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In three months, the G20 group of major financial powers will join us in South Africa, hosted near Cape Town by the gregarious finance minister Trevor Manuel. As usual the ministers will wine and dine, and protesters will suck teargas.
But elite self-congratulation will be muted, for the economic officials were reminded during the recent financial meltdowns that when Wall Street has a cold, others get pneumonia.
Or consider a metaphor that better spreads the blame: 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 lost nearly US$100 billion–17% of its value–between July 23rd and last Friday.
Yet SA 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’.
Did the relaxation of exchange controls represent a shock absorber or volatility-amplifier? Since dropping the ‘financial rand’ dual exchange rate 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 starting in 1999.
Because of periodic currency crashes and Mbeki’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.
Last month, even the IMF’s annual Article IV Consultation report admonished Manuel’s team for the enormous current account deficit, far higher than even the USA’s (and than Thailand when it melted down a decade ago). According to the IMF, South Africa ‘could be adversely affected by weaker appetite for emerging market assets, a global slowdown, or a sharp deterioration in the terms of trade.’
But both the IMF officials and Pretoria’s two respondents–Peter Gakunu and Goolam Aboobaker–argue that ‘sound macro-economic fundamentals, particularly the low external debt together with a well managed and stable financial sector and a flexible exchange rate regime would assist in mitigating this risk.’
As a result of this myopic approach–so similar to the IMF’s soft-peddling of East Asia’s problems just prior to its 1997-98 crashes–South African financial analysts have taken to blaming the victim: the USA’s vast network of ‘Ninja’ borrowers (No Income, No Job or Assets).
Yet as consumer advocate Ralph Nader argues, ‘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 a new Bantustan within Global Financial Apartheid. Consider Apartheid’s three minimum requirements for the homelands, in which roughly half of black South Africans were segregated:
– 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’);
– these agents expressed a willingness to put down local demonstrations using repressive means (and witness regular police brutality against widespread contemporary municipal protests); and
– 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 export-orientation).
The Bantustan 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 George W. Bush termed Mbeki when it comes to Zimbabwe).
Given these power relations, the challenge faced by the infamous Bantustan dictators–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, 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, 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 last week 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 Bantustan military official who turned anti-apartheid and hosted the African National Congress 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 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 dust in the air concerning the ANC’s post-Mbeki leadership succession race–which culminates in December–to justify the attention of trade unions and Communist Party attention to one more elite talkshop.
Like Buthelezi decrying 1980s apartheid (while killing its genuine Zulu 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 colleague David Moore, The World Bank, published by UKZN Press.)
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 progressive 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.