[Debate] Fighting corporate power from the US to SA

[Patrick Bond]

April 2012

http://www.loot.co.za/shop/main.jsp?page=detail&id=jrvj-1591-g320


  Corporate Power and Globalization in US Foreign Policy

	

	
	

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edited by Ronald W. Cox
Series: Routledge Studies in US Foreign Policy

More than a decade into the new millennium, the fusion of corporate and 
state power is the essential defining feature of US foreign policy. This 
edited volume critically examines the relationship between corporations 
and the US state in the development of foreign policies related to 
globalization. Drawing together a wide range of contributors, this work 
explores the role of corporations in using US foreign policies to 
advance the interests of transnational capital in a wide range of 
contexts, including: how US government policies have contributed to the 
globalization of production and finance the ways in which transnational 
corporations have influenced the US relationship with China, a crucial 
linkage in the new era of transnational accumulation how transnational 
corporate power has shaped capital-labour relations, humanitarian 
intervention, structural adjustment policies, low-intensity democracy 
and the G20 summits the "corporate centrism" of the Obama 
Administration, whose policies have been consistent with the growing 
power of transnational capital in US foreign policymaking the politics 
and consequences of the embedded relationship between various sectors of 
the transnational capitalist class, global institutions and the US 
state, including the limits and contradictions of this relationship 
during the ongoing capitalist crisis. This work will be of great 
interest to students and scholars of both US foreign policy and 
international political economy.

***

Introduction to Corporate Power and Globalization in U.S. Foreign Policy

Ronald W. Cox, editor

Introduction

A decade into the new millennium, the fusion of corporate and state 
power is the essential defining feature of US foreign policy. For over 
thirty years, the political and economic ascendancy of sectors of 
transnational capital has pushed political discourse in the US steadily 
to the right of the political spectrum. While political scientists write 
about the increasing polarization between US political parties, the 
extent to which both parties operate within a corporate framework often 
gets lost in the stridency of contemporary partisanship. Both Democratic 
and Republican Presidents have endorsed escalating military budgets, 
deregulation of global financial markets, and massive federal bailouts 
of US-based financial institutions deemed "too big to fail." Shouting 
matches occur with some frequency within the corporate boundaries of 
permissible dissent, but only in a manner that never challenges the 
policies of military expansionism and unsurpassed corporate welfare. 
Corporate largesse has been focused overwhelmingly on Wall Street, which 
is a starting point for understanding the outlines of a corporatist US 
state that has taken shape after three decades of a right turn. The 
defining features of US corporatism are a commitment to transnational 
capital accumulation, global financial deregulation and a steady 
expansion of US Empire. A Wall Street-Treasury complex rests 
side-by-side with a Military-Industrial-Complex in a structure of 
plutocracy that fundamentally threatens the stability of US democratic 
institutions.

This book will examine the manifestations of corporate power in US 
foreign policy and the global economy over the past thirty years, 
culminating in an assessment of the implications of greater 
concentrations of wealth and power for democracy, both in the US and 
abroad. At present, the US government can accurately be characterized as 
"Democracy, Incorporated," (Wolin 2008) symbolized by the recent Supreme 
Court decision declaring unlimited corporate spending on political 
advertising campaigns to be a first amendment right protected by the US 
constitution. The fact that US-based transnational firms in investment 
and commercial banking, insurance, pharmaceuticals, oil and gas, and 
military contracting already dominate the political process may make the 
Supreme Court decision less relevant than it otherwise would be. Just 
one of these sectors of global capitalism, the pharmaceutical industry, 
devotes enough money to political lobbying in the US Capitol to hire 
thousands of influence peddlers each year, whose numbers quadruple the 
membership of the House of Representatives and the US Senate combined. 
Within the executive branch, whether staffed by Democrats or 
Republicans, the revolving door between the leading corporate interests 
and the White House ensures an institutional power for corporate America 
that cannot completely understood by the statistics of campaign finance. 
Instead, the growth in corporate lobbying networks is more important in 
tracing corporate influence over US state policy. Corporations that are 
most powerful can be measured by their degree of lobbying strength on 
Capitol Hill, which has been reduced to a plutocracy where legislation 
is developed, refined, and tailored to the profit-making needs of 
corporations that dominate entire sectors of the global economy. Both 
the political and economic power of these corporations will be the 
subject of this volume, starting with an analysis of the role of 
corporate interest blocs in weakening and ultimately eviscerating the 
earlier regulatory structures of capitalism in favor of the promotion of 
a much more global production system.

Even after the most recent global capitalist crisis, which is the 
greatest meltdown since the Great Depression of the 1930s, the financial 
corporations left standing have used their institutional power in order 
to fight against attempts to reintroduce regulatory frameworks 
associated with the New Deal era. No single corporation comes close to 
Goldman Sachs in having its former CEOs and executive personnel so 
well-represented in the ranks of Treasury Department officials, spanning 
the administrations of Clinton, George W. Bush, and the Obama White 
House. As Dan Skidmore-Hess explains in his chapter on "Obama's 
corporate centrism," Goldman Sachs and other powerful financial firms 
such as Citigroup contributed disproportionately to the 2008 campaign of 
Barack Obama. These firms more recently waged a successful political 
battle to defeat any effort to break up banking institutions whose sheer 
size and clout has helped make them more powerful within the US state 
and within the global capitalist system---even in the aftermath of a 
crisis that continues to threaten the stability of a system that Goldman 
Sachs helped to deregulate. One consequence of the current capitalist 
crisis is the increasing reliance by investment and commercial banks on 
business associations to advance their policy preferences, including the 
American Bankers Association, which saw a 47 percent increase in 
lobbying between 2007 and 2008 (Open Secrets 2009). But the long-term 
trend of the ascendancy of financial interests in US domestic and 
foreign policy can be traced to structural changes occurring within 
global capitalism which date to the mid-1970s. Since that time, the 
financial sector has expanded its political and economic power within 
the US and global marketplace.

This book includes contributions from critical theorists in political 
science and international relations whose work is associated with an 
examination of the relationship between corporate interests, the US 
state, and US foreign policy within the current global political 
economy. The chapters provide a historical and contemporary examination 
of the expansion of corporate power and the "right turn" in public 
policy in the US and abroad.  We focus our attention on the growth of 
the political power of corporations that some theorists associate with a 
global or transnational capitalist class. In particular, we examine the 
increasing structural and institutional power of transnational 
corporations on US state policies that have promoted corporate 
globalization, neoliberalism and military intervention. Our goal is to 
address some of the problems we see in current scholarship, namely the 
lack of sustained focus on corporate-state relations at the very time 
that such relations constitute the most important power dynamic of 
contemporary global capitalism.

Transnational Capital After Bretton Woods: The Historical Context for 
the Right Turn
In the first chapter of this book, I examine the political economy of 
the rise of the new structure of global production and accumulation 
which developed in the wake of the collapse of the Bretton Woods system 
after 1971. This system, in place from 1945 to 1971, placed restrictions 
on short-term, speculative flows of financial capital across borders by 
establishing a supportive regulatory framework for states to control 
capital movements. The regulatory apparatus complemented and encouraged 
a system of capitalist production that was much more integrated within 
national borders, and less dispersed and divided across countries and 
regions than would be the case in the current global political economy. 
Member states within the Bretton Woods system commonly relied on capital 
controls to maintain currency values that were pegged within a range to 
the dollar, which in turn was fixed to gold at $35 per ounce. By the 
late 1960s, US-based financial firms joined with the most competitive 
sectors of transnational capital in such business associations as the 
Committee on Economic Development, to lobby for an end to what they saw 
as the overly restrictive financial architecture of the Bretton Woods 
era (Helleiner 1996: 81-122; Cox, Skidmore-Hess 1999: 123-124).

 From the 1970s to the present, the most global and competitive of 
US-based commercial and investment banks promoted a deregulation of US 
financial markets and efforts by the US state to promote the elimination 
of capital controls in foreign markets. The political power of the 
financial sector was enhanced by a high-tech revolution that enabled a 
greater flow of financial investments across national borders. Greater 
global competition pressed US-based commercial and investment banks to 
develop strategies of corporate consolidation and innovation of new 
financial products in an effort to avoid greater loss of market shares 
to newly emerging financial institutions. Developed states, increasingly 
subject to the pressures of the global marketplace and the policy 
preferences of financial capital, steadily removed capital controls from 
the late 1970s through the 1980s, a process that was most aggressive in 
the United States and Western Europe, culminating in the financial 
integration of European markets in the 1990s. Meanwhile, the US state 
used the debt crises in the developing world to implement austerity 
measures that opened portfolio markets in a number of emerging market 
economies. The Clinton Administration elevated financial liberalization 
to new heights in its foreign economic policies, which reflected the 
deepening institutional and structural power of transnational 
corporations within the US state, which has steadily been transformed 
into a transnational state whose dominant bureaucracies and political 
institutions are structured to promote the liberalization of global 
financial markets and favorable conditions for the accumulation of 
global capital on behalf of transnational corporations (Robinson 2004).

