Economic growth and poverty alleviation?

Speaker: Phillip Dexter (Chief Research Manager: Social Cohesion and Integration Research Programme, HSRC)

Respondent: Prof Pieter le Roux (Institute of Social Development, University of the Western Cape)

Harold Wolpe Memorial Trust forum meeting

Institute for Democracy in South Africa, Cape Town, 24 June 2003

SUMMARY NOTES

PHILIP DEXTER

The SACP does not have an economic policy as such, but we do have a strategy and a programme to address the economic challenges of South Africa, to eradicate poverty, and to deal with the issues that face the working class.

In 1994 the Reconstruction and Development Programme (RDP) seemed to capture the collective sense of how we would address the challenges that face us as a country and the social problems after apartheid. We woke up one morning in 1996 and there was the Growth, Employment and Redistribution macroeconomic strategy (Gear). Some said it replaced the RDP, others said Gear was an extension of the RDP. Whatever the views, there was a strong sense that there was a shift in the priorities that we were trying to address. There has been a great deal of debate and a lot of division since in the liberation movement around the necessity for Gear.

Most South Africans would agree that we have a list of national priorities as long as any other developing country. Our unique history, particularly in the last decade and a half, has ensured that we have addressed a significant number of these, not least of all establishing a just constitutional order, a vibrant democracy and ending ‘legal’ or formal racial discrimination. In the past decade, the ANC-led government has made advances in terms of alleviating poverty, creating a climate of peace and security, and stabilising the economy. Despite these achievements, we still rate as one of the most unequal societies in terms of health, wealth, opportunity and income distribution. Unemployment is far too high and racism still walks tall in our country.

The idea that any government could come to power and ‘deliver’ to overcome the legacy of colonialism, apartheid and capitalism in 10 years is naïve.

The terrain on which the national democratic revolution takes place and the character of this revolution is such that there are many challenges that need to be overcome simultaneously. Of the many objectives we have, the two top priorities are to promote economic growth and to eradicate poverty.

Some people don’t like it when you say this is the point is made that this is obviously a capitalist society. But we do, but we live in a capitalist country in a world in which a particular kind of capitalism is rampant. Capitalism has consistently failed to address the needs of the majority of the world’s population. Poor growth and poverty are direct outcomes of the failures of capitalism. We need to bear this in mind. It does not mean we believe this it is desirable or that and we want it that way. Anybody on the Left would not want to accept that the way things are at the moment is all right. We want to change it, but we have to accept that the end of socialism as practised in Eastern Europe and social democracy in the classical sense is a reality. With this have come terrible consequences for the vast majority of the world’s population.

In our own case, the people have within their grasp the opportunity to build a developmental state. Our political history has bequeathed us a strong and popular national liberation movement and working class party, as well as progressive trade unions and civil society organisations. These organisations, including the ANC, SCP, the Congress of South African Trade Unions (Cosatu), community-based organisations, NGOs, popular organisations and movements represent a consciousness in working people and sections of the intelligentsia in our society. They represent an alternative vision. In spite of the 1994 democratic breakthrough, the trajectory of our revolution is contested. It is clear that there is incredible pressure on the national liberation movement. At the same time, the class structure of our society is becoming deracialised, with some black people now part of the bourgeoisie. The rest of the society has stayed the same. We have strong, radical, working class movements. There are two or three critical issues that we need to grapple with in this regard. The process of class formation is the most important one.

Since the government is delivering key basic services, many of them free, we already have elements of classical welfarism in place. There are those who scoff at these measures, but we need more of these, not less. Measures such as grants, free basic services and equal opportunities in education and training provide the only real basis for beginning to level the playing fields in a society as distorted as ours. But we need to go beyond such interventions if we wish to overcome the structural weaknesses of our economy.

Aspects of our economy are more stable than they have ever been. Indicators such as inflation and interest rates have begun to move in the right direction, enhancing this stability. But the dual economy, as highlighted by President Thabo Mbeki in his address to the nation earlier this year, means the impact of this stability is felt positively by corporate South Africa and the wealthy, and either has no impact or is felt negatively by the poor and the marginalised.

These structural weaknesses still make us vulnerable, in terms of the price of oil, the value of the rand, export performance, interest rates and investment flows. Such stability as we have has not, and cannot, address low growth, inequality, mass unemployment and poverty. If we are to ensure faster economic growth, better distribution of wealth and the eradication of poverty, there are a number of crucial battles to be fought and won in the medium term. We need to intervene decisively in the economy to create employment and economic opportunities for the large section of our population who merely eke out an existence. To achieve this microeconomic reforms are of critical importance.

