Financialization, corporate power, and South African subimperialism

Introduction Has South Africa adopted a mini-me political economy with all the worst characteristics of United States financialized capitalism, but within an intermediate global power relation that generates only geopolitical frustrations internationally, and amplified domestic crisis? Cox (Chapter 1, this volume) locates “financialization within the long-term structural shifts in US and global capitalism that have taken place from the 1970s to the present” so as to explain “specific transition points in US foreign policy” that facilitated financialization. From the 1980s, “the US state, backed by the most mobile sectors of US capital, promoted policies that extended the financialization of production from the US domestic market to the global market, " in part because “structural economic crises facing the top 500 industrial corporations intensified during the 1970s and early 1980s.” This contrasted with “previous strategies of US-based firms during the 1960s to solve the long-term accumulation crises by acquiring unrelated businesses in an attempt to counter the beginning stages of declining rates of profit.” As a result, Cox posits, “corporations increased their levels of political mobilization in an effort to shift US state policy in a more conservative direction.” The results included “liberalization of capital investment opportunities for US financial and non-financial firms in the developing world” and the rise of “transnational corporate political networks as vehicles for the restructuring of capital markets in developing countries, " which in turn “received additional political and economic support from an emerging transnational class within the developing world that was increasingly linked to global finance.” South Africa illustrates this same process very explicitly, especially if we take as US corporate political philosophy “neoliberalism” and consider the internal contradictions within the logic of that system. The logic is reflected not only in the upheavals in 2008-2009 and their aftershocks in 2011 with no end in sight, but also in the tensions that began rising 40 years earlier. The South African state and large corporate blocs are both victims and perpetrators of the process, because although profit rates recovered after the DeKlerk and Mandela governments’ turn to neoliberal macroeconomic policy, the unsustainability of this kind of accumulation was obvious in two processes. First, extraordinarily high levels of social protest followed rising post-apartheid inequality and neoliberal public policy. Second, the structural economic contradictions perpetually worsened, with symptoms including a high current account deficit, rapidly-rising foreign debt, and domestic household debt repayment problems during deflation of the world’s highest speculative property bubble. As for the accompanying political process, US foreign policy had supported corporate profit seeking during apartheid but by the end of the first Bush government, in 1991-1992, the State Department and its allies in the Bretton Woods Institutions and international finance more generally had begun to shift discernably toward endorsement of a low-intensity democracy strategy for South Africa. By 1993, the Clinton Administration’s neoliberal agenda included a more aggressive ideological role for USAID in South Africa, pressure by Commerce Secretary Ron Brown on South African negotiators to conclude the predemocracy ascension to the General Agreement on Tariffs and Trade on disadvantageous terms in 1993, promotion of a 1993 International Monetary Fund loan which locked in the Mandela government, and support for a variety of World Bank policy advisory missions. These were early indications of pressure on Nelson Mandela’s presidency (1994-1999) to adopt a much broader, deeper set of neoliberal policies, many of which did not immediately serve US state or corporate interests - but which are better understood as reflections of ideological commitment. That commitment, in turn, followed the demise of Social Democratic, Labour, and Keynesian state policies that especially in Europe were won by working-class movements over the course of a half-century and that also responded to the perceived threat of socialist influences prior to the 1980s. Even newly-liberated African states were given some latitude in post-independence social and economic policy formulation. But this changed during the 1980s in Africa as the Cold War wound down and Bretton Woods’ neoliberalism was imposed. Because of the isolationist approach of P.W. Botha’s South African government, Pretoria’s conversion to neoliberalism lagged a few years. On the one hand, Washington’s security and minerals establishment was partially linked to Pretoria during the Reagan Administration’s “constructive engagement” era, but on the other, US activists put sharp pressure on white South African business through sanctions campaigning, the underlying factors that had begun in the 1970s world economic restructuring did not escape South Africa. It is useful to first revisit the main trends so as to locate the context into which Pretoria politicians from both white nationalism and black nationalism inserted the South African economy and society in the 1980s-1990s. The organic process of financialization can then be traced and extreme features in South Africa highlighted, such as real estate bubbling and household debt, the current account deficit and foreign debt, and financialization’s reach into the regional hinterland. These closely track trends in the US economy. But structure must be accompanied by agency, hence a brief profile of the leading official responsible for growing financialization and corporate power over the post-apartheid period, Trevor Manuel. His recent role in climate finance politics has been decisive, although in mid-2011 he was better known as the second-leading Third World candidate to replace Dominique Strauss-Kahn at the International Monetary Fund (IMF). To conclude we will consider the relatively futile resistance to date, but the potential for linking anti-neoliberal movements to challenge the core dynamics.