between government intervention, the private sector and the participation of civil society…There must be a significant role for public sector investment to complement the role of the private sector and community participation in stimulating reconstruction and development.

”We must finance the RDP in ways that preserve macro-economic balances, especially in terms of avoiding undue inflation and balance-of-payments difficulties. This requires a strategic approach that combines public and private sector funding, taking into account the sequence and timing of funding sources and programmes.”

For its part GEAR said:

“It is Government’s conviction that we have to mobilise all our energy in a new burst of economic activity. This will need to break current constraints and catapult the economy to the higher levels of growth, development and employment needed to provide a better life for all South Africans. We are confident that our social partners will join us in the combined efforts needed to achieve this goal.”

It went on to say that one of the elements of its Medium Term Strategy is “a social agreement to facilitate wage and price moderation, underpin accelerated investment and employment and enhance public service delivery…In the longer term, a broad social agreement might address a wider range of issues related to economic restructuring, income distribution and social policies.”

It also aspired towards a National Social Agreement and said:

“A strong tradition of collective bargaining characterises the South African industrial and social environment. Sectoral and regional agreements are likely to contribute to structuring future growth and development. There is an important role also for a broad national agreement, to create an environment for rapid growth, a brisk investment trend and accelerated delivery of public services based on equity and universal access. The challenge facing the government and its social partners is to ensure that a national agreement underpins rapid growth, job creation, and development…(We) invite Government’s social partners to join in the building of a competitive fast-growing economy.”

On September 16, 2015, Business Report, a supplement to The Star and other papers, carried a full page report on the Government’s 7th Annual Industrial Policy subtitled “Economic Sectors, Employment & Infrastructure Development Cluster Ipap 2015/16 – 2017/18.”

The report carries comments made by Minister of Trade and Industry, Mr Rob Davies, in which once again, he calls for a government-business-labour compact to confront our country’s challenges, saying:

“To achieve coherent, coordinated, sustainable reindustrialisation, we must act, and act together.

“Absolutely vital to this goal is to develop deep and principled forms of cooperation between government, state-owned companies (SOCs), the private sector and labour.

“The goal must be to work together in an integrated, solution-based manner that accommodates and reconciles different and competing interests to the greatest possible extent.

“We must put grandstanding behind us in the quest for pragmatic, workable compromises, trade-offs and hard-fought agreements that can progressively nurture long-term trust between all the key stakeholders.

“This is the nitty-gritty of grown-up, democratic nation-building.”

A Business Report article in the same edition on “Targeting actions for industrial development” says Minister Davies pointed to:

‘The need to decisively change the nature and tone of the conversation between government, business and labour to ensure that all three parties identify areas in which they can actively work together to secure and strengthen their joint efforts, factoring in the tough realities of extremely difficult global and domestic economic conditions.'

It would seem that five questions arise from all this:

(xiv) was it reasonable for the RDP and GEAR (and the current Government) to count on a focused social compact, government-business-labour-community, to join forces to achieve the objectives they set;

(xv) has this compact materialised;

(xvi) if it has not, as seems to be the case, and combined with the reported private sector ‘investment strike’, would these two factors not have had a negative impact on the achievement of the goals of the RDP and GEAR;

(xvii) what policy responses are required to respond to these challenges and hopefully address our major socio-economic historic tasks of achieving high and sustained rates of economic growth and development and the eradication of poverty, underdevelopment, unemployment and inequality; and,

(xviii) will this necessitate a review of the proposition that it will be a voluntary compact between Government, business and labour which will enable us to achieve the fundamental socio-economic transformation our country needs?

VII

It is obvious that the historical situation in South Africa, including the imperative contained in our Constitution to create a non-racial, non-sexist and prosperous society of shared wealth and, in this regard, the related corollary to ensure the proper functioning of our democracy, demands the implementation of policies and programmes which will accelerate the process towards the required fundamental social transformation.

Some questions arise in this regard.

(xix) Might it be that one of the strategic errors in the GEAR document was that it was based on the assumption that all economic actors in our country, including capital, would respond to its macro-economic reforms in the same way as these actors would respond in any “normal” capitalist society?

(xx) Among others, GEAR visualised “a brisk expansion in private sector capital formation, an acceleration in public sector investment, an improvement in the employment intensity of investment and output growth, an increase in…service delivery, making intensive use of labour based techniques, a restructured public sector to increase the efficiency of both capital expenditure and service delivery, and enhanced human resource development.” Was it logical for GEAR to make these projections and assert that by 2000 South Africa would achieve a 6% annual economic growth rate and job creation of 400 000 per annum, which targets were not realised?

(xxi) Is it not possible that the ANC leadership made the serious mistake of failing to understand that “colonialism of a special type” also meant that this would also be informed by “capitalism of a special type”?

(xxii) Was it not necessary when GEAR was adopted that this ANC leadership should have understood that the democratic Government would have to intervene in nationally particular ways to impact on the functioning of the capitalist system as it expressed itself in our country, understanding the setting of the functioning of this capitalism within the context of “colonialism of a special type”?

(xxiii) Does it not remain one of the strategic challenges that faces any democratically elected Government that, with the experience of two decades of democracy, it must draw the correct lessons from, and, while not being ideologically and politically anti-capitalist, act on the basis of the proven reality that operating within a capitalist system, we have not made sufficient progress towards eradication our inherited inequalities, and therefore the reduction of unemployment and poverty levels?

(xxiv) Did the political power, on one hand, and capital, on the other, in our country, do enough, or anything at all, for instance to draw the necessary lessons from such historical experiences as the cooperation between democratic political power and private capital in West Germany as they worked together to facilitate the unification of West and East Germany after the end of the Cold War?

(xxv) In the end, did the fault lie with the claimed “neo-liberal socio-economic approach” that after just over two decades of democratic rule South Africa has not achieved the fundamental socio-economic transformation it desperately needs, to eradicate the legacy of colonial and apartheid racism, or does the problem and explanation not rest in something else that is more historic, fundamental, and strategic?

* Evaristo is not the real name of the recipient of this letter.

This article first appeared in two parts on the Thabo Mbeki Foundation Facebook page.