Part 3 in a three-part series. Read Part 1 here and Part 2 here.

The coherent logic of neoliberalism (for my version of neoliberalism, see here).

Transformation

The peaceful transition of 1994 has been recognised as a quid pro quo involving the handing over of political power to the ANC while leaving the economy essentially unchanged.

Books and articles have been more recently published showing that the trade-off also involved making the capitalist class slightly multiracial. Business leaders congratulated themselves not only for saving the country from communism but guiding the ANC into swapping Marxism for neoliberalism.

What took them by surprise was “transformation”: the (mainly) African demand, via the ANC, that the ownership of the country and its management structures should be proportional to South Africa’s racial demography.

Using its political power, the ANC introduced such legislation as the Employment Equity, BEE, and Public Procurement Acts, together with all their amendments over the years, and the various “sector” charters committing the various industries to make specified targets for black ownership, among other transformation targets.

Being gazetted in terms of Section 12 of the B-BBEE Act gives legal status to these charters. While not happy with this state’s interference with the market and the heavy costs to business, business leaders saw these things as inconveniences to be endured as long as neoliberalism remained the hegemonic rationality.

Foremost among the inconveniences are incompetence and corruption. Rather than having to face the guaranteed charge of racism, “cadre deployment” became – and remains – the acceptable euphemism for people in senior positions for which they have neither the training nor experience.

This has contributed to the collapse of many state departments, municipalities, institutions and state-owned enterprises (SOEs). Before the Government of National Unity, the DA led the charge against what it called “toxic SOE bailouts”, with a “mind-blowing” R331.2 billion being allocated to SOEs between 2013/14 and 2022/23, thus “perpetuating subpar management and operational inefficiencies”.

What no one has yet dared do is a systematic and comprehensive costing of former president Thabo Mbkei’s commitment to creating what he called a “black bourgeoisie”. A safe guestimate of the cost is some trillions of rand when the bucketloads of “everything” is taken into account, including the cost of SOE bailouts.

“Everything” recently had a new addition. “Transformation” seems to be unique in being the only sector to be austerity-free. As part of the GNU government’s pledge that BEE is here to stay, the Labour Department will soon be appointing 20,000 interns as labour inspectors to ensure that businesses are complying with employment equity legislation.

No cost has evidently been given for these new posts, but at a national minimum wage, they come to about R5 billion. This is alongside the paucity of labour inspectors to enforce labour laws, including health and safety ones.

And to all this must be added the equally astronomical losses due to corruption. Journalist Phillip de Wet estimated that R1-trillion was lost to State Capture. The Zondo Commission, with a considerably narrower focus, put the figure at R57 billion.

It’s large, whatever the final amount turns out to be.

Unlike the costs of creating, sustaining and enhancing the financing of the black bourgeoisie, which are all legal, corruption is not. Unlike the first corporate-made black billionaires — including Cyril Ramaphosa — those excluded from this corporate takeover of selected ANC leaders were left to fend for themselves. With the same ambitions of being rich, these neglected leaders and their business associates were, or are, those who illicitly help themselves to any available source of wealth.

Foremost among the unintended consequences of transformation is the ballooning, not of the general public sector wages, but of public debt.

Public Debt

Public debt is an unconditional offence to neoliberalism for two main reasons.

First, the government taking on more debt allegedly “crowds out” the availability of finance for private investors. The theory of crowding out holds that rising public-sector spending undermines private-sector spending. The government obtains the needed revenue by borrowing through the sale of Treasury securities. Treasury sales increase interest rates and borrowing costs, which reduce private borrowing and spending.

This is also where the dreaded sovereign credit agencies enter the neoliberal scene. They provide would-be investors and lenders with supposedly independent assessments of a country’s creditworthiness.

South Africa has had a “junk” assessment since November 2017, which means an above-market interest rate for any borrowing made. This is neoliberalism’s second reason for avoiding debt. Not to be forgotten is that these assessments or ratings are shaped by economics being not a science, but a political argument.

Debt is a main reason for South Africa’s austerity policies, which have selectively identified selective public sector pay as the public enemy. Addressing our government’s budget deficit by reducing its spending on goods and services is a sign of good behaviour, according to neoliberalism’s rationality.

Our government was proud to announce that, notwithstanding austerity, its current budget achieved a “primary” surplus, that is, a budget surplus before debt costs.

And this includes the Treasury to reduce Eskom’s unsustainable debt, taking responsibility for paying R254 billion of Eskom’s debt obligations for the next three financial years, beginning in 2023. In December 2022, Eskom’s debt was R422 billion.

But there are alternatives.

Alternative debt financing

Other than mentioning that the Alternative Information and Development Centre, where I work, has been providing financial alternatives (see here, here, and here) and that the Institute for Economic Justice has been doing the same, the scope of this article prevents any elaborations.

These finance alternatives are from a different rationality to that of neoliberalism and, moreover, without necessarily endangering the integrity of capitalism.

