8 April 2019 — Terry Bell Writes
First published in City Press, Sunday, April 7
South Africa’s trade unions were probably just as confused as most people when a considerable fuss was made last week about the decisions of ratings agency Moody’s. The agency first said it would not publicise its views on South Africa’s status before the May 8 elections. Days later, it changed tack.
Moody’s will, for now, retain South Africa’s rating one notch above junk status where the other two agencies, Fitch and S&P have already placed it. Both announcements were hailed by the likes of Business Unity SA as “a welcome reprieve”.
The question that should be asked is: a reprieve from what and for whom? And what have these agencies to do with it?
That the agencies have influence, there is no doubt. As economic pundits such as Iraj Abedian noted about Moody’s initial decision: the agency did not want to be accused to trying to influence the outcome of the elections.
A more cynical view is that this was a subtle form of blackmail: either you pursue the cost-cutting, growth-first, austerity policies advocated by global financial institutions or we junk you.
The change of tack can be seen in a similar light, with the threat of junk status ever present. And junk status means that South Africa — to use a horse racing term — is severely handicapped. The country has to carry a much heavier interest rate burden on any loans as it continues to compete in the global growth stakes.
As an already heavily indebted country, loans are essential in the desperate bid to prop up pillaged state owned enterprises. Higher interest rates mean even more crippling debt. And this is what it amounts to when “junked” by all the ratings agencies.
In this context, the agencies are not dissimilar to horse racing tipsters. The difference is that they also play the role of handicappers while making their assessments. Yet their role remains to provide information on potential winners and losers to the money and commodity market gamblers around the world.
These are the men — and a few women — who sit behind screens in financial centres, earning massive bonuses for gambling successfully with money that is not theirs. They place bets of billions and trillions of Rand daily on whether the value of a Rand a Peso, Euro, Shilling or whatever will rise or fall; whether there will be a glut or shortfall of sugar, iron ore, cocoa or one or other commodity.
In the process they affect the lives and livelihoods of millions of working people who suffer the consequences of volatile currencies and commodity prices. Ironically, much of the money being gambled comes from the insurance, pension and provident funds of working people who hope for financial returns.
But the actions in this casino create nothing of intrinsic worth: human talent and increasingly complex technology is devoted to amassing paper wealth, effectively thieving. All in the service of a system based on competition in the pursuit of growth and private profit, with little or no thought to the consequences.
These are the rules laid down by what is widely seen as a global financial aristocracy. A more correct — and in South Africa, perhaps appropriate — term would be a kakistocracy. The word means “government (control) by the worst element of a society”.
The “solutions” offered by such global gurus merely compound the problems created by the system they support. So look to this kakistocracy for answers seems akin to believing, as the economist JM Keynes once reputedly said, “that the nastiest of men for the nastiest of motives will somehow work for the benefit of us all”.