The US state is especially important in advancing the interests of a 
transnational class through global institutions such as the 
International Monetary Fund and the World Bank, and through 
collaboration with other transnational states in global forums such as 
the G-20 (the subject of Susanne Soederberg's chapter of this volume). 
In the US, transnational finance capital has relied on neoliberal 
theory, strong institutional connections to the executive branch 
agencies, including the White House, State Department, Treasury 
Department, and Federal Reserve, and a growing army of lobbyists on 
Capitol Hill, to chip away at New Deal regulations. Over the past three 
decades, there has been a deepening consolidation of the financial 
sector, resulting in an increasing integration of the functions of 
commercial and investment banks starting as early as the 1980s but 
intensifying with a wave of mergers and consolidations legitimized by 
the repeal of Glass-Steagall in 1999. At the same time, the productive 
sectors of the US economy were becoming "financialized" to a much 
greater degree, as shareholders of US-based Fortune 500 firms were 
increasingly dominated by large-scale institutional investors with 
strong ties to global finance (Epstein 2005: 3-16). One indicator of the 
growing market power of the financial sector is the fact that 40 percent 
of all US profits by 2007 were concentrated within that sector. Much of 
these profits were based on the recycling of debt. A significant portion 
of this debt, equivalent to 30 percent of US consumption from 2000-2007, 
was tied to the refinancing of the US housing market, itself a product 
of policies promoted by the US transnational state and the deregulation 
of domestic and global financial markets.

Since 1985, US corporations in particular have benefitted from changes 
in US economic policies and tax laws that enabled the shift from 
corporate divisions to a multilayered corporate subsidiary structure 
(see Cox, chapter one, in this volume). Within this new structure of 
global production, US-based transnational corporations in the high-tech 
and manufacturing sectors have moved away from ownership and control of 
production in favor of ownership and control of the highest value-added 
aspects of the production process:  product design, patents, marketing 
and distribution. Transnational firms have used their corporate brands 
and their control over key marketing and distribution networks to 
dominate entire sectors of the global economy, namely by linking with 
global production networks that include corporate subsidiaries, 
subcontractors and independent producers throughout the world which are 
connected by this new global production system. Within this system, 
non-financial corporations at the top of the global supply chain have 
become more dependent on financial assets as a percentage of capital 
investments and as a percentage of profits than was the case in the 
previous Bretton Woods system. I coin the term "financialization of 
production" in chapter one as a short-hand phrase to help us understand 
the extent to which non-financial transnational corporations have become 
more dependent on an accumulation of financial assets, and on 
relationships to institutional financial investors, to maintain their 
dominant position within the contemporary global production system.

In Chapter Two, Sylvan Lee and I analyze the centrality of the China 
market in understanding the shift to a global production system 
dominated by transnational corporations and powerful state actors. We 
explore the political economy of the rise of China as a nexus market in 
the global production of computers and computer-related products that 
connects global transnational firms to East Asian production networks. 
This production system, emblematic of the new globalized production 
structures that have been especially advanced in the high-tech sectors 
of the world economy, has involved a wide range of economic and 
political actors. These include US-based transnational corporations, the 
US state, the Chinese state and Chinese corporations who have partnered 
with US firms, and an East Asian production network working on Original 
Equipment Manufacturing contracts with transnational corporations. These 
relationships have helped to forge a high-tech revolution in the global 
production of computers and computer-related products. Cox and Lee argue 
that the political economy of the US-China relationship can best be 
understood as part of a political process in which the market power of 
transnational corporations is fused with the political power of US and 
Chinese state actors. The result is an integrated production network 
dependent on labor repression, environmental degradation and a dramatic 
fracturing of the Chinese economy (and indeed much of the global 
economy) between those who benefit from the new system of accumulation 
and those who are systematically exploited or excluded.

In Chapter Three, Nelson Bass and I examine the role of the largest 
labor federation in the US, the AFL-CIO, within this new structure of 
globalized production. For decades during the Cold War, the AFL-CIO 
worked closely with US state and corporate interests in promoting an 
anti-communist foreign policy agenda. For the AFL-CIO, these efforts 
took precedence over building alliances with foreign trade unions 
working against corporate exploitation and government repression. The 
arm of the AFL-CIO foreign policy, the American Institute for Free Labor 
Development (AIFLD), sided with dictatorial regimes and conservative 
unions in an effort to improve the investment climate for US 
corporations. This tacit bargain between the US state and union 
officialdom reached the tragedy of the absurd with the US escalation of 
the Vietnam War during the mid-to-late 1960s, when AFL-CIO leaders took 
a pro-war stance at the very time that working class opposition to the 
war was growing.

The key question that Bass and I examine in chapter three is: how much 
has changed in the foreign policy strategies of the US labor movement?  
Specifically, has the creation of the International Labor Solidarity 
Center in 1997 heralded a move away from collaboration with the US state 
and US corporations embodied by AIFLD?  According to the rhetoric of 
union officials, the creation of the Labor Solidarity Center was to be 
the start of more aggressive solidarity campaigns with foreign trade 
unions, designed to improve the aggregate position of workers within a 
global economy where production was increasingly divided across the 
borders of states. By comparing and contrasting the historical patterns 
of US labor's foreign policy agenda with the contemporary patterns of 
activity undertaken by the Labor Solidarity Center, we reach the 
conclusion that not much has changed. The AFL-CIO has replaced the 
anti-communism practiced during the Cold War with a foreign policy 
agenda that follows the lead of the US state in prosecuting the "war on 
terror" rather than working to build new solidarity structures with 
foreign trade unions.

In Chapter Four, Dan Skidmore-Hess analyzes the political implications 
of the "corporate-centrist" orientation of the Obama Administration, 
whose biggest campaign donors are transnational corporations 
concentrated in the banking and high-tech sectors of the US economy. 
Following the "investment theory of political parties," developed by 
Thomas Ferguson, Skidmore-Hess illustrates how many of Obama's most 
controversial policies from health care to taxation have emerged 
directly from previous "moderate Republican" proposals, and have been 
crafted to win the support of corporate interests that financed his 
campaign in 2008. The fact that such policies are now labeled 
"socialistic" or even outright "socialism" by Obama's critics is simply 
a reflection of how far the spectrum of permissible debate has shifted 
to the right in US political discourse. Ultimately, the largest 
contributors to Obama's 2008 Presidential campaign, finance and 
high-tech industry, mirror the centers of power within the new global 
economy. Therefore it is no surprise that Obama is following a 
globalization and militarization agenda that is consistent with previous 
administrations. The positions of the Republican Party and the Obama 
Administration are well to the right of the preferences of US public 
opinion. But of course, public opinion does not shape the corporate 
agenda that dominates US politics. The only opinion that matters these 
days in crafting agendas for US domestic and foreign policies is the 
opinion of the upper 10 percent of the US income bracket (Hacker and 
Pierson 2010).

In Chapter Five, David Gibbs explores another crucial component of the 
corporate agenda in US foreign policymaking:  the military-industrial 
complex. Despite the fact that the Cold War with the Soviet Union ended 
long ago, weapons systems originally justified by the Soviet threat have 
steadily been expanded. New threats have been identified to justify an 
annual military budget that is now higher than any Cold War budget in 
real dollars. Gibbs provides several reasons for this in his chapter, 
including the institutional power of the military-industrial complex, 
which exerts a bureaucratic influence on policymaking simply because of 
its significant size and reach. The military as a powerful bureaucracy 
seeks to perpetually expand its revenues, and is closely linked to 
corporate actors through a revolving door of procurement contracts and 
lobbying networks. Corporations that enrich themselves through domestic 
military procurement have used their political clout to gain 
Congressional support for weapons systems that have no clear relevance 
to national defense or security. Furthermore, as Gibbs notes, US foreign 
policy elites have always been committed to linking military capability 
to the imperatives of the "open door" or the promotion of globalization, 
which is very relevant in an age of transnational capital accumulation. 
Militarization is justified to maintain security commitments, such as 
NATO, that are considered necessary to help ensure access to foreign 
markets. Thus military engagements such as the US intervention in Kosovo 
should be seen in the context of efforts to expand the purpose and 
rationale for military alliances and military spending that otherwise 
might be called into question.