The importance of recognising different rationalities

Being rational doesn’t mean being beyond critique.

Maintaining rational coherence of the argument that public pay can become economically unaffordable and that this condition ends with crippling public debt and the anguish of austerity involves no shortage of selectively choosing what one sees. Denial or blindness thus becomes a protective necessity.

Relativism is not anywhere involved in such a critique. Relativism – the view that there’s no absolute truth, only the truths that a particular individual or culture happens to believe – makes such denial or selective blindness unnecessary. Having rejected objective standards, what each individual or group sees or thinks is as equally valid as any other perceptions, thoughts, behaviours or doctrines. Relativism is the ultimate solipsism.

Not recognising the validity of different rationalities has a similar profoundly limited outcome. Rather than trying to understand theories, behaviours or ethical norms different from one’s own, one simply dismisses them as various forms of stupidity, craziness, incomprehensibility, hypocrisy, fake news or, as with identity, just difference. The laziness of using labels stops further inquiry at the expense of impoverishing understanding.

A current case in point is what is happening in Gaza. Daily Maverick’s First Thing daily newsletter of 7 October 2024 noted, under its FACTS OF THE DAY feature: “Today in 2023, Hamas and several other Palestinian militant groups launch an attack on Israel. It resulted in the deaths of around 1,200 people, and 251 hostages were taken, including civilians and soldiers. The attack initiated the Israel-Hamas war.”

Its failure to recognise the existence of Palestinian rationality — rather than, at best, a caricature of it — feeds the view of Palestinians being either insane terrorists or Islamic fundamentalists for whom the killing of Jews and the elimination of Israel is a sacred duty for which they would be rewarded in heaven. Left unsaid but implicit in its unacknowledged acceptance of Israel’s rationality is the idea that Israel is doing no more than exercising its right to self-defence.

(The very notion of an Israel-Hamas war, echoing Israel’s selective rationality, should also be noted. How can it be a “war” – used as a euphemism! – when Palestine, not just Hamas, has no army, no infantry, no tanks, no artillery, no anti-aircraft guns or anti-tank weapons, no rockets [other than, presumably, Hamas’s homemade ones given the total blockage of Gaza] and, crucially, no air force, not even drones? Rather than being a “war”, it’s an extended massacre of defenceless civilians and the unrestrained destruction of Gaza.)

Moving out of this chaotic ensemble of competing rationalities begins with attempting to explain how these different rationalities emerge and are sustained.

Limiting the answers specifically to this article on the rationality of neoliberalism and, implicitly, the capitalism behind its neoliberalism form are two classes. For convenience, I’m calling them the privileged and the deprived. The question thus becomes: How do the directly conflicting rationalities of each class arise worldwide?

My suggested answer is that most people are born into one of neoliberalism’s competing classes. For most people, this accident of birth heavily shapes our life experiences, schools, friends and occupations, along with the thoughts, values and aspirations associated with these classes and their subdivisions.

A minority manage upward social mobility, from the deprived to the privileged, while an even smaller number exiled themselves from the rationality of the privileged to join rationalities challenging the privileged.

The answer is slightly more complicated in South Africa because, before 1994 — a recognised though not unproblematic date — there were apartheid restrictions to upward mobility. But 1994 changed all that dramatically via transformation, as we have already seen. After more than 30 years of legally required accelerated upward mobility for the victims of apartheid — mainly Africans — the children and grandchildren of this early vanguard now, like the others of their class, join the normal pattern of being born into privilege. In this way, they (largely) unconsciously acquire the rationality of the privileged class.

Achieving the elusive social compact necessitates neoliberalism’s negation

The first Government of National Unity (GNU) in 1994 added to the already existing multiclass unity of the Tripartite Alliance of the ANC, SACP and Cosatu. These were the heady days when antagonistic classes became “social partners”. This social compact, however, was formally buried in 1996, along with the Reconstruction and Development Programme (RDP). The RDP’s burial gave birth to the adoption of the government’s neoliberal policy known as Gear.

There have been innumerable government attempts since Gear to form a new social compact. The compact is an agreement between the government and the people on the roles and responsibilities each plays so that rather than class conflict, there is a collective agreement shaping the nature and growth of society.

The first of the more recent efforts to achieve a social compact was contained in President Ramaphosa’s 2022 State of the Nation Address. He spoke of the government’s intention “to forge a comprehensive social compact that would join all social partners in a common programme to rebuild the South African economy and enable higher growth”.

As a sign of his determination and urgency, he gave his government 100 days to “finalise a comprehensive social compact to grow the economy, create jobs and combat hunger”.

The promised 100 days is now all but forgotten.

But something could have been done. As a first step during those 100 days, the president and his government could have demonstrated their sincerity to a social compact in which everyone makes sacrifices by voluntarily making substantial cuts to their pay and unrestrained use of the benefits contained in the Ministerial Handbook.

