The IMF, the DA and the local anti-worker hack-pack
Last week the IMF released its annual Article IV Country Report on South Africa. As could be expected, this leading organ of global neo-liberalism once more advocated greater labour market flexibility, the preservation of labour brokering, wage moderation and trade liberalisation. The Report acknowledges the low levels of fixed investment by the private sector, and the crisis levels of unemployment and inequality in SA. But it is silent on the responsibility of its own macro-economic policy prescriptions for the reproduction of these structural problems.
The Report is also unsympathetic to the critical intervention required for placing our economy onto a new, more inclusive and job-creating growth path - namely through a state-led industrial policy programme. Its brief paragraph on industrial policy is stuck in the old myth that industrial policy is about the "hopeless" task of governments second-guessing the market by seeking to "pick winners". The successful Asian industrialisation policies were not focused on picking winners, but rather on weeding out losers and, above all, on disciplining capital. This is exactly what our own Industrial Policy Action Plan (IPAP) seeks to do.
For all of these reasons, COSATU was absolutely right to come out with guns blazing against the underlying perspectives contained in the IMF Report.
Nonetheless, the Report is still worth reading, not least because what it actually says is frequently not quite how the local anti-worker, media hack-pack and opposition parties have chosen to present it to the South African public. The Mail & Guardianheadlined its report "IMF reports doom and gloom for SA economy" (not quite true, but chiming with all the other dooming and glooming in the weekly tabloid). TJ Strydom story in Times Live is headlined "IMF urges SA to rein in trade unions". The DA's Tim Harris released a statement titled "IMF Report: DA calls on Minister Gordhan to disregard COSATU's hysterical criticism".
The DA statement tells us that "COSATU represents the ultimate set of entrenched interests in SA, and their blocking of policy reforms is the most damaging constraint to our country's growth". (I note in passing that the DA statement conveniently ignores the IMF Report's advice that government should go ahead and implement e-tolling as a "quick-win" measure to "restore investor confidence". But, I suppose, despite the DA's adulation of the IMF, we couldn't expect its "shadow finance minister" to issue a statement entitled "IMF calls on Minister Gordhan to disregard DA's hysterical criticism of e-tolls".)
The drift in all of these interventions is part of the broader narrative that the commercial media and the DA have been punting since at least the 2008 outbreak of the global capitalist crisis - sow panic and turn the resulting fear and loathing against the organised working class, COSATU in particular.
The so-called doyen of South African liberal journalism, Allister Sparks carries this agenda forward in his own extolling of the IMF Report ("The Way Forward - Wanted: an economic strategy", Cape Times, October 9). Sparks tells us that the IMF has "recommended a more flexible labour market framework, greater policy certainty, scrapping of plans to ban labour brokers...and...that we get on with essential structural reforms by implementing the National Development Plan." All of this is true. All of these recommendations will be found in the IMF Report. But Sparks' summary of the IMF Report is so one-sided that it amounts to a deliberate piece of distortion.
What are the structural reforms the IMF recommends? It recommends labour market flexibility, yes, but it also recommends that we deal much more decisively with the extraordinarily high levels of corporate concentration, price collusion, and profit-taking. Of course, Sparks and Harris are entirely silent about this dimension of the IMF report and yet it is a central theme. The IMF Report devotes considerable attention to the need for what it calls "product market reform" - a polite technical term for dealing with oligopolistic pricing by "large incumbent firms". The oligopolistic nature of key sectors of our economy, the Report notes, is undermining new entrants and the development of SMMEs. Oligopolies add excessive costs to downstream users and consumers of over-priced commodities, making our exports uncompetitive, but providing for very high profits for a handful of dominant corporations.
"South African companies are relatively profitable compared to EM [emerging market] peers", the IMF Report notes, "and appear particularly so in sectors with high concentration. New entrants, especially SMEs, often find it difficult to compete with existing firms that have high market dominance, despite government support for startups..."(IMF, p.56). The Report goes on to commend the Competition Commission for the work it has done in sanctioning collusive corporate behaviour and recommends strengthening the Commission's powers and increasing the fines levied on offending colluders. It even suggests that SA emulate Mexico's equivalent commission which has the power to press criminal charges. Again, Harris and Sparks don't mention any of this, of course.