In Chapter Six, Patrick Bond examines the history and consequences of 
the financialization of  production in the developing world, with a 
particular focus on the role that US foreign policies have played in 
creating the conditions for the emergence of neoliberalism on a global 
scale. Bond points out that the US state intervened forcefully on 
numerous occasions in debt crises during the 1980s and the 1990s to 
construct US-backed IMF/World Bank structural adjustment packages that 
amounted to socialization of losses for investment and commercial banks. 
The working class and the poor in developing countries paid for the bad 
investments of global bankers through austerity measures and through the 
financialization of productive assets which led to a transfer of wealth 
on a global scale from poor to rich. So the current financial crisis is 
hardly the first time that the US government has used taxpayer dollars 
to bail out the top investment and commercial banks. A number of 
precedents were established during the 1980s and 1990s that set the 
stage for more aggressive financial accumulation on a global scale, 
including a demonstrable willingness of the US state to bail out 
investment bankers who "were exposed in various regions and countries -- 
Eastern Europe (1996), Thailand (1997), Indonesia (1997), Malaysia 
(1997), Korea (1998), Russia (1998), South Africa (1998, 2001), Brazil 
(1999), Turkey (2001) and Argentina (2001) -- whose hard currency 
reserves were suddenly emptied by runs." The politics of this emerging 
financial architecture are evident in Bond's case study of South Africa, 
where the growth of a transnational class tied to the profits of 
neoliberalism and global accumulation have managed to impose their 
agenda on the working class coalition that had been most responsible for 
the demise of apartheid. The ripple effects of these politics of class 
collaboration are exemplified by the transfer of one leading South 
African neoliberal, former Finance Minister Trevor Manuel, to prominent 
positions within the World Bank and IMF, where he has emerged as a voice 
for cap and trade legislation as the solution to the global climate crisis.

In Chapter Seven, William Avilés further explores the intersection 
between the US state and US-based transnational corporations that have 
benefitted from the US promotion of "low-intensity democracy" in the 
developing world. Avilés defines "low-intensity democracies" as 
"procedural democracies that allow political opposition, greater 
individual freedoms, a reduced institutional role for the armed forces, 
and a more permeable environment for the investments of transnational 
capital." Avilés notes that US support for such democracies emerged 
"haltingly" under Presidents Carter and Reagan and then became a central 
component of President Clinton's foreign policy agenda. US officials 
considered the transfer of power from military governments to 
low-intensity democracies favorable to a wide range of US security and 
economic interests in the developing world, given that such regimes were 
associated with less instability than the military dictatorships that 
the US had previously supported. Avilés uses examples of Colombia and 
Honduras to illustrate the process leading to the establishment of 
"low-intensity democracies" in these countries. The features associated 
with each case include: a rise to power of neoliberal technocrats within 
the dominant political party structures of each country; pressure from 
global institutions such as the IMF/World Bank that ties future loans to 
the liberalization of the economy; a reduction of the role of the 
military in political governance; and an expanded use of internal 
security forces, including the military itself, to counter threats to 
the neoliberal project. As Avilés  notes, the contradictions of 
low-intensity democracy are apparent in the rising gap between rich and 
poor, which has generated internal political conflicts over the terms of 
neoliberalism. In the case of Venezuela, Avilés argues that the failure 
of low-intensity democracy has helped lead to the consolidation of power 
of Hugo Chavez as an alternative to neoliberalism.

Just as Avilés documents the contradictions of low-intensity democracy 
as a process for implementation of a neoliberal policy agenda in 
developing countries, Susanne Soederberg in Chapter Eight examines the 
contradictions of global capitalism embedded within the decisions of the 
leaders of the G20 summits in 2009 to authorize a continuity of the very 
same neoliberal policies that have led to the current capitalist crisis. 
Soederberg analyzes the policies associated with the financialization of 
the global economy over the past thirty years as a consequence of a 
long-term crisis in global capitalism. She exposes the extent to which 
both financial and non-financial corporations have relied on the US 
state and elites within the developing world to promote and implement 
policies that have made the global economy more vulnerable to systemic 
meltdowns. This includes what Soederberg calls a "financial fetishism" 
that treats the establishment of a market-based monetary and credit 
system as the most rational way to allocate credit, with the central 
problem being to ensure that market participants have access to all 
necessary information in which to maximize their "rational" allocation 
of resources and investments. In such a formulation, all considerations 
of the class basis of political power vanishes from the equation, 
thereby obfuscating the central role of political and economic actors in 
using their power in the global economy, and through the US state, to 
secure the adoption of government policies that direct a greater pool of 
investment resources toward short-term financial investments.

Soederberg notes that the process of subjecting more of the world's 
pension funds to market-based mechanisms has been a central feature of 
the various financial architectures that have been established prior to 
the current crisis. Most importantly, she concludes that "the global 
South continues to pay a higher price [than the North] for risks 
associated with US-led strategies of expanded capital reproduction." As 
a manifestation of what is required by the class-based politics of 
corporate globalization, "governments of emerging markets must 
continually signal creditworthiness in the form of low labor standards, 
balanced budgets, low taxation, environmental and financial regulation, 
and trade deregulation -- all of which have had harmful effects on the 
social fabric and environmental sustainability in the developing world."

Each of these authors contribute to our knowledge of how the fusion of 
market power with political power has worked to create a particular set 
of structures favorable to transnational capital investment and 
accumulation, often through mechanisms of class-based rule, exploitation 
and transfer of wealth from poor to rich. The relationship between the 
US state and transnational corporations is a crucial part of this 
process. This includes the tax breaks and regulatory deregulation of the 
late 1970s to the present, the dramatic expansion of corporate lobbying 
networks that have often been more important than elections in framing 
US economic and foreign policies, and the crucial role of the US state 
in using both its military and its economic power to expand 
neoliberalism to the Global South. The result has been frequent crises 
in the Global South and throughout the system, often followed by direct 
financial intervention by the US on behalf of the very interests whose 
reckless and unregulated investments contributed to each recurring crisis.

In the Conclusion, Cox, Daniel Skidmore-Hess, and Cathy Skidmore-Hess 
examine the extent to which the term "transnational capitalist class" is 
useful for understanding US foreign policies in promoting corporate 
globalization. They breakdown some of the benefits and problems 
associated with this term, and advance a case for the term 
"transnational interest bloc" which argues that the ability of sectors 
of transnational capital to secure political hegemony is contingent on 
the context of domestic and international political alliances that have 
been built up over time. In other words, there is an emerging 
transnational capitalist class, but its ability to exert its political 
power as a class has often been contested, and affected, either 
positively or negatively, by the particular environments in which it 
operates. The authors then examine why the US state has been such 
fertile ground for a deepening of transnational capitalist class power 
over the past three decades. In particular, they explore the class and 
racial aspects of US domestic politics associated with the "long 
right-turn" that has enabled an expansion of corporate power. They end 
by suggesting some of the contradictions, weaknesses and limitations of 
transnational class power within the current configurations of the US 
state which might give opponents political space to challenge the 
corporate agenda.

Bibliography
Cox, R. and Skidmore-Hess, D. (1999).US Politics and the Global Economy: 
Corporate Power, Conservative Shift. Boulder: Lynne Rienner.

Epstein, G., ed. (2006). Financialization and the World Economy. 
Northampton, MA: Edward Elgar Publishing.

Hacker, J. and Pierson, P. (2010). Winner Take All Politics: How 
Washington Made the Rich Richer and Turned Its Back On the Middle Class. 
New York: Simon and Schuster.

Helleiner, G. (1996). States and the Reemergence of Global Finance: From 
Bretton Woods to the1990s. Ithaca: Cornell University Press.

Open Secrets (2009). "Washington Lobbying Grew to $3.2 Billion Last 
Year, Despite Economy," opensecrets.org/  January 29.

Robinson, W. (2004). A Theory of Global Capitalism. Baltimore: Johns 
Hopkins University Press.

Wolin, S. (2008). Democracy Incorporated: Managed Democracy and the 
Specter of Inverted Totalitarianism. Princeton, N.J.: Princeton 
University Press.

