Neoliberalism Must Go

South Africa has been captured by orthodox economics, which has revealed time and time again not to work in our context. Unfortunately, those in power remain intent on continuing in the same vein, thus reproducing the status quo. For the economy and society to transform, we must remember how we got here, and how Vision 2030 is unlikely to manifest.

At the dawn of democracy, South Africa’s economy was performing poorly after violent internal protests, international sanctions and post-cold war ideological changes. The ANC’s Department of Economic Planning (DEP), which would later become “Team Finance” in the National Treasury, drove the ideological underpinnings of the post-apartheid state’s fiscal institutions. The DEP’s employees were trained at Goldman Sachs in New York in 1992 in collaboration with the World Bank and the International Monetary Fund (IMF) – all considered the bulwarks of neoliberal economics. In 1996, in step with this, the National Treasury implemented the Growth, Employment and Redistribution (Gear) strategy, which was composed of neoliberal macroeconomic policies, the tenets of which can be summarised into four categories: stabilisation, liberalisation, privatisation, and rationalisation.

Policy reforms, but little progress

Gear’s medium-term policies included “a relaxation of exchange controls, trade liberalisation, ‘regulated’ flexibility in labour markets, strict deficit reduction targets, and monetary policies aimed at stabilising the rand through market interest rates”. This supply-side approach was aimed at the rapid expansion of the private sector and the eventual shrinking of the state’s role. Similar to the World Bank and IMF Washington Consensus strategies, the belief was that the liberalisation of the economy would lead to accelerated economic growth and a reducion in poverty and inequality.

At the same time, the labour constituency and others presented strong critiques of Gear. In the late 1990s and early 2000s, the dominant policy rhetoric became one of “microeconomic reforms” in an otherwise “stable” macroeconomic environment. Macroeconomic policy was to remain untouched – bar the formal introduction of inflation targeting in 2000 – and microeconomic interventions would resolve “blockages in the economy”. Certain progressive policy changes were made, including moderately expansionary fiscal policies, recognition that government spending can “crowd in” (rather than “crowd out”) private sector investment, a rise in government social spending, and the recognition of the need for an active industrial policy. However, the macroeconomic policy framework remained largely unaltered, and different aspects of government economic policy became increasingly contradictory.

The Accelerated and Shared Growth Initiative for South Africa (AsgiSA) was launched in 2006 with the desire for shared growth and to achieve its target of halving unemployment and poverty between 2004 and 2014. This goal would only be achieved if GDP grew at an average of 4.5 per cent between 2007 and 2009, and by an average of 6 per cent between 2010 and 2014. Before the global financial crisis, the economy grew, but did not yield these desired targets. In 2010, the New Growth Path (NGP) framework was released. The NGP was aimed at enhancing growth, employment creation and equity. The policy’s principal target was to create five million jobs over the next 10 years. The NGP combined with the Industrial Policy Action Plans (IPAP) would support the growth of industry, particularly manufacturing.

The NGP represented the most progressive and interventionist policy framework to date. However, it also attempted to accommodate the conservative macroeconomic policy within a more developmental economic strategy. COSATU’s response to the NGP titled “Government’s New Growth Path Framework: One Step Forward, Two Steps Backward: A response from the Congress of South African Trade Unions” expressed that the NGP did not represent a new breakthrough in economic thinking and reinstated Gear positions. As a result, labour unions insisted on its overhaul.

In 2011, the National Planning Commission drafted the National Development Plan (NDP).  Gear, it was argued, had been successful at improving the country’s financial situation. However, the impacts were mixed, and the socioeconomic situation remained dire. The NDP would have to cover Gear’s shortfalls. The NDP is reflective of the post-Washington Consensus, which had evolved, by the late 1990s, from a solely economic growth agenda to “the neoliberal, market-friendly approach [that] … places sustainable, egalitarian and democratic development at the heart of the agenda”.

Macroeconomic policy in the NDP is consistent with post-crisis policies, which do not challenge the structures of economies, but rather look to strengthen the neoliberal agenda. The recent Economic Recovery and Reconstruction Plan continues in a similar vein. It emphasises the importance of improving education – a desperately needed intervention, but problematically framed as though skills will, by themselves, create jobs. It calls for expanding the role of the private sector in “network industries” that provide essential public goods – electricity, communication, transport and water – and prioritises supply-side microeconomic interventions. These include the deregulation of product and labour markets. The recovery plan reaffirms the existing macroeconomic policy.

Building a new economy will require more

What we have experienced over the past 27 years is orthodoxy with rays of progressive thinking. This approach has not yielded the developmental outcomes we desire for our economy. Recently, there has been a doubling down of neoliberalism, with austerity or fiscal consolidation as the tool of choice. Building a new economy will take much more than the current proposals for structural reform. No matter how conducive the environment is for capital, we will not build a new economy with more of the same. Macroeconomics is predicated on a set of distributive relations across different social groups, which entails distributive choices across various social groups, and within and across households.

In South Africa, we must understand how social reproduction – the production of goods and services and the production of life as part of one integrated process – was engineered through settler colonisation and how the systems of exploitation and oppression have shaped the current context during apartheid. We must ask ourselves how and if our current economic policies address the predicated issues? Systematic oppression and exploitation of black labour played an early and deliberate role in shaping the asymmetrical power relations in the industrialisation and wealth accumulation processes, and more generally, the trajectory of capitalist accumulation.

This system included the cheap labour of black men and the unpaid and underpaid work of black and coloured women. It is no wonder that in 2015, 54 per cent of full-time workers earned below the “working poverty line” of R4 125. The apartheid state played an active role in enforcing spatial and socioeconomic separations between production and social reproduction. The labour migration system, established to supply cheap labour to the mining industry, marginalised the rural population’s land-based livelihoods, with few compensating employment opportunities. It demanded that those left behind in the former Bantustans undertook unpaid labour, for example, subsistence agriculture and rearing of children, to reproduce the labour force sent to the cities and the mines.

Former Bantustans remain underdeveloped. These structures set black men apart from their families, contributing to the long-term fragmentation of families and men’s detachment from childcare. Black and coloured women carried the burden of social reproduction, while white women displaced their responsibilities onto black women, hiring them as domestic workers to take care of their homes and children. Care was deliberately feminised. Black and coloured women have, historically, been excluded from waged work, and when they are in waged work, they are underpaid.

In the current context, black and coloured women remain over-represented in the lowest-paying occupations (such as domestic work) and under-represented in the highest-paying occupations (such as legislators, senior officials and managers). The dispossession of land from the black majority has meant that the people have been deprived of natural resources, such as water. This has made social reproduction, in the absence of wages and adequate state support, even more difficult, for instance, in the fight against disease and securing adequate sustenance.

Macroeconomic policies in our country have not addressed how these processes have been reproduced. Thus, the social reproduction crisis is only deepening in our country. We must resist mainstream approaches that accommodate and naturalise power. Economies are a set of decisions about how we socially reproduce. These decisions, whether implicit or explicit, cannot be left to the spontaneous whims of the markets. The pandemic has only exacerbated these pre-conditions.

Now more than ever, we need an interventionist state that is bent on the reconfiguration of social and economic power, is human-centred, and considers the regenerative interaction between public investment, labour productivity, socioeconomic development, rights, and equity. This begins with abandoning neoliberalism.