We sit at one of those crucial moments in our society where we may again make a choice. The Growth and Development Summit (GDS) agreement reached between the government, business, labour and the community in Nedlac represents a moment where these constituencies have an opportunity to begin to work together to overcome the structural weaknesses of our economy and to jointly implement strategies that will eradicate poverty. This does not mean abandoning the struggle for socialism or for other objectives such as a shorter working week.

Within the space they have created, the poor and the working class in particular have the opportunity to ensure that job creation takes place, and we can ensure that investment occurs at the level necessary to create higher growth and redefine empowerment away from the conception of it being essentially black business development. In a society where patterns of income are so obviously determined by race, large sections of the people who benefit should be black, and black business development is important, but we must make sure that it is not just a small group that benefits. Empowerment cannot be reduced to what has been called an ‘Irish coffee’ – a bit of ‘chocolate’ sprinkled on top of a layer of white ‘cream’ sitting on top of a large amount of black coffee. It must be a broad-based process.

The GDS creates the opportunity to extend basic services while continuing to struggle for more free services for the poor. We need to strengthen the role of the developmental state through improving public services and especially local government, where much of the success of the agreement will be measured.

The SACP views all these challenges and opportunities as benefits and outcomes of the national democratic revolution. That we have achieved them is testimony to the success of the ANC-led tripartite alliance. The opportunity to discipline and direct private capital is now within our grasp, but it will only happen if the objective of building a more popular movement for empowerment is achieved.

It is through the state, co-operatives and other forms of collective capital accumulation, access to land and through acting as collectives of consumers in the short term that we can increase the pace of growth, share growth more equitably and eradicate poverty.

We as the SACP are part of the tripartite Alliance. We make inputs on policy. After the unbanning of the liberation movements, there was a fanciful notion that we could simply make proposals to the ANC and those would become its policy. If we want to get the kind of policies in place that will impact on poverty, we have to mobilise people. In a very profound way we have been able to impact on incomes and on housing, among other things.

The party’s strategy and programme involves medium-term objectives towards building socialism in the society. This view permeates the trade union movement, large sections of civil society and large parts of the ANC. Firstly, we must impact on power relations in race, gender and class. This can only be done through building some form of socialism, led by our vision of fundamentally altering the structure of society. Secondly, we must consolidate democracy in the society. Some say we have achieved democracy, but the experience of Zimbabwe, other African countries and some South American countries shows that cannot leave the survival of our democracy to chance. Our democracy will be challenged were we to try to alter the fundamental economic structure of the society. Thirdly, we need to achieve this restructuring through the developmental state. The only viable delivery mechanism is a state which acts intelligently and is responsive to people’s needs. Fourthly, we need microeconomic interventions – for example, the creation of employment through such means as public works programmes and the creation of economic opportunities that are not reduced to a few opportunities for a few individual entrepreneurs. We are aiming at real empowerment and the eradication of poverty. The GDS has explicitly and formally recognised that the state must intervene to create employment opportunities through public works programmes, not just digging roads, but launching home-based care programmes and crèches, and extending services to the poor. Addressing poverty is not only about giving people a grant. We accept the importance of a Basic Income Grant, but infrastructure jobs must be created as well.

We need to strengthen the role of the state in partnership with business and trade unions. Capacity building in the state is essential. We need to discipline and direct private capital in our society. The process of our struggle has gone through particular moments. During the first few years of democracy people were very complacent because they had democratically elected a government. But what changes things is ordinary people mobilised and organised. There has been a period of reawakening of people in active politics. We see this in single issue campaigns such as the Treatment Action Campaign and the Basic Income Grant campaign. Without this we cannot tilt the balance of forces in favour of the poor and marginalised. Powerlessness, racism and discrimination is what we have to conquer. We won’t get economic growth and eradicate poverty (rather than merely alleviating it) unless we free resources and channel them to those people who currently have nothing.

PIETER LE ROUX

This debate is not a debate of superficial interests – the free market ideology has established intellectual hegemony in the world. More than half of the students in my classes now say they support the free market. There was an ideological vacuum after the fall of the Berlin Wall. Many communist parties redefined their visions but, unexpectedly for the social democrats, their positions had to change too. There are high employment costs and unemployment even in social democracies. I believed in the Swedish social democracy model, but that was when it was a high growth economy in the 1970s. The growth model of the USSR in the 1930s enabled the Soviet Union to withstand the German onslaught during the Second World War, but there have been significant changes in the world since then. The developmental state has undergone changes because of the limitations which have become apparent with that approach.

We should be thinking about a future in which we use the power of private production but see to it that resources are more evenly distributed. Black economic empowerment should not amount to the ‘Irish coffee’ Philip spoke about, its success is fundamental to the fortunes of the poorest 50% of the population. There is a high level of resentment because most people are not in the ‘chocolate’ that is currently sprinkled on top of the ‘Irish coffee’. Extension of services to the majority is very important but we are not fighting against the privatisation of public services.

