In March Reserve Bank governor Lesetja Kganyago shocked many, including conservative economists, when he announced that the monetary policy committee (MPC) had decided to increase the repurchase rate by 50 basis points to 7.75%, effective March 31. The March increase marked the ninth repo rate hike since November 2021.
The consequences of these increases include a depressed economic environment and high levels of unemployment as attempts are made to control inflation. This is a dangerous and misguided idea, yet one that aligns with capitalist logic. In this article I delve into the reasoning behind these decisions and their implications for the capitalist order in SA, examining the nation’s response to the uncertain future of capital accumulation that hung in the balance after the Marikana massacre of August 2012.
These interest rate hikes are presented as “more consistent with the current view of risks to inflation” and aim “to anchor inflation expectations”. They are presented as rational and informed by pure economics. However, they have a far more fundamental function in modern capitalism: to ensure the continued reproduction of capitalism by taming workers’ uprisings.
This, in SA, the Global South and many parts of the Western world, is not immediately evident unless one has a historical understanding and appreciation of how austerity, a dangerous and mad idea, is and has always been used to discipline the working class and resolve the class antagonism that threatens capital accumulation.
After the state killed 36 workers who were protesting against low wages at Marikana and demanding a minimum wage of R12,500 a month — all in defence of a British-owned Lonmin mine — there was a sense that the fate of the capitalist order hung in the balance. The courage and decisive steps by mineworkers presented a threat of bottom-up social change, which had the capacity to challenge social relations that were important to capital accumulation in a mineral-energy complex and highly financialised economy.
The blood and tears of Marikana’s fallen heroes nourished the soil that reignited movements that not only sought reform but challenged a social order that organises every sphere of society for the sake of profit.
The first of these was the formation of the EFF, a Marxist-Leninist and Fanonian movement whose strategic mission is economic freedom in our lifetime. This was followed by the expulsion of the National Union of Metalworkers of SA (Numsa) from union federation Cosatu; the rejuvenation of the land question and attempts to amend the constitution to allow for expropriation without compensation; amendment of the Banks Act of 1990 to allow for state-owned companies to apply for fully fledged banking licences; the introduction of a national minimum wage; the introduction of a private member’s bill in parliament to nationalise the SA Reserve Bank; the Fees Must Fall movement; insourcing demands in state institutions and private companies; and many other interventions that have the potential to affect the organisation of society in favour of capital accumulation.
This is not to argue that before the Marikana massacre SA did not have progressive movements that sought to challenge the status quo. However, the movements mentioned necessitated the revival of what US economist Clara Mattei describes as the austerity trinity — the combination of fiscal, monetary and industrial policy decisions that advance cuts of social spending in budgets, higher interest rates and the suppression of wages.
While the trinity requires all three — fiscal, monetary and industrial austerity — to be in alignment and to work in unison, in SA it is mainly monetary policy that has demonstrated the danger and madness of austerity. The Reserve Bank governor may have been interrupted during the Covid pandemic, when we witnessed various forms of state interventions, including the reduction of interest rates to the lowest levels in the recent past. However, austerity has been the governor’s economic policy despite overwhelming evidence that is an inappropriate and misguided monetary tool.
This is the case even when the World Bank and IMF say austerity does not work and instead makes things worse. Interest rate hikes favour those with savings and investors, who historically and presently represent a small minority. The majority of the people, workers in particular, are deeply indebted and at risk of losing their homes. Unemployment in SA, at 35.6% among the highest jobless rates globally, pushes workers into survival mode. You are just happy to have a job regardless of the pay because there is someone right next to you willing to do the exact same work for far less.
Why austerity measures? What is the rationale? Why does the governor insist on increasing interest rates despite overwhelming evidence that such monetary instruments are failing? Why does he continue to insist that inflation targeting is more important than 11-million people who are hungry and desperate? Why do the governor and other members of the MPC insist on such high interest rates that benefit only a few, who in SA represent one racial group, while the majority who are black perish in unimaginable poverty? Why this dangerous and mad idea?
Furthermore, why is there no honest reflection on the causes of the July 2021 unrest that saw shops vandalised and hungry people opting for lawlessness when they stormed shops to take food they did not pay for? Is it not evident that such social unrest is a direct consequence of economic policies that leave the majority in dire poverty, while a select few enjoy the spoils of capital accumulation? Why are these connections not being made, and why are alternate economic policies that prioritise social welfare, equality and sustainable growth not being seriously considered?
The only probable and acceptable rationale supported by empirical evidence and historical studies is that the current increases in interest rates are meant to quell dissent and anti-capitalist awakening.
Austerity is nothing but an undemocratic reaction to threats of change. Far much more damaging, it is an ideology that cannot be subjected to democratic processes, and the public is excluded from decision-making. Instead, it is delegated to a group of technocrats whose interests are to enforce class-appropriate behaviour on the working class. The famed British economist Ralph Hawtrey would be proud: “Never explain, never regret and never apologise,” he said to the central bank in response to criticism and pressure from the working class.
There is nothing that has changed about austerity today that makes it different from the historical context in which it was conceptualised. As we face the prospect of yet another rate hike in the coming days, we must not blame such dangerous and mad ideas on incompetence. Instead, we must call it what it is: an agenda against the working class.
• Dr Tshimomola is an EFF researcher.
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