***

*Financialization, corporate power*

*and South African subimperialism*

**

By Patrick Bond

Published in Ronald W. Cox, ed.,

/Corporate Power in American Foreign Policy/, London, Routledge Press, 2012

*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 (2012, 
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 2008-09 and their 
aftershocks in 2011 with no end in sight, but also in the tensions that 
began rising forty 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 1991-92, the State Department and its 
allies in the Bretton Woods Institutions and international finance more 
generally had begun to shift discernably towards 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 US AID in South Africa, pressure by Commerce 
Secretary Ron Brown on South African negotiators to conclude the 
pre-democracy 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 
(1994-99) 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 Institution neoliberalism was 
imposed. Because of the isolationist approach of PW 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-90s. 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 
potentials for linking anti-neoliberal movements to challenge the core 
dynamics.

*Structural forces behind the international rise and retention of 
neoliberalism*

Several key moments marked the rise of neo-liberal policy influences 
across the world, many traceable to the crisis and financialization 
processes described by Cox (2012). In 1973 the Bretton Woods agreement 
disintegrated when the US unilaterally ended its payment obligations, 
representing a default of approximately $80 billion. The agreement on 
Western countries' fixed exchange rates -- by which one ounce of gold 
was valued at US$35 between 1944 and 1971 -- had served to anchor other 
major currencies. As a result of the US move the price of gold rose to 
$850 per ounce within a decade.

Also in 1973, several Arab countries led the formation of the Oil 
Producing Exporting Countries cartel, which raised the price of 
petroleum dramatically and in the process transferred and centralized 
inflows from world oil consumers to their New York bank accounts. From 
1973, /los Chicago Boys/ of Milton Friedman who became leading Chilean 
bureaucrats, began to reshape Chile in the wake of Augusto Pinochet's 
coup against the democratically elected Salvador Allende, representing 
the birth pangs of neo-liberalism.

In 1976 the International Monetary Fund (IMF) signaled its growing power 
by forcing austerity on Britain at a point where the ruling Labour Party 
was desperate for a loan, even prior to Margaret Thatcher's ascent to 
power in 1979. Later that year, the US Federal Reserve addressed the 
dollar's decline and US inflation by dramatically raising interest 
rates. In turn this catalyzed a severe recession and the Third World 
debt crisis, especially in Mexico and Poland in 1982, Argentina in 1984, 
South Africa in 1985 and Brazil in 1987 (in the latter case leading to a 
default that lasted only six months due to intense pressure on the 
Sarnoy government to repay). At the same time, the World Bank shifted 
from project funding to the imposition of structural adjustment and 
sectoral adjustment (supported by the IMF and the Paris Club cartel of 
donors), in order to assure surpluses would be drawn for the purpose of 
debt repayment, and in the name of making countries more competitive and 
efficient.

The overvaluation of the US dollar associated with the US Federal 
Reserve's high real interest rates was addressed by formal agreements 
between five leading governments that devalued the dollar in 1985 (the 
Louvre Accord). However, with a 51 per cent fall against the yen, this 
required a revaluation in 1987 (the Plaza Accord). Once the Japanese 
economy overheated during the late 1980s, a stock market crash of 40 per 
cent and a serious real estate downturn followed from 1990. Indeed not 
even negative real interest rates could shake Japan from a long-term 
series of recessions.

During the late 1980s and early 1990s Washington adopted a series of 
financial crisis-management techniques -- such as the US Treasury's 
Baker and Brady Plans -- so as to write off (with tax breaks) part of 
the $1.3 trillion in potentially dangerous Third World debt due to New 
York, London, Frankfurt, Zurich and Tokyo banks which were exposed in 
Latin America, Asia, Africa and Eastern Europe. Notwithstanding the 
socialization of the banks' losses, debt relief was denied the borrowers.

In late 1987 crashes on the New York and Chicago financial markets 
(unprecedented since 1929) were immediately averted with a promise of 
unlimited liquidity by Federal Reserve Chairman Alan Greenspan. The 
promise was based on a philosophy which in turn allowed the bailout of 
the savings and loan industry and various large commercial banks 
(including Citibank) in the late 1980s notwithstanding a recession and 
serious real estate crash during the early 1990s. Likewise in 1998, when 
a New York hedge fund, Long Term Capital Management (founded by Nobel 
Prize-winning financial economists), was losing billions in bad 
investments in Russia, the New York Federal Reserve Bank arranged a 
bailout, on grounds the world's financial system was potentially at high 
risk.

Starting with Mexico in late 1994, the US Treasury's management of the 
'emerging markets' crises of the mid- and late 1990s again imposed 
austerity on the Third World. It also offered further bailouts for 
investment bankers exposed in various regions and countries -- Eastern 
Europe (1996), Thailand (1997), Indonesia (1997), Malaysia (1997), Korea 
(1998), Russia (1998), South Africa (1998, 2001), Brazil (1999), Turkey 
(2001) and Argentina (2001) -- whose hard currency reserves were 
suddenly emptied by runs.

In addition to a vastly over-inflated US economy whose various excesses 
have occasionally unravelled -- as with the bursting of dot.com stock 
market (2000-01) and real estate (2007-10) bubbles, which even 
unprecedented US government bailouts could not cure -- China and India 
picked up the slack in global materials and consumer demand during the 
2000s. However, this is not without extreme stresses and contradictions 
that in coming years will threaten world finances, geopolitical 
arrangements and environmental sustainability.

For example, at the time of the April 2009 G20 meeting called to 
generate a systematic elite response to the crisis, rhetorical gestures 
aimed at fusing markets and regulation were far less important than the 
economic /realpolitik /of unending Wall Street bailouts. The official 
communique issued at the close of the G20 (2009) London Summit, the 
'Global plan for recovery and reform', maintained the fiction that 
elites can simultaneously construct 'strong global institutions' within 
'an open world economy':

We face the greatest challenge to the world economy in modern times; a 
crisis which has deepened since we last met, which affects the lives of 
women, men, and children in every country, and which all countries must 
join together to resolve. A global crisis requires a global 
solution... We believe that the only sure foundation for sustainable 
globalization and rising prosperity for all is an open world economy 
based on market principles, effective regulation, and strong global 
institutions.

The contradictions between expansive rhetoric and harsh neoliberal 
reality could be found in the North-South divide, as well. At the 
November 2008 G20 press conference, IMF managing director Strauss-Kahn

called for nations to approve a fiscal stimulus equal to 2 per cent of 
gross domestic product. Such a move, he said, would result in a 2 per 
cent increase in growth. When asked where fiscal stimulus was need, he 
said, 'everywhere, everywhere where it is possible' (Grice and Foley, 
2008).

But for Strauss-Kahn, such Keynesian noises were easily uttered at times 
when the Bretton Woods institutions had to be seen to be acting. In 
reality, according to Robert Weissman (2009), Strauss-Kahn's

IMF is forcing countries in financial distress to pursue contractionary 
policies -- exactly the opposite of the stimulative policies carried out 
by the rich countries (and supported by the IMF, for the rich 
countries)... The Fund's loans since September 2008 to countries rocked 
by the financial crisis almost uniformly require budget cuts, wage 
freezes, and interest rates hikes. These are exactly the opposite of the 
policies that make sense in recessionary conditions. They are exactly 
the opposite of the huge stimulus measures taken in the United States 
and other rich countries. They are the opposite of the interest rate 
reductions in the United States (now effectively at zero) and other rich 
countries. In Ukraine, Georgia, Hungary, Iceland, Latvia, Pakistan, 
Serbia, Belarus and El Salvador, the IMF has told countries to cut 
government spending, an analysis by the Third World Network shows. This 
means less money for health, education and other vital priorities.

Hence the $500 billion in new capital for the IMF would not necessarily 
change matters, since the Fund was not short of resources; by the 2008 
IMF/Bank meetings there was only one major borrower, Turkey. The G20's 
failure to specify the need for the IMF to move into post-neoliberal 
ideological territory was another indication of the durability of the 
global elite's perspective. Many intellectual critics of neoliberalism 
concluded that the G20 represented nothing new. Remarked Walden Bello 
(2009), 'It's all show. What the show masks is a very deep worry and 
fear among the global elite that it really doesn't know the direction in 
which the world economy is heading and the measures needed to stabilize 
it.' According to David Harvey (2009), the G20 asked, simply,

how can we actually reconstitute the same sort of capitalism we had and 
have had over the last thirty years in a slightly more regulated, 
benevolent form, but don't challenge the fundamentals? ... The 
fundamentals have to do with the incredible increase in consolidation, 
if you like, of class power. I mean, since the 1970s, we've seen a 
tremendous increase in inequality, not just simply in this country, but 
worldwide. And in effect, the assets of the world have been accumulated 
more and more and more in few hands. And I think when you look at the 
nature of the bailout programs, the stimulus programs and all the rest 
of it, what it really does is to, in effect, try to keep those assets 
intact while making the rest of us pay... If you look backwards, you 
will see that this is not the first financial crisis we've had. We've 
had many of them over the last thirty years, and they all have the same 
character. We had our own savings and loan crisis back in the 1980s. 
There was a Mexican debt crisis back in 1982, when, in effect, Mexico 
was going to go bankrupt. And if they had gone bankrupt, then the New 
York investment banks would have gone under. So what did they do? They 
bailed out Mexico, therefore bailing out the New York investment 
bankers, and then they made the Mexican people pay.

