| Subscribe to our free newsletter |
 |
| Stay up to date with changes to our website, news about articles in forthcoming issues of Amandla!, news about our Discussion Forums and Seminars and much more ... click here to subscribe |
| Amandla! Office: 129 Rochester Road, Observatory, Cape Town, South Africa Postal Address: P.O. Box 13349, Mowbray, 7706, Cape Town Telephone: +27 (0)21 4472525 Fax: +27(0) 866378096 |
|
|
| Amandla! is published by |
| Alternative Information & Development Centre (AIDC) a progressive activist think tank that focuses on the multi-dimensional crisis. AIDC sees the necessity of integrating both the ecological and economic dimensions of the crisis into its programmes. It does this from the perspective of developing alternatives that ensure planetary sustainability and social, economic and environmental justice. |
| New Growth Path: pasting over crisis cracks with ‘social pact’? | by Liv Shange | | Print | |
|
Late last year, the Department of Economic Development unveiled the New Growth Path (NGP) as a recipe for completely restructuring SA’s economy from the world’s most unequal society, dominated by finance capital, based on mineral extraction and export, with mass unemployment, a chronic current account deficit, a volatile and over-inflated currency, to the ‘developmental state’. The first phase is to be implemented during 2010-2011. By 2020 five million ‘decent’ jobs should have been created, and the official unemployment rate, today just under 25% (in reality close to 40%), should be down to 15%. Finance Minister Pravin Gordhan’s February budget was hailed as a balancing act in line with the NGP, promising more jobs while reassuring capital that ‘SA’s public finances remain in safe hands’ (Business Day, 2011/02/24). Key elements of the NGP: - The transformation of SA into a ‘developmental state’ - A national consensus on wages, prices and high savings through compulsory pension schemes - Suppport for more diverse and labour-intensive production; raising economic growth to 7 percent/ year by 2020 - Measures to curb currency volatility and the flow of ‘hot money’ which is inflating the value of the Rand making exports expensive and uncompetitive - Accumulating the state’s capital reserves - Encouraging Foreign Direct Investment The NGP is an attempt to manage SA’s conflicting class forces through a national consensus. Key is a ‘social pact’ between government, capitalists and workers: government will provide infrastructure and incentives for growing private businesses; capitalists will commit to job creation, and workers will accept ‘moderate’ wages. SA and the global economic crisis The NGP is government’s response to the “severe economic downturn.” In upbeat tones, the global crisis is presented as an opportunity for SA and the continent. Admission into the “BRICS” group of emerging market economies (Brazil, Russia, India, China, SA) is a springboard to achieve SA’s developmental objectives. The NGP’s prospects But what are the NGP’s prospects? Technically the recession ended in late 2009, but SA’s, and the world’s, recovery has been very weak. SA’s 2010 GDP (Gross Domestic Product – the total value of all goods and services produced in a year) growth was 2,8 percent, and is expected to be 3,4 percent this year – based on hopes of continued world economic recovery. Net job losses continued into the first quarter of 2010. Last year, jobs creation totaled +93 000 – far short of the NGP’s 500 000 a-year target. At the current growth rate, jobs lost in the recession will be replaced only in 2014. Those employed support an average eight people, so unemployment impacts on immediate and extended families and whole communities. Most households are still battling the effects of the recession. Now many bourgeois analysts recognise there is a high risk of a new global crisis. World food and commodity prices are at their highest levels ever, driven by speculation and demand, especially China’s, and global warming-linked disasters like the drought in Russia and flooding in Australia. Wheat prices rose 76 percent over the last year, maize 88 percent and soybeans 47 percent. The United Nations’ Food and Agriculture Organisation (FAO) has warned that agricultural commodity prices may rise by a further 20 percent this year. High food prices are an important factor fuelling uprisings in North Africa and the Middle East which have sent oil prices soaring. With the imperialist attack on Libya and popular unrest spreading in the region, including in Saudi Arabia, the world’s largest oil producer, the oil price continues to rise. In the two years up to February 2011, SA’s petrol prices rose 36 percent. There have been another three increases since with more to come. Also in the past two years, municipal service charges increased by 62 percent and electricity by 38 percent. Electricity will rise a further 25,8 percent in July, followed by another 25,9 percent next year. Bread prices shot up 24 percent in the past year alone. Consumers are battling just to keep their noses above water. Household debt remains at 78 percent of disposable income despite interest rates at 30-year lows. Now inflation is increasing while demand decreases. SA’s working class and poor have not experienced any recovery. New global downturn ahead? Economic analysts concede SA’s recovery is limited to a few sectors like finance and retail – both fueled by consumer borrowing. Despite low interest rates, the corporate sector is not borrowing enough to create jobs. Similarly the near-zero interest rates in the major economies have not stimulated investment and growth. Instead, the massive stimulus packages have created a new threat of sovereign debt defaults; that is, whole economies unable to pay their debts and going bankrupt. In the US this is made worse by a crippling trade deficit and a budget deficit so high special laws had to be passed to avoid the government from running out of money. Rating agency Moody’s has downgraded US debt outlook to negative, sending world markets panicking. The prospects for the world economy are, in short, very dim. Eisuke Sakakibara, Japan’s former top currency official, believes that the world is headed for a major downturn that will last until 2018. The Committee for a Workers’ International (CWI – the international socialist organisation DSM is affiliated to) predicted the likelihood of a ‘double-dip’ recession. Nouriel Roubini, one of the few bourgeois economists who foresaw the financial crisis, warns that rising oil prices are likely to trigger a new crisis comparable to the drawn-out depression of the late 1800s. Organic crisis of capitalism The unprecedented worldwide government stimulus packages aimed at countering the effects of the economic meltdown (the R110 trillion global bank-bailout, the US’ latest ‘quantitative easing’ of $600bn or China’s combined stimulus packages totaling over R40trillion) only postponed the crisis. Capitalism has no solution to the periodic crises that grip it. It attempts to overcome them by destroying the very wealth it has created. In 2008-10 wealth worth $50 trillion – equal to the value of one year’s world production of goods and services – was lost, says the International Monetary Fund (IMF). After decades trying avoid a major crash, world capitalism has no way out now. The few growth pockets in Germany, Brazil and some Latin American countries are exceptional occurrences and cannot counter the tidal wave building worldwide. Despite the hype
|