There has been a debate about whether the government should provide a Basic Income Grant (BIG) or create employment through public works programmes. The public delivery of services was used by the National Party under apartheid to garner support for itself. It created massive public sector employment for its supporters by delivering services, albeit to the white minority. However, although public works created employment for the poor whites under apartheid, we do not have management capacity to deliver on the scale that is needed. Public works would be wonderful for the 100 000–200 000 who would benefit, but there are 6 million unemployed people. In Gauteng, for example, 95% of anti-poverty projects did not deliver what they said they would, and all of these projects were public works programmes.

The introduction of a BIG, provided it is well administered, would eliminate absolute destitution within four years. (In Namibia a report on such a grant was submitted to the Cabinet, but it has not gone any further.) A BIG would enable people to not only feed their children, but also to go out to look for work. On the subject of whether grant money would be spent wisely, the existing Child Support Grant is paid to the caregiver, and, in most cases, the caregiver spends it well. We should move the debate away from an either/or approach to public works and BIG. They could complement one another. BIG has never been presented as a panacea but, if it is implemented, it will certainly address the lot of the poorest 40% of South Africans.

The current world economic system will crash, but we can’t wait 20 years for it to do so. We need to shift to a new vision of what needs to be done now.

DISCUSSION

Are those with jobs an elite group?

· I have revisited Harold Wolpe’s Race class and the apartheid state. He asserts the role of class. I rejected the term ‘underclass’ before, but there is a mass of people who will never get a job and are unemployable, excluding the informal sector. They will turn to crime. Those who are employed and in a union are in an elite group insofar as they have a job while others do not.

· The ‘labour elite’ argument is not valid, the statistics show most of the money earned by workers goes to others in the form of remittances. Neither capital nor the state supports the poor, the working poor do.

Philip Dexter: I don’t accept the notion of people being unemployable. Everybody has some useful purpose in society. I know not all people could be trained to be computer programmers, but the idea that there are people out there who cannot be trained to do something useful is nonsense. The notion that people who are working are part of an elite is wrong – workers are supporting 8–10 people each on average. The only elite is the one with the hold over the resources – the filthy rich. They must give up some of what they have. We will not get anywhere by telling workers they should be grateful for the jobs they have.

The SACP is not delivering a real critique

· I am disappointed. I came to a forum bearing the name of Harold Wolpe to hear a talk by Philip Dexter representing the SACP, but I have not heard a radical critique of what is going on or any exciting ideas. Philip has given a general rambling presentation that did not come to anything.

Philip Dexter: The SACP’s critique may not be radical enough for some, but we all have a radical vision. We cannot sit at home and say ‘I wish there was communism’, we have to do what we can within the current constraints.

The Growth and Development Summit

· I am disappointed to hear Philip praise the GDS, it was just a public relations exercise. Government ruled out the possibility of any discussion about Gear and the other policies that have contributed directly to poverty and its reinforcement. The SACP has not progressed.

Philip Dexter: Labour wanted more from the GDS, and we could have got more if the Alliance had got its act together, but that did not happen.

Public works programmes, training for employment and BIG

· I don’t think Philip was holding public works up as a magic bullet or that Pieter is holding out that BIG will solve all our problems. We need to boost incomes and create sustainable livelihoods.

Pieter le Roux: The reality of what the public works programme can deliver will be seen in the next three or four years. I am predicting that it will only create 100 000–200 000 jobs, but I would be happy to be proved wrong.

Philip Dexter: The extension of public works programmes is important. We think it will create 300 000–600 000 jobs. If public works is linked to skills development through sector education and training authorities (Setas), it could create momentum for drawing people into the economy. BIG is not a panacea, one of a number of possible interventions.

Pieter le Roux: To push for public works is not a victory. We are hoping to do what Sweden did – there people were retrained when they lost their jobs, but we must remember the Swedish population is well educated, unlike most of the people here. We will not get a massive return on training. There is no evidence that people move from training into jobs. This is what Working for Water was supposed to do, but it has not done so. With public works programmes at the moment, half of the money goes for training or materials, and only half gets to the people who are supposed to benefit. If we did things on a modest scale, public works programmes would work. However, it is not possible to deliver public works at a scale which would deliver 600 000 jobs. I agree that BIG is not a magic bullet, but many on the left underestimate its potential. It is sustainable on the level that it has been proposed – there has been detailed work to show that this is the case. In spite of the fact that minimum wage legislation has been extended to domestic workers, some of these people are working for as little as R300 a month. If BIG were to be introduced, you will suddenly have ‘capitalism between consenting adults’ because people would know they have at least some income, so they would no longer be compelled to work for next to nothing. With a BIG, women will no longer be dependent on their husbands – when US women became eligible for social security, many were able to leave abusive husbands. BIG is more than just another idea in the hat. It will cause a fundamental change if it is implemented.