We can summarise, then, from this list of major events and processes 
reflecting tensions and occasional eruptions: there is displacement but 
never /genuine resolution/ to the growing overall problems of volatility 
that have wracked world politics and economics. A more decisive 
/resolution /to a previous round of crises/, /in contrast, was the 
1929-45 devalorisation of overaccumulated capital first in an enormous 
crash of fictitious capital from 1929-32 and then in the degeneration of 
underlying productive capitals during the Great Depression and World War 
II. Since then, we have seen a pattern emerge: the more stable, 
predictable, prosperous and evenly distributed set of political-economic 
relations during the immediate post-War quarter-century (1945-70) was 
followed by a sense of chaos in global political economy and 
geopolitics. It is this global structural context that is terribly 
important to understanding why South Africa shifted from racial to class 
apartheid after 1994.

*South Africa's reinsertion into global circuits of capital *

Nelson Mandela's experience with neoliberalism during the late 1990s was 
similar to many other middle-income countries, entailing standard 
'Washington Consensus' or 'structural adjustment' policies:

. government budget cuts, increases in users fees for public services 
and privatization of state enterprises;

. the lifting of price controls, subsidies and any other distortions of 
market forces;

. liberalization of currency controls along with regular currency 
devaluation;

. higher interest rates and deregulation of local finance;

. removal of import barriers (trade tariffs and quotas); and

. an emphasis on promotion of exports, above all other economic priorities.

In South Africa as elsewhere, the effects of these policies have been 
quite consistent. Budget cuts depressed most economies' effective 
demand, leading to declining growth rates compared to the prior 
Keynesian or statist era. Often the alleged 'crowding out' of productive 
investment by government spending that justified the Washington 
Consensus was not, in fact, the reason for low investment levels; hence 
the budget cuts were not compensated for by private sector growth. 
Privatization processes typically did not distinguish which state 
enterprises may have been strategic in nature; were too often 
accompanied by corruption; and often suffered from foreign takeover of 
domestic industry with scant regard for maintaining local employment or 
production levels (the buyers' incentive was sometimes simply gaining 
access to markets). Moreover, the World Bank and IMF economists who most 
forcefully promoted privatization never bothered to determine how state 
agencies could supply services that enhanced 'public goods' (and merit 
goods). For example, the positive effects of water supply on public 
health, environmental protection, local economic activity and gender 
equality were never calculated. Thus all state services were reduced to 
mere commodities, requiring of their recipients full cost recovery 
through elimination of subsidies.

This in turn led South Africa's poor and working-class people to begin 
protesting at amongst the highest rates per person in the world. The 
police conservatively measure an average of more than 8000 'Gatherings 
Act' incidents per year since 2005 (Freedom of Expression Institute and 
Centre for Sociological Research 2009). In part this reflects the 
distorted character of 'growth' that South Africa witnessed after 
adopting neoliberal macroeconomic and microdevelopment policies, and the 
logical 'double-movement' (Polanyi 1957) for and against commodification 
of life playing out in the country's slums. As just one reflection of 
extreme uneven development during the era of financialization, South 
Africa's cities hosted the world's most speculative residential real 
estate bubble, with an inflation-adjusted price rise of 389% from 
1997-2008, more than double the second biggest bubble, Ireland's at 
193%, according to /The Economist/ (20 March 2009), with Spain, France 
and Britain also above 150%. (The US Case-Shiller national index was 
only 66% over the same period.) Although there were many more houses 
built annually with state subsidies in the post-apartheid period for 
lower-income people, compared to the last decade of apartheid, World 
Bank advice in 1994 meant that these were typically half as large, and 
constructed with flimsier materials than during apartheid; located even 
further from jobs and community amenities; characterised by 
disconnections of water and electricity; with lower-grade state services 
including rare rubbish collection, inhumane sanitation, dirt roads and 
inadequate storm-water drainage (Bond 2005).

In most provinces, the majority of the Gatherings Act incidents were 
'service delivery protests' over low-quality provision and the rising 
cost of water, sanitation and electricity (Freedom of Expression 
Institute 2009). Even after 'Free Basic Services' -- 6000 liters per 
household per month of water and 50 kWh of electricity (with small 
increases anticipated in 2010) -- were provided, the convex nature of 
water/electricity tariffs meant the rise in the second block of 
consumption had the impact of raising the entire amount, resulting in 
higher non-payment rates, higher disconnection levels (1.5 million/year 
for water, according to the state) and lower consumption levels by poor 
people (Bond and Dugard 2008).

How did this happen, in a society that boasted one of the world's 
greatest urban social movements during the 1980s (Mayekiso 1996), which 
in turn generated a powerful urban reform project in the early 1990s, 
culminating in an African National Congress (ANC) 1994 campaign platform 
-- the 'Reconstruction and Development Programme' -- which had insisted 
upon various forms of decommodified real estate, especially housing 
finance? These promises were another case of 'talk left, walk right', as 
goes the local slogan, because notwithstanding a housing minister -- Joe 
Slovo -- who was also chair of the SA Communist Party at the time (just 
prior to his death due to cancer in early 1995), the December 1994 
/Housing White Paper/ set as a main task restoring 'the fundamental 
pre-condition for attracting [private] investment, which is that housing 
must be provided within a normalized market'. In practice this entailed 
huge concessions to banks, alongside a drive to commercialize municipal 
utilities (Bond 2000). This was not merely the fault of a dying Slovo 
and his director-general, Billy Cobbett (subsequently director of the 
World Bank's Cities Alliance), for the dye was cast when neoliberalism 
was adopted in the early 1990s by the late apartheid regime. The period 
was marked by several policy shifts away from 1980s-era 
sanctions-induced dirigisme carried out by 'verligte' (enlightened) 
Afrikaner 'econocrats' in Pretoria, once the influence of 'securocrats' 
faded and the power of white English-speaking business rose during the 
1990-94 negotiations. That period included South Africa's longest 
depression (1989-93) and required Mandela's ANC to periodically 
demobilize protest, until in late 1993 the final touches were put on the 
'elite transition' to democracy (Bond 2005).

In the meantime, long-standing ANC promises to nationalize the banks, 
mines and monopoly capital were dropped; Mandela agreed to repay $25 
billion of inherited apartheid-era foreign debt; the central bank was 
granted formal independence in an interim constitution; South Africa 
joined the General Agreement on Tariffs and Trade on disadvantageous 
terms; and the International Monetary Fund provided a $850 million loan 
with standard Washington Consensus conditionality. Soon after the first 
free and fair democratic elections, won overwhelmingly by the ANC, 
privatization began in earnest; financial liberalization took the form 
of relaxed exchange controls; and interest rates were raised to a record 
high (often double-digit after inflation is discounted). By 1996 a 
neoliberal macroeconomic policy was formally adopted and from 1998-2001, 
the ANC government granted permission to South Africa's biggest 
companies to move their financial headquarters and primary stock market 
listings to London (Bond 2005).

The basis for sustaining the subsequent property and financial bubble 
came from two sources: residual exchange controls which limit 
institutional investors to 15% offshore investments and which still 
restrict offshore wealth transfers by local elites; and a false sense of 
confidence in macroeconomic management. The oft-repeated notion is that 
under Finance Minister Trevor Manuel, 'macroeconomic stability' was 
achieved since apartheid ended in 1994. Yet no emerging market had as 
many currency crashes (15% in nominal terms) over that period: SA's were 
in early 1996, mid-1998, late 2001, late 2006 and late 2008. By early 
2009, /The Economist/ (25 February 2009) ranked South Africa as the most 
'risky' of 17 emerging markets, in large part because corporate/white 
power had generated an enormous balance of payments deficit thanks to 
outflows of profits/dividends to London/Melbourne financial headquarters.