Instead, President Ramaphosa has given us a second GNU, which compounds his failure to keep his 2022 promises. Rather than honouring his commitment to reduce the size of his Cabinet and executive committee, he enlarged both.

Rather than cutting government pay and perks, he accepted the increases to both made since 2022. (For more on the current GNU, see my Daily Maverick article.)

These pay and perks enjoyed by the government committed to cutting the pay and jobs of others are detailed in a BusinessTech article, “Free houses to VIP security – how much you’re paying For South Africa’s 75 millionaire ministers”. The details cannot be provided here, but a summary of the total costs includes:

• Salaries for 32 ministers and 43 deputy ministers — R181.33 million.
• Salaries for ministers’ and deputy ministers’ support staff — R467.33 million.
• Other perks — R553 million (data from the 6th administration; thus, it is likely to be higher in the 7th).
• The above excludes the estimated 97 luxury residences for ministers and deputy ministers in Pretoria and Cape Town, which are collectively worth another R1 billion.
• Also excluded is the R553 million for VIP protection, international travel, vehicles, alternative electricity, water and security.
• The total annual cost is at least R1.2 billion.

And there’s still more. Business Day reveals, in an article on 7 October 2024, that the medical care costs provided to current and former presidents and vice presidents for the years 2019-2024 came to almost R500 million. These costs were originally intended for emergencies only but now cover all medical costs, even though all the beneficiaries are also beneficiaries of publicly funded private medical aid.

And then, there’s the pre-GNU DA. Before becoming GNU Minister of Home Affairs, Leon Schreiber, the DA’s then Chief Whip, in 2023, tabled the Cut Cabinet Perks Bill, designed “to rein in the obscene waste of valuable public resources that currently goes towards funding the rockstar lifestyles” of ministers and deputy ministers.

Similarly, shortly before the May election, Deon George, the DA’s then-shadow finance minister, wrote an article castigating Cosatu for “defending the widening public sector wage gap”. In it, having identified public sector wages and unit labour costs as increasing more rapidly than labour productivity, he described this problem as “an obvious area where the government must concentrate its fiscal consolidation efforts”.

To achieve this, he introduced the “Responsible Spending Bill”, which, he writes, “marked the first real attempt to address head-on the triad of uncontrollable spending, a top-heavy bureaucracy and an escalating debt crisis”.

He is now the GNU’s minister of forestry, fisheries and the environment.

To attribute these rather stark double standards to hypocrisy would be a mistake attributable to not recognising the compatibility between these double standards and the neoliberal rationality of the GNU president and his ministers. Hypocrisy is not involved because rewarding the rich is an essential objective of neoliberalism, especially when there is nothing illegal about the rewards.

Other than a fleeting discomfort probably felt by some members of the GNU, there is no reason to expect any lasting sense of shame.

Being part of the same rational framework is probably part of the main reason why those who blame the public sector for our ills, selectively exempt those public sector segments at, or near, the top of the public sector pyramid from belonging to the public sector.

Accustomed to (worldwide) inequality, they also mainly accept those whose occupations “naturally” make them part of the rich. Judges, public sector lawyers and doctors immediately spring to mind as being part of this select group. So, too, do the vice-chancellors of supposedly public universities, whose median total cost of their packages was about R3,966,069 in 2019, while subjecting their universities to austerity.

This article began as a riposte to Ray Mahlaka and the Constitutional Court. Recall, therefore, that Mahlaka blamed the government for its longstanding, above-inflation pay increases, which made (selected) public servants and their trade unions “accustomed to this largesse”.

The Constitutional Court gave its support to Mahlaka’s (and many others) attack on the largesse and the accompanying “bloated wage bill”. Further recall, the court’s main concern was that the government’s promised “illicit salary increases” would “precipitate a fiscal crisis” that would both plunge the government into “substantial excess debt” and detract from the state’s ability to alleviate the plight of the poor.

The situation is different for those inside another rational frameset. For them (including me), what is now called a social compact will be a necessity to realise most of our Constitution’s provisions. But this has no chance of happening until the little matter of neoliberalism is dealt with.

I’ve previously explained how I think this could happen – given time. But it’s precisely time that we don’t have. The climate change clock is ticking much faster than science predicted even a decade ago. Few people in the world haven’t already experienced climate change personally.

The tragedy is that most of them don’t know the climate change causes of the disasters they experience. For them, they are part of what happens in the “natural world”. And most of those who do know better seem unwilling to take — or even accept — the radical measures demanded by the never-ending climate disasters.

The question thus becomes which neoliberal outcome will arrive first: Will it be the burial of neoliberalism itself? Or will it be the suicide imposed on everyone else by neoliberals’ ability to contemplate the end of the world, but not the demise of neoliberalism?

Jeff Rudin works at the Alternative Information and Development Centre and is a member of the Amandla! Collective. This article is published jointly with the Daily Maverick.