||Trevor's toy telephone can't ring Wall Street or Washington The world financial crisis is drubbing South Africa, leaving officials to fib about 'macroeconomic fundamentals.'
What President Thabo Mbeki terms Global Apartheid, like Apartheid itself during the bad old days, apparently needs a few Bantustans to kick around.
We are witnessing a boot to the bum of the Johannesburg Stock Exchange, which according to Azzar Jammine of Econometrix, lost R700 billion (17% of its value) between July 23rd and last Friday, a sum equivalent to half the size of the national economy's annual output.
Yet Treasury director-general Lesetja Kganyago is in an emollient, even denialist mood: 'We should not be too worried about further volatility' (he wrote last week). 'We must continue to strengthen our shock absorbers', which include 'a floating exchange rate' (sic).
Did the relaxation of exchange controls represent a shock absorber or volatility-amplifier? Since dropping the finrand system in 1995, the SA Treasury has suffered four intensive speculative attacks on the currency
(the most of any substantial country) and last year managed the world's worst-performing major currency. The country's vulnerability also stems from Treasury's decisions to happily repay $25 billion worth of apartheid-era debt which should have been labeled 'Odious' under international law), and then permit the largest SA firms' financial headquarters to escape to London.
Because of periodic currency crashes and Pretoria's refusal to reimpose currency controls, the last dozen years witnessed record-high real interest rates. As a result, domestic private fixed investment has been extremely weak and inflows of 'hot money' - portfolio investments - destabilised the economy. So real estate and the stock market have boomed while manufacturing withered, leaving us with a trade and payments deficit exceeding 7% of GDP this year, in the high danger zone.
Many of these diagnoses apply to the US, where, according to consumer advocate Ralph Nader, 'The corporate capitalists' knees are shaking a bit. Their manipulation of the sub-prime housing market has led to a spreading credit crunch and liquidity crisis.'
South African financiers have experimented just a little with crazy schemes,
but even without a derivatives culture in mortgage bonds, enough liquidity
was pumped into local real estate to drive average prices up 200% between
1997-2004, compared to just 60% in the US.
This leaves South Africa at risk of becoming, to borrow Mbeki's metaphor, a
new Bantustan within Global Financial Apartheid.
Consider Apartheid's three minimum requirements for the homeland elites:
a.. politicians allied to Pretoria repeatedly gave it legitimacy when
under pressure (today, witness how South African officials laud the
'international community' and 'multilateralism', synonyms in the same tradition of 'separate development');
b.. these agents expressed a willingness to put down local demonstrations
using repressive means (and witness last week's Sebokeng police shootings
amidst many other examples of police brutality against widespread service
delivery protest); and
c.. the old Bantustans also had the responsibility to supply cheap migrant
workers to the outside world as labour reserves (witness SA's post-1994
doubling of unemployment along with its new commitment to
The homeland capitals were equipped with 'toy telephones' which the old
rulers could always play with, but which had no connection to power.
Pretoria's racist regime simply imposed its will, occasionally allowing the
local tyrant to serve as 'point man' for whatever relatively harmless local
crisis bubbled up (as Bush does with Mbeki on Zimbabwe).
Given these power relations, the challenge faced by the likes of Buthelezi,
Matanzima, Mangope, Cebe and the rest was to disguise the faulty line to
their constituents and pretend they had the ear of the powerful. They needed continual reaffirmation that there was dignity and upward mobility associated with their sleazy jobs.
Today the sleazy work entails proclaiming never-ending reforms to Global
Financial Apartheid. When US war criminal Paul Wolfowitz was appointed by
Washington as World Bank president in April 2005, Trevor Manuel - then chair of the Bank's Development Committee - welcomed him as a 'wonderful individual. perfectly capable.'