To cover the current account deficit, a vast new borrowing spree began, 
with foreign debt rising from $25 billion in 1994 to $80 billion by late 
2010 and more than $100 billion by mid-2011. Moreover, consumer credit 
had drawn in East Asian imports at a rate greater than SA exports even 
during the 2002-08 commodity price bubble. If there was a factor most 
responsible for the 5% GDP growth recorded during most of the 2000s, by 
all accounts, it was consumer credit expansion, with household debt to 
disposable income ratios soaring from 50% to 80% from 2005-08, while at 
the same time overall bank lending rose from 100% to 135% of GDP. But 
this overexposure began to become an albatross, with non-performing 
loans rising from 2007 by 80% on credit cards and 100% on mortgages 
compared to the year before, and full credit defaults as a percentage of 
bank net interest income rising from 30% at the outset of 2008 to 55% by 
year's end (SARB 2009).

Although the decline in corporate tax revenue drove the budget deficit 
to a near-record 7.6% of GDP estimated for 2009, South Africa was not 
pursuing a classical Keynesian strategy, the state was simply carrying 
through massive construction projects contracted earlier. Anticipated 
increases in state spending based upon ruling party promises -- 
especially for job creation -- were deferred by the new finance 
minister, Pravin Gordhan (2009), in his maiden budget speech in October 
2009. The post-apartheid share of social spending in the total budget 
only rose from around 50% during the mid-1990s to 57% at the peak of 
crisis in any case, boosted only by social grant transfer payments.

High corporate profits were not a harbinger of sustainable economic 
development in South Africa, as a result of persistent deep-rooted 
contradictions (Republic of South Africa Department of Trade and 
Industry 2009, Legassick 2009, Loewald 2009):

·with respect to stability, the value of the rand in fact crashed 
(against a basket of trading currencies) five times, the worst record of 
any major economy, which in turn reflects how vulnerable SA became to 
international financial markets thanks to steady exchange control 
liberalization (26 separate loosenings of currency controls) starting in 
1995;

·SA witnessed GDP growth during the 2000s, but this does not take into 
account the depletion of non-renewable resources -- if this factor plus 
pollution were considered, SA would have a net negative per person rate 
of national wealth accumulation (of at least US$ 2 per year), according 
to even the World Bank (2006, 66);

·SA's economy became much more oriented to profit-taking from financial 
markets than production of real products, in part because of extremely 
high real interest rates;

·the two most successful major sectors from 1994-2004 were 
communications (12.2 per cent growth per year) and finance (7.6 per 
cent) while labour-intensive sectors such as textiles, footwear and gold 
mining shrunk by 1-5 per cent per year, and overall, manufacturing as a 
percentage of GDP also declined;

·the Gini coefficient measuring inequality rose during the 
post-apartheid period, with the Institute for Democracy in South Africa 
(2009 citing Statistics South Africa) measuring the increase from 0.56 
in 1995 to 0.73 in 2006, while Bhorat, van der Westhuizen and Jacobs 
(2009, 80) calculated a rise from 0.64 to 0.69, and the SA Presidency 
(2008, 96) conceded an increase from 0.67 to 0.70 over nearly the same 
period;

·black households lost 1.8% of their income from 1995-2005, while white 
households gained 40.5% (Bhorat et al 2009, 8);

·unemployment doubled to a rate of around 40% at peak (if those who have 
given up looking for work are counted, around 25% otherwise) -- but 
state figures underestimate the problem, given that the official 
definition of employment includes such work as 'begging' and 'hunting 
wild animals for food' and 'growing own food';

·overall, the problem of 'capital strike' -- large-scale firms' failure 
to invest -- continues, as gross fixed capital formation hovered around 
15-17 per cent from 1994-2004, hardly enough to cover wear-and-tear on 
equipment;

·businesses did invest their SA profits, but not mainly in SA: dating 
from the time of political and economic liberalization, most of the 
largest Johannesburg Stock Exchange firms -- Anglo American, DeBeers, 
Old Mutual, Investec, SA Breweries, Liberty Life, Gencor (now the core 
of BHP Billiton), Didata, Mondi and others -- shifted their funding 
flows and even their primary share listings to overseas stock markets 
mainly in 2000-01;

·the outflow of profits and dividends due these firms is one of two 
crucial reasons SA's current account deficit has soared to amongst the 
highest in the world (in mid-2008 exceeded only by New Zealand) and is 
hence a major danger in the event of currency instability, as was 
Thailand's (around 5 per cent) in mid-1997;

·the other cause of the current account deficit is the negative trade 
balance during most of the recent period, which can be blamed upon a 
vast inflow of imports after trade liberalization, which export growth 
could not keep up with;

·another reason for capital strike is SA's sustained overproduction 
problem in existing (highly-monopolised) industry, as manufacturing 
capacity utilization fell substantially from the 1970s to the early 
2000s; and

·fast-rising corporate profits avoided reinvestment in plant, equipment 
and factories, and instead sought returns from speculative real estate 
and the Johannesburg Stock Exchange: there was a 50 per cent increase in 
share prices during the first half of the 2000s, and the property boom 
was unprecedented (Bond 2005, 2010).

As for the South African financial role in Africa, mid-2002 witnessed 
Finance Minister Manuel promising the Commonwealth Business Council he 
would 'fast-track financial market integration through the establishment 
of an internationally competitive legislative and regulatory framework' 
for the continent. But, without any Africa-wide progress to report two 
years later, Manuel's director-general Lesetja Kganyago (2004) announced 
a new 'Financial Centre for Africa' project to amplify the 
financialization tendencies already evident in Johannesburg's exclusive 
new Sandton central business district: 'Over the five years to 2002, the 
financial sector grew at a real rate of 7.7% per year, more than twice 
as fast as the economy as a whole'. Responsible for a full quarter of 
post-apartheid South African GDP growth, the sector required further 
room to expand. According to Kganyago (2004):

What is needed is a financial hub especially focused on the needs and 
circumstances of the region, much in the same way that Singapore and 
Hong Kong cater for the capital needs of the Asian continent. . . . 
International financial centres tend to have a foundation in common. 
Elements include political stability, free markets, and what is best 
described as the rule of commercial law.

Pretoria's specific aims included 'opening South Africa's markets to 
African and global issuers; global lowest trading costs and trading 
risk; global leadership in investor protection; and a global hub for 
financial business process outsourcing'. Concluded Kganyago, 'Africa's 
economies cannot wait the slow maturing of national financial markets to 
provide the necessary channel for large-scale foreign capital flows for 
development. Only a regional financial centre will be in a position to 
provide these services in the foreseeable future.'

A telling incident in mid-2002 illustrated the responsibility that the 
South African government has taken on, via the New Partnership for 
Africa's Development, to police the financial mechanisms of imperialism. 
A Cabinet meeting in Pretoria concluded with this statement: 'The 
meeting noted the provision by South Africa of a bridge loan to the 
Democratic Republic of the Congo of Special Drawing Rights (SDR) 75 
million. This will help clear the DRC's overdue obligations with the IMF 
and allow that country to draw resources under the IMF Poverty Reduction 
and Growth Facility' (Republic of South Africa Government Communications 
and Information Service 2002). Consistent with imperialism's need to 
renew accumulation by dispossession, Pretoria thus codified the earlier 
generation of IMF loans made to Mobuto Sese Seko, riven with corruption 
and capital flight to European banks. Continuities with an earlier 
sub-imperial project were obvious, for the people of the DRC were 
previously victims of South Africa's apartheid-era allegiance with 
Mobuto, an arrangement that especially suited the ecology-destroying 
mineral extraction corporations headquartered in Johannesburg. The 
people's struggle against oppression had initially spawned another ruler 
in 1996, Laurent Kabila, who unfortunately refused democracy and later 
fell to an assassin's bullet. Thanks to his unelected son Joseph's 
connections in Pretoria's Union Buildings and finance ministry, the old 
'odious' Mobuto loans would not be repudiated but instead be honoured, 
and serviced with the new credits. In addition, IMF staff would be 
allowed back into Kinshasa with their own new loans, and with neoliberal 
conditionalities again applied to the old victims of Mobuto's fierce 
rule. These elite linkages, the protective Washington gear and Mbeki's 
capacity for reproducing neoliberalism in such hostile conditions were, 
together, at least temporarily effective.

To accomplish the diverse agenda laid out above required exceptionally 
powerful political cover for corporate and especially financial 
interests, and by the mid-1990s such a force appeared in Pretoria. 
Whereas Nelson Mandela was an extremely useful moderate figure in 
demobilizing rightwing Afrikaner reactionaries as well as left-wing 
revolutionaries, an operational figure to promote neoliberalism was also 
terribly important.

