Action Needed! Can We Avoid a Depression, Never Mind a Recession?

By Glenn Ashton · 3 Mar 2009

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Picture: quandaries
Picture: quandaries

It is clear that we have entered a global economic fire-storm. There are inevitable comparisons between the Great Depression which also began on Wall Street and which will affect each of us, where ever we live, as if we were US citizens.

Besides comparisons being odious, no two historical events are ever identical in either cause or effect. There certainly may be similarities between the Great Depression and the Pretty Damn Massive One into which we are now sinking. Those in the navigation station of corporate capitalism have not yet begun to throw themselves from their buildings, as much as the general public may wish them to. Instead the lords of Manhattan and the square mile pursue state bailouts and golden parachutes as their birth-right.

The international sages, the Warren Buffets, the George Soroses, the Joseph Stiglizes, all concur we are in serious economic dwang. South Africa shall not be spared. Our reliance on a narrow production base and on unbeneficiated minerals renders this inevitable.

Finance minister Trevor Manuel initially stated that we would be insulated from the full effects of the crisis. He has since considerably shifted his position but continues to feel that our economy will continue to grow despite market woes. Similarly, Reserve Bank Governor Tito Mboweni has been reluctant to admit that things are as bad as they really are. 

It is of concern that our financial leadership are spouting similar guff that the market pundits use to prop up the façade of normality. This is popular wisdom flying in the face of reality. Fact remains we are staring down the rabbit hole and no Trevor or Tito in Wonderland has either the power or ability to prevent our entry into this terra incognita, particularly given their public denial of the severity of the challenge.

By and large people continue as usual. Shopping malls are full. People seem incapable of perceiving the approaching train wreck. The surface appearance of the middle and working classes is normal. Yet already the poor stand ever more densely at the sides of the roads and job centres, seeking work wherever it may be. The middle classes are often indebted to the hilt, a pay check away from penury.

What happens when there is no work to be had? Bankruptcies are rising sharply. Houses are being lost, cars repossessed. Downscaling is a reality. Jobs are shed across the collar spectrum. 

One job loss leads to others. Domestic workers are laid off in concert with office staff. Additions to houses are halted putting builders out of work. Eating out becomes a luxury, closing restaurants. Fashionable fripperies are eschewed. Medical aid and insurances are foregone, threatening the very foundations of our economy.

Given these realities it would seem more pragmatic for our leadership to shift away from denial of how bad things really are, and instead take a more responsible line by warning the public in language that can be widely understood. While the safety net of social spending has broadened, it is insufficient. Manuel's statement that we are not 'technically' in a recession, after growth of 0.2% and contraction of 1.8% in the last two quarters respectively, may be factually correct but it smacks of denialism. Perhaps those closest to the financial engine don't wish to admit we are running on fumes? Perhaps they simply don't wish to incite panic?

It is the way of South African leadership to put a positive spin on things. History  demonstrates the foolhardiness of this approach. In South Africa - cursed by the gulf of the GINI co-efficient - a full blown recession, or worse, a depression, raises the all too real spectre of increased social unrest. The background mutter of service delivery protests could rise to a crescendo. 

What happens when food simply becomes unaffordable to a critical mass? Given the fragility of social networks amongst the marginalised, ravaged by the shades of poverty and HIV/AIDS, the pressure is building. The state social network, even if expanded, cannot provide an adequate bulwark. 

It would be far more prudent and responsible to plan for worst and not the best scenarios. While state infrastructure projects, school feeding projects and other social grants may prevent some leaks in the dyke, we will all be in the swim together if the dyke is breached by the coming storm. We need better financial intelligence of both sorts – wisdom as well as the acquisition and implementation of knowledge.

It would, for example, be prudent to rapidly accelerate the ability of the unemployed majority to feed themselves. Food security has finally been recognised as a major issue this election. About time too. Yet Trevor Manuel allocated a scant R1,8bn towards food security projects this budget cycle. The neglected national land reform programme remains underfunded. This is insufficient.

The formation of collectives along the lines of the kibbutz, where social co-operatives are actively encouraged, offer one realistic possibility that the government has recognised. Not everyone is destined for success as a farmer; there will be those who provide trade, transport and networking skills and resources. Niches will emerge as this new economy grows. The promotion of local food production makes it possible to build the economy from the ground floor up. It is heartening that this concept has been floated but we need urgent implementation and not endless discussion and analysis. 

Given the increasing urbanisation of our population it is crucial to provide the tools for people to feed themselves both in cities and in the countryside. From Kampala to Kinshasa, most food eaten within African cities originates from within and around the urban area, making these cities far more food secure than New York, London or Johannesburg. If the supply to any modern western city is disrupted, there is usually a three day supply of food at hand, thanks to functioning markets. What happens when they fail?

Apartheid removed people from the land but there remains a strong tradition of farming amongst all communities. To augment this, modern agro-ecological farming methods need to be researched and networked. The power of high input agricultural cartels like Monsanto must be curbed. That one company controls the majority of our wheat, barley, soy and maize seed, but has also been permitted to have undue influence on national agricultural policy is not only unacceptable but runs counter to the interests of national security.

People are the power that drive the economy. When economies collapse it is the duty of a good government to harness society to enable recovery. All of the worlds powerful economies have grown off strong agricultural resource bases. We may need to return to this basis to successfully recover from the failure of corporate capitalism disguised as globalisation.

South Africa's best opportunity to weather this financial crisis is to put adequate tools in place to provide food, open markets and the means for societal networking and cohesion. The realisation of a sustainable economic model depends on it working for everybody. We have the people, we have the knowledge and we have the means.  Land reform, coupled to the revitalisation of a labour intensive agricultural sector offers us perhaps the most reliable and practical route out of the casino economy trap. 

If we are in fact the development economy our leadership insists we are then we need a practical and concrete plan to attain this hitherto illusory goal of development for all. We have had enough talk about change over the past decade and a half. Now is the time for action.

Ashton is a writer and researcher working in civil society. Some of his work can be viewed at Ekogaia - Writing for a Better World. Follow him on Twitter @ekogaia.

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Rory Short
6 Mar

Sustainable Living

Glenn I could not agree with you more on your following four points
a) People are the power that drives an economy.
b) When economies collapse it is the duty of a good government to harness society to enable recovery.
c) All of the world

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Frank Spencer
9 Mar


How is it possible, then, that unemployment, according to the latest stats, is on the decline?

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