19 September, 2020 — Terry Bell Writes
Six months ago, the gross, even terrifying, social and economic inequalities that were regarded as normal around the world were highlighted when Covid-19 was declared a pandemic by the Word Health Organisation. Since then, those inequalities have become even more gross and terrifying.
Latest research reveals that the very rich have generally become much richer while ever more millions of working people — including many who might once have thought of themselves as middle class — have been made hungry and desperate, cast onto the social scrapheap of joblessness. Over recent decades, profits and the wage and welfare gap have increased massively, especially in the world’s largest economy, the USA.
The Forbes magazine richest list, for example, this month gave the combined wealth of the ten wealthiest Americans as $853 billion. In 1982, when the list was first compiled, the ten richest Americans had a combined wealth (in today’s dollars) of just $27.9 billion. And the gaps between the highest and lowest paid have yawned into chasms.
It is a situation well summed up this month by Oxfam executive director, Chema Vera: “Covid-19 has been tragic for the many but good for a privileged few.”
Vera was speaking at the launch of the campaigning groups’ report entitled Power, Profits and the Pandemic. He added: “The world’s largest corporations are making billions at the expense of low wage workers and funnelling profits to shareholders and billionaires – a small group of largely white men in rich nations.”
This, as Oxfam has long maintained — along with many human right groups and the bulk of the labour movement — is a crisis “fuelled by a rigged economic model”. And, with more than a touch of irony, that model arguably entered the mainstream of economic policy making exactly 50 years ago to the month.
On September 13, 1970 the New York Times published a lengthy essay by Chicago University economist Milton Friedman under the appropriate, but then still controversial headline: “The Social Responsibility of Business is to Increase its Profits.” It triggered a “new normal” that reversed the slow and uneven moves toward some social and economic equality that followed the reconstruction of Europe after World War 2.
That post-war “normal” owed much to another economist, John Maynard Keynes who essentially saw the state acting as the arbiter in an economic system that would work, so far as possible, “to the benefit of all”. Concessions to workers such as health care, helped by a booming economy of post war reconstruction, also tended to remove the prospect of resentful rebellion or even revolution.
Friedman’s essay outlined his liberal “shareholder philosophy”, a concept championed from 1979 by British prime minister Margaret Thatcher and then by President Ronald Reagan of the United States as it spread across the globe. The era of “trickle down” theory and what became known as neo-liberalism or the Washington consensus had arrived.
This was a case of moving into a massively destructive fast lane without the occasional application of a Keynesian handbrake to slow the rate of social and environmental damage.
South Africa, because it only shook off the shackles of racist exclusivity in 1994, came late to the need for social and economic reconstruction and, with it, the choice between prioritising redistribution or private profits. The clumsily named National Economic Development and Labour Council (Nedlac) was established in 1995 ostensibly to debate the matter and to arrive at economic policy decisions acceptable to “all stakeholders”.
But Nedlac, bringing together representatives of government, business, labour and community organisations, turned out, in the words of many in the labour movement, to be a “toy telephone”. In under a year, the business group had produced an effective “make the rich richer/trickle down” macro-economic proposal entitled, without irony, Growth for All.
The combined labour federations responded with a comprehensive redistributive proposal based on the work done over several years by the ANC’s own Macro-economic Research Group and shelved in 1993 by Nelson Mandela. Finally, government produced its own trickle-down proposal aptly named Growth, Employment and Redistribution and subsequently dubbed, by the SA Communist Party and others, “the 1996 class project”.
GEAR, in its various guises, peppered with acronyms, became the post apartheid normal as the labour movement shelved its alternative proposals. In the 24 years since then, the trade unions have failed to unite or to again provide any comprehensive alternative while, at the same time, never repudiating, at least in principle, their 1996 proposals.
But, in practical terms, many of the unions capitulated to the “normal” by establishing investment companies where, in line with Friedman’s shareholder philosophy, share prices became the sole priority. In the process, a tiny group of former union leaders joined the ranks of rand billionaires amid mass and growing unemployment.
This is a “normal” few would wish to return to. As a result talk of social responsibility is now commonplace, with even captains of industry paying at least lip service to wanting an economy that “works for all stakeholders”.
But what they want is a “new normal”, the maintenance, a la Keynes, of the system, but with the “human face” of perhaps a small universal income grant or minimum wage. This to ensure that the social fabric remains reasonably intact and allows the profits to continue to flow, albeit with some restrictions.
However, with the economy, nationally and globally, in deepening crisis, this would be too little too late and could only be imposed by authoritarian means. However, dictatorships — even wars — have never been bad for all business although inevitably disastrous for the mass of working people.
So the majority, seeming now to have rejected the pre-Covid-19 normal, should be equally dismissive of any post-Covid-19 new normal. What is needed is something new. Yet, in the absence of an agreed and fought for comprehensive alternative, a new normal is the horrifying prospect ahead of us.