*The case of Trevor Manuel*

Individuals are sometimes important to examine as vectors of change in 
their own right, but mostly as personications of broader class 
interests. The transition from militant anti-apartheid (and often 
anti-business) politics of the 1970s-80s to the compromises of the 1990s 
was best reflected in the trajectory of South Africa's most vocal 
neoliberal politician, Manuel, who served as Finance Minister from 
1996-2009 and subsequently as Planning Minister. Manuel chaired the 
World Bank/IMF Board of Governors in 2000, as well as the Bank's 
Development Committee from 2001-05. He was one of two United Nations 
Special Envoys to the 2002 Monterrey Financing for Development summit, a 
member of Tony Blair's 2004-05 Commission for Africa, and chair of the 
2007 G-20 summit. Manuel was appointed UN Special Envoy for Development 
Finance in 2008, headed a 2009 IMF committee that successfully advocated 
a $750 billion capital increase, served on the UN's High Level Advisory 
Group on Climate Change Finance in 2010, and in March 2011 was elected 
co-chair of the design committee for the Green Climate Fund. Within the 
latter process, he suggested that up to half the anticipated $100 
billion/year fund be sourced from controversial private-sector emissions 
trading, not aid budgets. Manuel's name was often mentioned as a logical 
successor to Dominique Strauss-Kahn as IMF Managing Director in May-June 
2011.

No one from the Third World has such experience, nor has anyone in these 
circuits such a formidable anti-colonial political pedigree, including 
several 1980s police detentions as one of Cape Town's most important 
anti-apartheid activists. Yet despite occasional rhetorical attacks on 
'Washington Consensus' economic policies (part of SA's 'talk left walk 
right' tradition), since the mid-1990s Manuel has been loyal to the 
pro-corporate cause. Even before taking power in 1994, he was considered 
a World Economic Forum 'Global Leader for Tomorrow', and in 1997 and 
2007 /Euromoney/ magazine named him African Finance Minister of the 
Year. No wonder, as in late 1993 he had agreed to repay apartheid-era 
commercial bank debt against all logic, and negotiated an $850 million 
IMF loan that straightjacketed Nelson Mandela (Bond 2003, 2005).

With Manuel as trade minister from 1994-96, liberalization demolished 
the clothing, textile, footwear, appliance, electronics and other 
vulnerable manufacturing sectors, as he drove tariffs below what even 
the World Trade Organization demanded. After moving to the finance 
ministry in 1996, Manuel imposed the 'non-negotiable' /Growth, 
Employment and Redistribution/ policy (co-authored by World Bank staff), 
which by the time of its 2001 demise had not achieved a single target 
aside from inflation. Manuel also cut the primary corporate tax rate 
from 48 percent in 1994 to 30 percent five years later, and then allowed 
the country's biggest corporations to move their financial headquarters 
to London, which ballooned the current account deficit. That in turn 
required Manuel to arrange such vast financing inflows that the foreign 
debt soared from the $25 billion inherited at apartheid's close to $80 
billion by 2009, when he became Planning Minister (SA Reserve Bank, 2009).

At that stage, with the world economy teetering, /The Economist/ 
magazine (25 February 2009) named South Africa the most risky of the 17 
main emerging markets, and the SA government released data conceding 
that the country was much more economically divided than in 1994, 
overtaking Brazil as the world's most unequal major country. 'We are not 
in recession,' Manuel quickly declared in February 2009. 'Although it 
sometimes feels in people's minds that the economy is in recession, as 
of now we are looking at positive growth' (Moneyweb 2009). At that very 
moment, in fact, the SA economy was shrinking by 6.4 percent 
(annualized), and had actually been in recession for several months 
prior. More than 1.2 million jobs were lost in the subsequent year, as 
unemployment soared to around 40 percent (including those who gave up 
looking). But in October 2008, just as Strauss-Kahn told the rest of the 
world to try quick-fix state deficit spending, Manuel sent the opposite 
message to his impoverished constituents: 'We need to disabuse people of 
the notion that we will have a mighty powerful developmental state 
capable of planning and creating all manner of employment' (Lapper and 
Burgis, 2008). This echoed his 2001 statement to a local Sunday 
newspaper: 'I want someone to tell me how the government is going to 
create jobs. It's a terrible admission, but governments around the world 
are impotent when it comes to creating jobs' (cited in Marais 2001, 208).

Governments under the neoliberal thumb are also impotent when it comes 
to service delivery, and thanks partly to his fiscal conservatism, 
municipal state failure characterizes all of South Africa, resulting in 
more protests per capita against local government in Manuel's latter 
years as finance minister than nearly anywhere in the world (the police 
count at peak was more than 10,000/year). Ironically, said Manuel in his 
miserly 2004 budget speech, 'The privilege we have in a democratic South 
Africa is that the poor are unbelievably tolerant' (/Mail&Guardian 
/2004). In 2008, when an opposition politician begged that food vouchers 
be made available, Manuel replied that there was no way to ensure 
'vouchers will be distributed and used for food only, and not to buy 
alcohol or other things' (cited in de Lange 2008). The attitude extended 
to AIDS medicines, which in December 2001 aligned Manuel with his 
AIDS-denialist president Thabo Mbeki in refusing access:'The little I 
know about anti-retrovirals is that unless you maintain a very strict 
regime ... they can pump you full of anti-retrovirals, sadly, all that 
you're going to do, because you are erratic, is to develop a series of 
drug-resistant diseases inside your body' (South African Broadcasting 
Corporation 2001).

Instead of delivering sufficient medicines, money and post-neoliberal 
policy to the health system, schools and municipalities, Manuel (2002) 
promoted privatization, even at the Monterrey global finance summit: 
'Public-private partnerships are important win-win tools for governments 
and the private sector, as they provide an innovative way of delivering 
public services in a cost-effective manner.' He not only supported 
privatization in principle, as finance minister Manuel put enormous 
pressure (equivalent to IMF conditionality) on municipalities -- 
especially Johannesburg in 1999 -- to impose commodification on the 
citizenry. In one of the world's most important early 21st century water 
wars, residents of Soweto rebelled and the French firm Suez was 
eventually evicted from managing Johannesburg's water in 2006 (Bond 
2006). Water privatization was Washington Consensus advice, and as 
Manuel once put it, 'Our relationship with the World Bank is generally 
structured around the reservoir of knowledge in the Bank' -- with South 
Africa a guinea pig for the late-1990s 'Knowledge Bank' strategy (Bond 
2003, 142). Virtually without exception, Bank missions and neoliberal 
policy support in fields such as water, land reform, housing, public 
works, healthcare, and macroeconomics failed to deliver (Bond 2005).

In spite of neoliberal ideology's disgrace, president Jacob Zuma 
retained Manuel and his policies in 2009. In September that year, 
Congress of SA Trade Unions president Sdumo Dlamini called Manuel the 
'shop steward of business' because of his 'outrageous' plea to the World 
Economic Forum's Cape Town summit that business fight harder against 
workers (K.Brown 2009). The mineworkers union termed Manuel's challenge 
'bile, totally irresponsible... To say that business crumbles too easily 
is to reinforce business arrogance.' Manuel also disappointed feminists 
for his persistent failure to keep budgeting promises, even 
transparency. 'How do you measure government's commitment to gender 
equality if you don't know where the money's going?', asked the 
Institute for Democracy in South Africa's Penny Parenzee (Scott 2005). 
Former ruling-party politician Pregs Govender helped developed 
gender-budgeting in 1994 but within a decade complained that Manuel 
reduced it to a 'public relations exercise' (Govender 2002).As for a 
commitment to internationalism, in early 2009 when Pretoria revoked a 
visitor's visa for the Dalai Lama on Beijing's orders, Manuel defended 
the ban on the exiled Tibetan leader: 'To say anything against the Dalai 
Lama is, in some quarters, equivalent to trying to shoot Bambi' (South 
African Press Association 2009).

At the same moment Manuel was sabotaging Zimbabwe's recovery strategy, 
chosen by the new government of national unity, by insisting that Harare 
first repay $1 billion in arrears to the World Bank and IMF, otherwise 
'there was no way the plan could work.' Zimbabwean economist Eddie Cross 
(2009) complained, 'In fact the IMF specifically told us to put the 
issue of debt management on the back burner... The South Africans on the 
other hand have reversed that proposal -- I do not know on whose 
authority, but they are not being helpful at all.'

