APRIL 24, 2012
Finance Minister Transmits Economic Slim's Disease
South Africa’s Dangerously Unsafe Financial Intercourse
Just before last weekend’s meetings of the World Bank and International Monetary Fund (IMF) board in Washington, South Africa’s Finance Minister dropped us an obscure news item: “Gordhan concerned about rand volatility”(Reuters, April 16).
Hidden away in the business pages, it was nevertheless an important confession. Pretoria can no longer remain in denial about South Africa’s glaring economic HIV+ status, what with our regular breakouts of full-blown financial AIDS, in a world featuring the collapse of so many sickly economies. Indeed, the rampaging plague will infect many more countries now that the IMF has an additional $430 billion to jet around the world with, thanks to careless finance ministers like our Pravin Gordhan.
Three years ago, his predecessor Trevor Manuel was responsible for lobbying the world to grant the IMF a $500 billion capital boost, aimed at firming up world finance after the 2008 melt. Now the banksters’ pimps are back for more, and even the BRICS bloc – Brazil, Russia, India, China and South Africa – were asked to fork out another $100 billion. Gordhan is on record supporting the bailout, even though the other BRICS haven’t yet paid a cent.
For once in his life, Australian media baron Rupert Murdoch spoke for the world’s masses when on Monday he tweeted about Britain’s contribution: “Govt sending IMF another £10bn to the euro. Must be mad. Not even US or China chipping in.”
Stodgy men like Murdoch may not like the ways of the wild Europeans’ world. And it’s true that the IMF remains full of unrehabilitated financial libertines, whose advice is inevitably to remove protections against monetary malfeasance, especially exchange controls. As some might paraphrase their advice in our sickening local parlance, “You can’t enjoy the sweet if the wrapper is still on.
Even Nelson Mandela, who mistakenly approved a $750 million IMF loan a few months before our 1994 liberation from political apartheid, adopted the same suicidal philosophy –call it economic apartheid. So as Gordhan is correct to finally now lament, the South African currency, the rand, became intensely ‘volatile’ – i.e., crashing dramatically, akin to a heart attack. Face it, that’s what happens when you play the field bare and unprotected, prone to picking up vile contagions from the world’s diseased financial industry, in an intellectual milieu of rampant economic-AIDS denialism.
Other opportunistic infections are all too obvious: a persistent current account deficit that by early 2009 had given us the reputation of the world’s riskiest emerging market, according to Economist magazine gossip. Last year, that status forced up our prime interest rate – the equivalent of a cheap perfume to attract sleazy one-night-stand banksters – to the world’s second-highest level, after Greece.
Why have we been so unhygienic in our international economic relations? There were those notoriously bad influences on Mandela at the World Economic Forum in 1992 and then two years later, IMF Managing Director Michel Camdessus reportedly told him he had to reappoint apartheid’s two main economic managers – both dirty old men with racist, big business swagger – when he took office in May 1994. Perhaps giddy with all the attention he was receiving then, Mandela stupidly agreed.
So it was SA Reserve Bank governor Chris Stals who, in March 1995, gave us a really bad dose of the virus just at the time the rest of the world was becoming aware of the emerging markets epidemic, a few weeks after Mexico caught economic Slim’s Disease and its currency crashed by two thirds. Stals cut a gaping hole in the only condom we had on at the time, the Finrand (‘Financial rand’), our decade-old system of discouraging capital flight. Within a year, in February 1996, the result was a crash of a third of the rand’s value, ironically catalyzed by a rumour that Mandela was ill.
Since then, like blood-letting in the 18th century, those promiscuous Pretoria players – the latter-day Lotharios Stals (1989-99), Tito Mboweni (1999-2009) and now Gill Marcus at the SA Reserve Bank and Chris Liebenberg (1994-95), Manuel (1995-2009) and Gordhan at Treasury – have tried to kill the patient by steadily rolling back that condom, loosening exchange controls more than 30 times. It must have felt relaxing to them and their Sandton financial district buddies, but with potentially fatal risk for the rest of us.
The worst period was 1999-2001 when the largest Johannesburg Stock Exchange-listed firms – Anglo, DeBeers, Old Mutual, SA Breweries, Mondi, Investec, Didata and others – were given permission by Manuel to take their party to London, switching financial headquarters and primary stock market listings away from Johannesburg.
The blood then hemorrhaged: corporate dividends, rich white people’s apartheid-era loot and ‘Black Economic Empowerment’ tycoons’ tenderpreneurship takings (e.g. Mzi Khumalo’s illegal R1 billion+ of capital flight) spurted out of SA at record rates. In 2007, according to economists from Wits University, the capital outflow amounted to more than a fifth of the country’s GDP that year.
Worse yet, our children will be adversely affected by this generation’s irresponsibility. For in order to pay off the capital-flight financiers, Manuel and Gordhan contracted foreign debt that is now $100 billion higher than the $25 billion Nelson Mandela inherited in 1994.
Each time there is a flare-up of the sickness, instead of staying home and recovering through tightened exchange controls, our financial fanatics cock their hips, raise the Reserve Bank’s repo rate to appear more attractive, and go out for more wild-and-crazy unsafe international monetary intercourse in the multiply-afflicted global capital markets. No wonder, as Gordhan has just complained, there’s extreme volatility in the temperature of the economy (the rand’s value). SA’s currency has crashed by more than 15 percent on six separate occasions: 1996, 1998, 2001, 2006, 2008 and 2011.
