AIDC Statement on New Growth Path, 2010-11-30

AIDC warns: NGP? Do not repeat the tragedy of GEAR as a farce!

The Alternative Information Development Centre (AIDC) welcomes that the
government’s New Growth Path (NGP) document recognizes the hard facts about
mass joblessness, poverty and inequality in South Africa. A new economic policy is
indeed necessary and the NGP document correctly points to how the global crisis has
opened up “new policy space” for a country like South Africa to “go beyond
conventional policy prescriptions”.

This acknowledgment must be strongly commended. Not least, because it
encourages the questioning of what follows in the document itself. The NGP document
suffers heavily from a balancing act within the government between neoliberals,
Keynesians and some who even describe themselves as Marxists.

Glimpses of clear sunlight in a long winter only indicate that summer is possible,
but are not summer itself (not even spring). The NGP recognises the need for a new
paradigm and tries to provide a more holistic plan for the economy. Unfortunately it is
not a “major paradigm shift”. We must not repeat as a farce the public support
tragically bestowed on GEAR by a few working class organisations in 1996. The NGP
does not use the new space it wisely acknowledges to clear a new path away from
GEAR and neoliberalism.

The authors of the document wish to break with GEAR macroeconomics.
However, NGP is completely silent on the need for capital controls to pursue any of its
more interventionist suggestions. Parallel to the presentation of the NGP, the
government has confirmed in its Medium Term Budget Policy statement that further relaxation of capital controls will be made. This is further evidence of government
operating at crossed purposes.

The NGP preaches “fiscal restraint” and is silent on taxation. While many of the
proposed projects inspire, it remains unclear where the money will come from. The
NGP hands over the main on-the-ground responsibility for job creation to profit-led
companies in the private sector. The results of doing so are already well known in our
country.

Indeed, the document seems to identify a need for greater state control, but at the
core of its economic strategy is a plan to decrease the weight of the public sector in the
economy. The GDP-measure is composed by the expenditure of the state and the value
of the total production for profit. The NGP projects a GDP growth per year of 4 to 7
percent for the entire economy, but only 2 percent a year for state expenditures. Such a
development would every year reduce the overall weight of the public sector in the
economy. The economy’s submission to the whims and short-term profiteering of so
called market forces would increase therefore, year by year. Reducing the relative size
of the public sector in the economy is a hallmark of neoliberalism.

The social contract between rich and poor proposed at the end of the document
may succeed in constraining the fight for a living wage for workers (which is their
right, and which would be good for the economy). However, nowhere else in the world
have proposals like this had any effect on what remuneration CEOs and shareholders
pay themselves. A small and historically empowered minority controls the bulk of the
surplus produced in the economy. How that surplus is used and distributed is at the
discretion of the economic elite.

In addition, the very notion that more profits to companies would create more
jobs in our country is a fallacy. This can be deduced from the beginning of the NGP
document itself, showing its ideological inconsistency. The NGP says that South
Africa has had 16 consecutive years of increasing profits at the expense of workers
wages. Since 2000 alone, we have discovered through research at AIDC, more than
R400bn (at current prices) have in this way been shifted over from wages to extra
profits. Unemployment has continued to grow.

Perhaps in compliance with the needs of geo-politic positioning, the NGP
proclaims SA as a “middle-income economy”. Such a country, according to this
document, shouldn’t spend so much on health as a share of GDP as South Africa does,
and proposes a cut in this share. That proposal is very unfortunate. If savings are made
on private healthcare costs by the introduction of a NHI, they should be redirected to
increase provision of public healthcare in the rural areas and other under serviced areas
of the country. In that process, tax financed health expenditure as a share of GDP
might as well increase substantially, may that then be at the expense of private
consumption!

Investments in health are investments in a better life for all. From 2000 to 2009,
TB prevalence has increased in SA with 51%. The HIV prevalence is 11% in the
population and more than 15% of the working age population between 15 and 49 years
are infected! Such a dire health situation at the heart of the labour force means that
health expenditures are not costs, but investments in sheer economic productivity.
There are 80 000 vacant jobs in public health. They don’t need to be “created”.

In the midst of a global economical crisis as well as a climate crisis, South Africa
needs an employment plan, rather than a traditional “growth path”. Employment
should take place where it is needed, not where private for-profit interests deem it
“possible”. The shortcomings of the NGP show that organised labour and popular
movements must continue to engage in the debate and forge an alternative economic
policy to neo-liberalism. The proposal outlined by Cosatu and the discussion at the
Cosatu-Civil Society conference gave hope for the future. The time for lobbying is up.
We need a broad mass movement to press forward and organise for mass employment,
as we fight against poverty for the many and wealth for the very few.