Often suggested as a candidate for the top job at the Bank or IMF (only 
pulling out of the June 2011 race for IMF managing director on the last 
day of eligibility), Manuel has expressed anger at the way local South 
African politics evolved after Zuma evicted Thabo Mbeki from the SA 
presidency in September 2008. Manuel (2011) told the Zuma government's 
main spokesperson, 'your behaviour is of the worst-order racist' after a 
(year-old) incident in which Manyi, then lead labour department 
official, claimed there were too many coloured workers in the Western 
Cape in relation to other parts of SA. Manyi had earlier offered an 
apology, but suffered no punishment. Manuel's disillusionment apparently 
began in December 2007, just prior to Mbeki's defeat in the African 
National Congress (ANC) leadership election.

It is easy to sympathize with Manuel's frustrating struggle against 
ethnicism and cronyism, especially after his opponents' apparent 
victories. However, former ANC member of parliament Andrew Feinstein 
records that the finance minister knew of arms-deal bribes solicited by 
the late defense minister Joe Modise. In court, Feinstein testified 
(without challenge) that in late 2000, Manuel surreptitiously advised 
him over lunch, 'It's possible there was some shit in the deal. But if 
there was, no one will ever uncover it. They're not that stupid. Just 
let it lie' (Pressly 2009).

Nevertheless, the myth of Manuel's financial wizardry and integrity 
continues, in part thanks to a 600-page biography, /Choice not Fate/ 
(Penguin, 2008) by his former spokesperson Pippa Green (subsidized by 
BHP Billiton, Anglo American, Total oil and Rand Merchant Bank). And 
after all, recent politico-moral and economic scandals by World Bank 
presidents Robert Zoellick and Paul Wolfowitz (whom in 2005 Manuel 
welcomed to the job as 'a wonderful individual . . . perfectly 
capable')(Bretton Woods Project 2005) confirm that global elites are 
already scraping the bottom of the financial leadership barrel. Yet it 
is still tragic that as host to 2011's world climate summit, South 
Africa leads (non-petroleum countries) in carbon emissions/GDP/capita, 
twenty times higher than even the US. Manuel's final budget countenanced 
more than $100 billion for additional coal-fired and nuclear power 
plants in coming years.

Given this background, Manuel's leadership of Green Climate Fund design 
in 2011 added a new quantum of global-scale risk. His long history of 
collaboration with Washington-London raised prospects for 'default' by 
the industrialized North on payment of climate debt to the impoverished 
South. Indeed, as Pretoria's main man link to the Bretton Woods 
Institutions, Manuel's role as co-chair of the Fund gave the Bank much 
more influence, and at a Tokyo planning committee meeting in July 2011, 
he prevented a conflict-of-interest charge made by the Nicaraguan 
negotiator from being tabled.

       The most important African negotiator -- and largest CO2 emitter (responsible for more than 40% of the continent's CO2) -- is South Africa.  Aside from ostensibly preventing climate change that could have an especially devastating impact in South Africa, Pretoria's climate negotiators have two conflicting agendas: increasing Northern payments to Africa (a longstanding objective of the New Partnership for Africa's Development, which unsuccessfully requested $64 billion per annum in aid and investment concessions during the early 2000s); and increasing South Africa's own rates of CO2 outputs through around 2030-35, when the Long-Term Mitigation Scenario -- South Africa's official (albeit non-binding) climate strategy -- would come into effect. Only then are absolute emissions declines offered as a scenario. In the meantime
, Pretoria has earmarked more than $100 billion for emissions-intensive coal and nuclear fired electricity generation plants due to be constructed during 2010-15, which would amplify Africa's climate crisis, requiring more resources from the North for adaptation. Thus far, South Africa does not, officially, see itself as a climate creditor, in spite of strong climate debt advocacy by the new Climate Justice Now! South Africa movement, especially in February-April 2010 when the World Bank considered and then granted a $3.75 billion loan to Eskom primarily for the construction of the world's fourth-largest coal-fired power plant (Bond 2011).

*Conclusion: Against financialization*

The trajectory outlined above merely reiterates some core processes of 
political economy and political ecology associated with South African 
financialization, crisis and uneven development. A deeper statement of 
geopolitical positioning (Bond 2006) and of domestic politics (Bond 
2005a) would confirm that territorial and social-control agendas were 
consistent with the accumulation processes observed above, especially as 
South Africa lined up as a sub-imperialist power, a deputy sheriff to 
global neoliberal institutions responsible for Africa (Bond 2005b). 
Moreover, South Africa was also crucial for advancing the 
financialization and commodification agenda in outlets including the 
World Trade Organisations General Agreement on Trade in Services, the 
World Bank and the IMF.

Given that this trajectory left a vast number of South Africans with 
widening income inequality and rising unemployment, with roughly half 
the country under what trade unions consider to be the poverty line, it 
was not surprising that very serious protests have regularly broken out 
against the concrete forms of neoliberalism in impoverished townships, 
sometimes numbering over 10,000 annually, according to police records 
(Bond 2010). The protests were serious, yet they had a so-called 
'popcorn' character insofar as they popped up and then died back down 
quickly. While up, depending upon which way the wind was blowing, they 
could push or be pulled to the left or right (for example, often 
becoming xenophobic). But although cadreship from the most advanced 
community struggles began to join a Democratic Left Front (DLF) in 2011 
and exhibited a desire for ideological coherence and a national linkage 
with likeminded activists, a big barrier was the inability of trade 
unions to devote their resources to developing the linkages. This was 
not only because the DLF was viewed as a potential competitor to the SA 
Communist Party but because the sectional structural interests of union 
members often conflicted with the precariat's even though they were all 
bound up in a broad working-class. The labour market was sufficiently 
flexible that in 2008-11, more than 1.3 million jobs were lost with no 
apparent recovery from the recession in terms of employment. Yet 
ironically, the best-organised sections of the labour movement regularly 
won wage concessions consistently above the inflation rate. These never 
transcended the particular firm-level agreement, however, except for the 
sole labour policy victory of winning a state commitment to National 
Health Insurance in 2009 which was gradually elaborated into a Green 
Paper in 2011.

Do what extent can the militancy at the base be turned into more 
generalized critique of the power of financial capital? Three examples 
are illustrative: township housing in the early 1990s, the Jubilee 
movement against international financial relations in the 2000s, and 
labour against high interest rates after 2008. In the first, the 
community activists in the SA National Civic Organisation (Sanco) turned 
their activism to bank 'bond boycotts' in the early 1990s, as the real 
interest rate increase from -6 to +7 over eighteen months meant that out 
of 200,000 borrowers, 40,000 fell into arrears. Bond (home mortgage) 
boycotts occurred in dozens of townships when communities collectively 
refused repay banks. The Sanco activists won minor concessions, but it 
was with a dramatic decline in housing prices in the prior Kuznets Cycle 
downturn and the economic upturn from 1993 that the financial pressure 
gradually eased and Sanco turned its attention to corporatist deals 
(Bond 2000).

The Jubilee South Africa campaigns against the residual apartheid debt, 
against foreign companies that profited from apartheid, as well as 
against further relations with the World Bank and IMF were generally 
unsuccessful, though in 2001 the World Conference Against Racism allowed 
a widespread reparations mobilization that had to be put down within the 
conference by Mbeki and UN Human Rights Commissioner Mary Robinson. In 
the mid- and late 2000s, Jubilee South Africa won some ground in US 
courts to pursue banks that had made apartheid loans, using the Alien 
Tort Claims Act. By 2011, however, the momentum for a major case was 
lost (Bond and Sharife 2010), and by then there internal divisions that 
left the organization in a dysfunctional state.

Finally the most hopeful sign of counterpower was the National Union of 
Metalworkers of South Africa campaign against extremely high real 
interest rates starting in 2008. By mid-2009, they were instrumental in 
the eviction of the Reserve Bank Governor, who in any case was too 
closely identified with Mbeki to be a comfortable ally of the new 
president, Zuma. The replacement was no better from labour's point of 
view, nor was Manuel's replacement at finance. The union continued to 
complain about high interest rates and capital flight, and were borne 
out by international events, but a more sustained shift in power to the 
left would be required before the parameters of neoliberal macroeconomic 
policy could be affected.

These examples suggest a need for a different and more integrated 
approach to fighting such extreme uneven and combined development. It is 
too early to say what kind of alliances might develop in future, 
assuming Zuma continues to alienate his labour constituents and 
communities continue rebelling. Their fusion in some form of workers' 
party would be an important step, but even before that inevitable 
development, the main work being done by critics of financialization and 
subimperialism is to prepare the ground with sound analysis that 
stretches as far as does the problem -- i.e., far beyond Johannesburg 
bank headquarters, to the core dynamic of world capitalism.

**

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