That’s the worst ongoing currency malady in the world, if we discount that fatal case across the Limpopo River, the wretched patient known as Zimdollar who died in January 2009. In this environment, you can’t just go take a shower and say you’ve protected yourself, as South African president Jacob Zuma should have learned.
Also revealed last week was the secret to our local ‘growth’: massive consumer credit binging, which in reality is just another symptom of the underlying disease. Even the Standard & Poor’s rating agency – not well regarded for timely recognition of financial f*&!-ups – indiscreetly remarked on South Africa’s unsecured personal loans for cars, home improvements, overdrafts and credit cards: “There are signs a bubble is forming… there’s no place in the world where unsecured credit has grown at this pace and there hasn’t been a problem with it.”
Our current finance minister, who is a trained chemist, surely understands these terrible infections. Yet for Gordhan, the cure is simply more globalization, with the vain hope that his intimate partners on Wall Street and the City of London will somehow discover a cure – though all evidence is certainly to the contrary, with Iceland, Ireland, Greece and now Spain keeling over. The Euro itself could be next in the morgue.
This past weekend’s parties in Washington offered more evidence of politicians’ pathological love of the international financial high life, and not even an AIDS specialist like Dr Jim Yong Kim – the just-named World Bank president who while at the World Health Organisation helped get cheap Anti-Retrovirals to millions of HIV+ Africans – has the skills to end this ideological plague, also known as the Washington Consensus.
We thought Dr Kim could do it, after reading a brilliant book he co-edited a decade ago, Dying for Growth, but he’s since been consorting with Washington quacks, trying as hard as he can to deny his earlier diagnoses by claiming the World Bank is now ‘pro-poor’. Ah, the lies that the terminally ill tell themselves – but no one else is fooled.
None of these fast-lane financiers learnt a lesson in humility from the 2007 firing of World Bank president Paul Wolfowitz due to nepotism (high-salaried favours for a girlfriend), nor from the tragically sex-addicted Dominique Strauss-Kahn, formerly IMF managing director, whose Viagra-fuelled orgies left him in a professionally-vegetated state of decay last May. Strauss-Kahn resigned in disgrace but his influence lingers, as the fast-thinning IMF desperately sought the new capital injection, so that his successor Christine Lagarde (herself still under investigation for politico-financial corruption in Paris) can in turn lend more to the European 1% elites to screw their 99%.
This is no harmless Mary Poppins, though Lagarde calls her $430 billion benefaction an ‘umbrella’, to disguise its real role: a sharp stick to jab at ordinary people’s bellies.
Gordhan is paying a high price for the company he keeps, if the BRICS go along with Lagarde’s request to add to the bank-bailout kitty. Gordhan was asked by Moneyweb’s Alec Hogg about the $100 million Pretoria is expected to contribute to the IMF: “Many African countries went through hell in the 70s and 80s because of conditionality according to these loans. Are you going to try and insist that there is similar conditionality now that the boot is on the other foot, as it were?”
“Absolutely,” replied hell-raiser Gordhan, “The IMF must be as proactive in developed countries as it is in developing countries. The days of this unequal treatment and the nasty treatment, if you like, for developing countries and politeness for developed countries must pass.”
Such a ‘proactive’ reversion to ‘nasty’ financial intercourse will be a pain in the ass for workers and poor people in Southern Europe, already victims of those men who, during Strauss-Kahn’s reign, earned the informal nickname International Maid Fornicators.
In this daredevil milieu, we can only expect Washington’s virus to spread. So it’s long overdue for those svelte swingers Gordhan and Marcus to take some time off to detox and get some overdue sex education. While well-intentioned but inept Keynesian doctors like Joseph Stiglitz, Paul Krugman and Jeffrey Sachs still search plaintively for an AIDS cure – an unending process that mainly allows the authorities to continue merrily along in their hedonistic ways – it’s time now to start practicing the ABCs: Abstain; Be faithful; and Condomise.
That requires
- abstaining from further financial liberalization and from paying IMF pimps;
- being faithful to poor and working people at home, instead of partying with the ever-unfaithful Goldman Sachs mafia (the ones who hired Mboweni after his 2009 firing); and
- condomizing by putting our exchange control system back on as tight as we can.
Others have done so since the pandemic hit emerging markets in the late 1990s. As a result, after an initial shock exposure which weakened their immune system, several countries condomized and even defaulted on Odious Debts, and grew stronger and more self-reliant: Argentina, Venezuela, Ecuador and Malaysia. Moreover, China and India never removed their exchange-control condom, and are now healthier, bigger and bolder than ever.
I’m optimistic that South Africans – or at least all those outside the Union Building, the Treasury and Reserve Bank (oh, and Parliament, which appears a lost cause) – can learn these lessons. After all, a caring populace moved, over the past decade, from widespread stigmatization of such afflictions to successful activism in search of affordable treatment, even facing down Big Pharma, the Thabo Mbeki and George W. Bush regimes, and the World Trade Organisation’s Intellectual Property fetish.
If a Financial Treatment Action Campaign arose here in 2012, as did Occupy Wall Street in the belly of the New York beast last September, it would surely do much more than teach the ABCs. Like those in the first TAC, the activists would force Pretoria to first reverse its Washington-Consensus denialism and immediately provide genuine Anti-FinancialViral therapies at clinics, factories, fields, homes and even shopping centres across the country. It’s South Africa’s turn for a new moral regeneration campaign, but this time one that takes seriously the challenge of economic liberation, instead of the current crew’s fascination with unending financial liberalization.
Patrick Bond’s latest books are Politics of Climate Justice and Durban’s Climate Gamble.