Flash forward two years, past one fatal nepotism scandal and another rigged
appointment process controlled entirely by George W. Bush, and again Manuel welcomes Wolfowitz's successor, Robert Zoellick (a fellow member of the Project for a New American Century, that notorious pro-war thinktank): 'We consider Zoellick to be very competent and hope he will be able to operate in the same manner as he demonstrated in the World Trade Organisation negotiations when he served as the US trade representative.'
Manuel's five-year fuss about 'voice' and 'democracy deficits' and 'global
governance' - and mild-mannered toy-telephone conversations - have generated exactly naught. There was not even the decency of a European Union call to consult Mbeki or Manuel last month when another neoconservative, Rodrigo de Rato, stepped down as International Monetary Fund managing director and was replaced, minus any Third World consultation, by French ex-finance minister Dominique Strauss-Kahn.
After Strauss-Kahn's visit to Pretoria last month, Mbeki meekly remarked,
'He is a very competent person and we think he would add enormously to the
work of the IMF - including improving the system of governance of the IMF,
making it more representative of the developing world.'
Reflecting the same subservience at a Maputo meeting on Monday with de Rato, Manuel and seven other African finance ministers announced: 'The African Governors stressed the need to protect and even increase the voting share of low-income countries as a group.'
The obvious mismanagement of global financial markets means this is the
perfect moment for a latter-day Bantu Holomisa - former Transkei military
strongman who turned anti-apartheid and hosted the ANC during the late
1980s - to rise up, tell it like it is, and foment serious protest.
Indeed there is such a figure, Venezuelan president Hugo Chavez, who on his last trip to South Africa - for the Joburg World Summit on Sustainable Development in 2002 - made this very point: 'We have to have a radical change in the formats of these summits... We just read a speech. There is no proper dialogue, it seems to be a dialogue of the deaf. Some people go from summit to summit. Our people go from abyss to abyss.'
Around 30 000 people marched that week from the abyss of Alexandra to the elite abyss of Sandton, decrying Mbeki's role in water privatisation, climate change and rising poverty.
The same happened a year earlier, at the World Conference Against Racism
here in Durban, where Mbeki removed from the summit agenda two central
issues - Zionism and reparations for slavery, colonialism and apartheid -
and received a 10 000-strong protest in response.
These are the kinds of precedents which make the G20 summit of finance
ministers scheduled for mid-November near Cape Town such an interesting
moment. South Africa's independent left, which most vigorously contests the corporate globalization agenda, is licking various wounds, including several that are self-inflicted. And there will be far too much Limpopo dust in the air to justify the trade unions and Communist Party's attention to one more elite talkshop.
Like Buthelezi decrying 1980s apartheid (while killing its genuine KZN
opponents), Manuel has already given the game away. Last year, upon his
return from the G20 summit in Melbourne where 10 000 protesters demanded an end to Global Apartheid, Manuel told reporters, 'There is still a case to be made for the IMF and World Bank to exist... but they have to become more relevant than they are'.
(If he desires an argument to the contrary, Manuel should read the new collection of seminal critiques from across the world edited by our UKZN colleague David Moore, The World Bank, published by UKZN Press and launched this week at Ike's Books.)
The G20 attendees will be: Argentina, Australia, Brazil, Canada, China,
France, Germany, India, Indonesia, Italy, Japan, Mexico, Russia, Saudi
Arabia, South Africa, South Korea, Turkey, United Kingdom, United States,
and the European Union. Of these, the only even mildly progressive
governments are Argentina's and Italy's, and the world's most serious
reformers - the Norwegians - won't be there.
What is required, as ever, is for civil society to do the serious
anti-Apartheid organising, both within the Bantustans with their
unemployment, inequality, disease, squalor, obsequious leaders and
intensifying social protest, and far beyond.
(Dennis Brutus is honorary professor and Patrick Bond director of the UKZN
Centre for Civil Society.)
Nightmare on Wall Street
By Mick Brooks 15 August 2007
The financial turbulence of recent days has wiped billions off the price of shares all around the world. On Friday August 10th London's stock exchange, the FTSE 100, alone dropped £63 billion. What does this mean? Obviously market capitalisation, as it's called, is just a paper price. The same firms are still employing the same workers and making the same things. But these firms are suddenly worth £63 billion less than twenty-four hours before. And this should sound alarm bells for their workers - and for the rest of us.