Philip Dexter: We have made it clear in the SACP some form of a grant is essential, but it is not the be all and end all, and it is not sustainable in the long term.

· I don’t have a problem with a BIG, but we cannot sustain families on a BIG, the amount of money is too small.

Job retention and job creation

· Where we have people in jobs lets keep them in jobs. Some things need to be on the back burner, for example, the current restrictions on plastic bags, because they destroy jobs. We need to put money in people’s pockets to push up aggregate demand.

· We must have a job creation programme which creates quality jobs, because that is the only way people will be able to participate socially and economically in the society. The balance of forces is against the majority of people. Public works will create employment, but we need to ensure that we create quality jobs.

Tax consumption, not investment

Pieter le Roux: Taxes should fall on consumption, not on investments.

Co-operatives

Pieter le Roux: Co-operatives work well in certain circumstances.

Neoliberalism and US hegemony

· Since the end of the Cold War and the collapse of the socialist bloc, neoliberalism has had a period of dominance. But now people see that neoliberalism has not delivered growth, it does not do what it promised to do. The New Left Review says that the US hegemony is declining; that the US is very powerful, but ideologically, its hegemonic hold is not as strong as it was. The US does not try to persuade anyone anymore, it tries to force countries to do what it wants. This forceful approach creates an opportunity for change.

· Trevor Manuel likes to say we don’t choose the world we live in. Historically there was always a shifting power between the rulers and the masses – there was a continuing power struggle. But American military took hold of the technology of communication, command and control. By doing this it has created a massive concentration of power which is both overtly destructive and insidiously destructive.

Consumerism

· There is an elite in the world for whom power and privilege is an end in itself. They use consumerism as invisible oppression, and they discard those who are not necessary. One consumer company has trained young photographers to go out every day and gather information about what is ‘cool’. This information is then translated into commercial activity which enslaves the consumers.

Gear

· We need to move away from Gear because it has been an absolute failure. The macroeconomic stability it promised has not materialised. The rand fluctuates. The greatest threat to South Africa is poverty, so poverty must be prioritised over macroeconomic stability.

Philip Dexter: The neoliberal agenda is discredited, but no politician will publicly say he or she is wrong. There has been a fundamental shift, let’s use it to our advantage, let’s take up the space that is given to us.

The state and privatisation

· We must go on the offensive against those trying to undermine the role of the state. The state must be the primary driver of development and service provision, it must lead.

Philip Dexter: We need to harness private productive power, we have to engage with private capital, recognising that those people own the means of production. An important part of our strategy has been to create different forms of ownership and fundamentally ensure we have a strong state which delivers services. I agree with the struggle against privatisation.

Local currencies and development

· We should create local currencies which can only be spent locally. This will have a powerful multiplier effect on local economies. This is not left wing or right wing, communist or capitalist. Do we really need to grow our economy for exports and tax income and property, or should we tax those things that are bad for local economies and promote things that are good for local economies.

Transforming the education system

· Class has to do with our education – we are taught we belong to a particular class. The privatised education system means that nobody without money can go to a good school. Those who go to disadvantaged schools can only aspire to disadvantaged tertiary institutions.

· The young people who are said to be currently unemployable are products of the 70s. They are people who were driven away from school by the system. Now they cannot get jobs, or the jobs they have are poorly paid. We must transform the education system. We need to open up access to schools. A child of a domestic worker will not get to go to a good high school because the parent only earns R800 per month. We should use the GDS platform to make sure the cost of education comes down.

An integrated approach to development

Philip Dexter: We have tried to go back to the vision of the RDP – an integrated approach to development. We want to provide some basic form of subsistence to free people from having to scrape to survive. Public works programmes are one possibility. Another possibility is assisting people to be engaged in self-help activities, in creative activities, and in small-scale entrepreneurial activity of the kind which currently receives no support. This is not a short-term process. We need sectoral interventions which strengthen productive capacity in different sectors. Public works are partly about providing services. You cannot ask people to work for nothing to make a profit for a private owner, but you can ask people to do this to enable the state to provide education and health care. We need to concentrate on getting investment to raise levels of economic growth. Government wants to implement programmes in Pretoria, but we must build up capacity at local government level to ensure that our programmes are implemented on the group. Integrated development will not build socialism as such, but it will take us out of the cul de sac we are currently in.