The South African Federation of Trade Unions (SAFTU) notes the Gross Domestic Product (GDP) for quarter 3 of 2022. Though the figures show the economy grew by 1,6%, this is nothing to celebrate. If anything, the economy is continuing on its usual trajectory of zigzags i.e., a trajectory characterised by constant fluctuations of growth and decline. If we trace the GDP stats to 19 quarters ago, the zigzag path is most graphic and lucid. Therefore, we have no illusions that this economy in structural crisis has made a U-turn and is on the growth path towards boom.
In addition to affirming our diagnosis of this zigzag path, the GDP for the third quarter vindicates our assessment on the relationship between expenditure and production. The GDP grew in tandem with the expenditure on it, at 1,7%.
Our analysis is based on the understanding that capitalism is a system of generalised commodity production, and as such, the production of commodities is driven mainly by the willingness to buy. If the general demand on commodities is low and the capitalists ramp production, they will experience loses as most of their goods will not be consumed. But because capitalists are profit driven, they always try to avoid making loses. Consequently, their estimation for production is always measured to ensure they do not over-supply goods and incur losses. It is in this light that demand becomes a key factor in a capitalist economy, and determines whether there is need to expand production.
In the context of this theoretical framework, we have argued that in order to create stimulation that calls for the expansion of productive forces and creation of employment, government should stimulate demand by fiscal spending.
The areas of fiscal expenditure that could stimulate the economy include the Basic Income Grant of R1 500 for the unemployed, the 10% increase to the public service wages and expansion of the public service compensation bill to hire more public servants and mass basic service provision of housing, water, sanitation and roads amongst others.
The infrastructure development programme could put the rural areas on the path of industrialisation, including building of hospitals and health centres in line with the ideals of National Health Insurance, closing the infrastructure backlog in public institutions and constructing roads.
In the event that government says that it does not have money to finance such programmes that have stimulatory effect, we have always called for the wealth tax, solidarity tax, reversal of the corporate tax deductions, and measures to put an end to illicit cash outflows that take place through tax dodging amongst others.
But stimulating demand for consumer goods does not guarantee that capitalists will expand their productive force to increase production, so that demand would not exit supply. In fact, history has taught us that capitalists, fixated on their narrow profiteering motives, often raise prices instead of expanding production. Fearing that general rise in prices erodes the profits for those who have financial assets, central banks hike interests to guarantee financiers profits.
This dichotomy created by competing profiteering interests of the industrial and financial capitalists — resulting in inflation and interest rate hikes — lead to further impoverishment of the working class. Hence household consumption on food declined in this period.
In addition to stimulating demand and hoping that its effect will be multiplied leading to job creation, SAFTU has consistently called for an end to the investment strike which is driven by government austerity programmes and the private sector hoarding of resources so desperately needed to develop our country. In 2017, it was reported that the private sector was hoarding R1,4 trillion, and this figure could be well above R2 trillion today. Meanwhile, government investment on its corporations and service provision has been declining.
Furthermore, property and land poverty must be addressed to ensure that economic demands of the Freedom Charter centred on the call for the sharing of the wealth are taken forward. In addition to this, the much needed industrialisation can be achieved if we put an end to the domination of the Mining/Finance/Energy complex. Mining complex is export driven and avoids industrialisation that could process minerals domestically, and finance result in the increased hoarding and speculation not investment in productive sectors of the economy.
These alternatives require a change of the current fiscal and monetary policy to prioritise job creation, addressing of poverty and inequalities. If we do not make structural changes, including the change from capitalism, our economy will continue being trapped in low growth path that zig-zags and leaves majority unemployed and impoverished.
SAFTU recognises the urgent need to abolish capitalism if the wellbeing of society is to be a priority.