Certainly, somebody's worried. The European Central Board is an austere body that seems to spend most of its time telling us we can't afford things. In a dramatic change of style, the ECB, the Federal Reserve Bank of the USA and the other central banks of the world threw $323 billion (£160 billion or so) at the financial markets in two days - August 9th and 10th.
The monetary authorities are concerned about a possible meltdown of the global financial system.
The origins of this stampede are in the US sub-prime loans scandal. Over the past few years, house prices have gone through a bubble in many advanced capitalist countries, including the USA. The bubble has been fed by easy credit terms powering house prices ever upward. In the States dodgy lenders have been chucking money at poor people who couldn't possibly afford to keep up repayments. These financial institutions have in their turn extracted their pound of flesh from those they regard as high-risk (sub-prime) borrowers. This sounds like a squalid corner of the money-lending world. It is.
The watchword of these lenders is the same as the speculators before the 1929 Wall Street crash. Pass the risk on to ‘the greater fool.' The house price bubble has burst in the States, leaving people to contemplate the fools' paradise the housing market always was. What about the sub-prime borrowers? Most have had their houses repossessed. Many of them are homeless. Forget about them. They're little people. They don't matter.
But this sordid little set-up is linked to, and threatens the existence of, the most respected and conservative banks in the world. Here's how. Financial operators in the City are sometimes described as ‘innovators' in the financial press. As far as we can see, most of them couldn't even invent the wheelbarrow - unless it was to take their bonuses home with. Nobel Prize winners in maths have been lured to the City in order to invent arcane formulae that guarantee to beat the markets! What this ‘innovation' usually amounts to is splicing and dicing financial instruments into ever more fancy pieces of paper. And one component of these bits of paper that all the geniuses in the City have been buying up is the toxic sub-prime mortgages.
Capitalism is a system where we all depend on everyone else for a livelihood, but we don't realise it. The way production is socialised and held together in the absence of a socialist plan is through the financial system. So, if large chunks of the banking system disappear into the wide blue yonder, it could have big repercussions for all of us.
The way capitalism is sold to us is this: most of us just want to get on with our lives. Fortunately there is a minority of risk-loving entrepreneurs who make things happen. It's all rubbish.
First we were told there are people in the City with brains the size of Saturn who understand the intricacies of high finance in ways most of us are totally incapable of. These guardians of the gate for the big banks didn't spot a thing and didn't raise the alarm. The present stampede shows these people are just cattle.
Secondly, capitalists are supposed to take risks. Well, they all betted on losers - credits that included the worthless sub-prime mortgages. So do they lose their money? No - the central banks hand it back to them and say, "Why don't you put it all on the black and see if you win this time?" Correction: the central bankers take our money and hand it to the incompetent losers and outright crooks who run the financial system to give them another punt.
Will the pandemonium spread to engulf the real economy? We don't know yet. What we do know from this incident is that capitalism offers us a life of permanent insecurity
Stock exchange gyrations were the big story at the end of last week. There was a smaller story. The National Institute for Clinical Excellence decided not to allow a drug that slows the onset of Alzheimer's disease to be prescribed on the National Health Service. NICE says the drug is expensive. It is. If prescribed, it could hugely improve the quality of life of people with creeping dementia.
Even more important, it could offer relief to their carers. Most Alzheimer's sufferers are looked after at home by people who may themselves be elderly and in poor health. They are not paid, often have to give up employment opportunities to look after the patient and get very little help from the state.
Carers are funny people. They don't think about money all the time. They are driven by a commitment to their loved ones. In the case of Alzheimer's, the sufferer may not even recognise their carer.
When NICE says we can't afford the Alzheimer's drug, think about the £160 billion the central banks threw at the financial markets in two days.