In contrast to the DA's one-sided finger-pointing at COSATU for curbing growth, the IMF Report tells us that "research suggests product market reform [i.e. ending monopoly capitalist pricing] in South Africa could boost potential growth by 1.2 to 1.5 percent..." (IMF p.12)
What about the IMF's recommendation that government must move ahead and implement the NDP? Sparks proudly holds this aloft as an anti-left trophy. The SACP has repeatedly warned against "monumentalising" an eclectic and relatively long (484-page) NDP base document. It contains some generally acceptable 20-year goals, some excellent if still general sectoral chapters, some highly problematic policies, many internal contradictions, and numbers of interesting if speculative proposals. In short, the NDP is a mixed bag. So what does the IMF Report understand as the NDP's core pillars? It is worth quoting the relevant section:
"The NDP focuses on a range of policy areas, especially infrastructure, education, health care, social protection, building a capable state, and promoting accountability and fighting corruption.
Infrastructure. The plan proposes to expand electricity capacity, water supply, public transport, and transport infrastructure to facilitate commodity exports.
Education and training. Actions include: improving the management of the education system; merit based school principal selections; improving teachers' performance with training remuneration incentives; adult education and a variety of informal training programs.
Health care. The plan aims at improving health management and implementing a national health insurance system to improve the quality of care and public facilities.
Building a capable state. The NDP aims at enhancing the role of the Public Service Commission to monitor standards and improve recruitment, and improving relations between national, provincial, and local governments.
Fighting corruption and enhancing accountability, by giving greater power to the Tender Compliance Monitoring Office, insulating anti-corruption agencies from political interference, setting up a dedicated prosecution team, specialist courts and judges, and developing accountability frameworks." (IMF, p.34)
Give or take a formulation here and there (for example the one-sided emphasis on transport infrastructure for commodity exports - and not also for local beneficiation) these pillars of the NDP, as conceptualised by the IMF, are perfectly acceptable.
There are, of course, missing pillars.
As already noted, the IMF Report is relatively negative about a state-led industrial policy programme. The NDP, in the weak chapter 3 of the document, is only marginally more supportive of re-industrialisation. On the other hand, while the IMF Report notes the dysfunctional nature of our apartheid spatial legacy, it fails to engage with the progressive proposals in the relevant NDP chapter 8 ("Transforming human settlement and the national space economy"). Instead, in probably the most ludicrous of its proposals, the IMF Report suggests that "more competition in the mini-bus sector would reduce commuter costs" (p.52) for poor households disadvantaged by being located on the distant peripheries of our towns and cities. Instead of the NDP's proposals for active spatial transformation to overcome the dreadful legacy of racialised apartheid geography, the IMF proposes even more competition in the hand-to-mouth, over-traded, violence prone taxi sector! That could only be a view from a distant Washington.
The biggest silence in the IMF Report is, however, its inability or unwillingness to connect existing macro- and micro-economic distortions in our economy with its own macro-economic policy prescriptions which, alas, have too often been pursued locally. The Report quite correctly notes that the key vulnerability of our economy to "external shocks" lies in our excessive dependence on "hot" money, short-term inflows into shares and bonds and the relative weakness of foreign direct investment coupled with the local investment strike by the major corporations. These distortions are directly related to the 1996 GEAR macro-economic policy package that propelled excessive exchange control and trade liberalisation, dual listings for major South African conglomerates (Anglo, SASOL, Liberty Life, Old Mutual, etc.), and the resultant massive capital flight out of South Africa.
To overcome these distortions we need to move away from the notion that we have to endlessly and exclusively court short-term investor-sentiment. We also need to direct and discipline capital - exactly what was agreed, for instance, but not enforced by way of community reinvestment requirements at the Financial Sector Summit five year ago.
Most of the local media and mainstream economic commentators treat these IMF Reports (selectively read) as if they were the Ten Commandments themselves descended from Mount Washington. Before we get into too much of a froth about our own latest IMF country report, it's worth remembering what Joseph Stiglitz has to say on the subject of country reports. During his time as Chair of President Clinton's Council of Economic Advisers, Stiglitz says the US administration happily disregarded their annual IMF US-country report as just the cut-and-paste views of "some second-rate IMF researchers". Given the dismal capacities of our own hack-pack media commentators, with the bar set so much lower here, I suppose we should be prepared to be slightly less judgemental of the IMF.
This article by SACP first Deputy General Secretary Jeremy Cronin first appeared in the Party's online newsletter Umsebenzi Online.
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