The strike wave and what it means

Cosatu responded to the IMF saying that “lowering wages” would decrease demand and make the poor pay for the capitalist crisis. Cosatu’s response appears to leave out the 40% of the population that is unemployed. NUMSA general secretary Irwin Jim, in explaining above inflation wage demands, is right when he says that workers should not bear the brunt of the global economic crisis. Our demand he explains “should be located and understood within the context of escalating cost of living and transport, amidst the triple crisis of poverty, unemployment and inequality faced by the workers and the poor. The workers are faced with the burden of taking care of the mass army of the unemployed, mostly their unemployed offspring and the elderly.”

Jim could have gone further. The dependency burden of the unemployed on the employed is in the order of 10 to 1. Indebtedness, which is greatly increased by the rise of unsecured lending and the garnishee arrangements to secure payment, further eats away at wages. Workers have to be bear the cost of crime and massive police corruption, poor public health, a shockingly poor education system and have additional burdens of poor infrastructure (sanitation, water, refuse removal, road maintenance). Fuel and administered price increases (electricity and municipal charges for water and rates) are further undermining wages.

The result of all this is that workers have nothing left to see themselves through the period between pay cheques. Add to this that many workers in the mining sector in particular still maintain two (or more) families, one in urban areas and another in the rural areas, and you can easily see many workers finding themselves in the unenviable position of seeing no benefit to themselves from their work.

This raises the question: Is it reasonable to expect the cost of remedying this to be laid at the door of the individual firm or even sector? Is it not fostering an illusion to suggest that semi-skilled workers can earn enough to solve these problems through their own salaries, like the middle class and the rich do? Cosatu’s angry response to the IMF seems to suggest that is the idea that is driving worker expectations and union actions.

But it has to be the State’s responsibility to increase the social wage and provide housing, education and health so that a more equal society is achieved over time. The State has to do this in such a way that inflation does not eat away workers wages and that employment and total output increases, thereby generating the tax revenue by which all these things are provided. The State has to lead society to a consensus, shifting as it may be, that shares the burden of the social wage between corporations, the wealthy, the middle class and the working class itself.

Will these increases solve workers’ problems?

Sadly, even the modest gains workers have made in the current negotiations are likely to be short lived. What is given with one hand will be taken away with the other through inflation and higher costs of borrowing (higher interest rates), low rates of investment in South Africa and lower inflows of foreign capital that may well see more jobs lost to mechanisation or to the closure and or re-location of their firms. This is a reality of South Africa’s place in global markets.

Pursuing wage demands above inflation and not linked to productivity will be self-defeating. In two or three years workers will be in a worse place than they are now as state revenues shrink, services deteriorate and unemployment increases as population growth ensures that young entrants to the labour market have no hope of finding employment and are ill-equipped for self employment beyond the most basic kinds of labour.

The real challenge to the IMF’s way of thinking is to argue that more redistribution is needed to the poor, the informal sector workers and unemployed. Also, that the state needs to be reformed so that it can provide quality health, housing, education, water and sanitation and other services to the poor. Wages should rise in line with inflation and increases should be linked to productivity and the ability of firms to pay.

South Africa’s union leaders must know that there is no solution to the problems they correctly point to on the basis of sector based wage hikes every year or two. Instead it’s quite likely that the repeated rounds of strike action are undermining the willingness of business and individuals to invest in new capacity and ventures. BMW this week announced it was not going to tender for a big planned expansion of its plant in South Africa, because of strike action. Gold Fields, a leading gold miner, has this month invested in acquiring high productivity mines in Australia.

It would be foolish to close one’s eyes to the costs of the current adversarial way of setting wages. The treasury has estimates that the mining stoppages subtracted half a percent from gross domestic product (GDP) growth in 2012 bringing it down from 3% to 2.5%. Export revenues were about R12 billion lower in 2012 than they would have been without the disruptions. The shutdown in gold production has cost the country approximately $100 million in lost production. According to Statistics SA, value added by the mining and quarrying sector decreased from R70 billion to R66 billion in 2012. The motor sector body, the National Association of Automobile Manufacturers of South Africa (Naamsa) has said the automotive strike cost South Africa 45,000 cars and approximately R20 billion, excluding the cost of the continuing component manufacturers’ strike.

All this means lower growth and less tax revenue to fund social spending and of course greater reluctance to invest. The downgrading of the state’s credit rating and the increased cost of state debt was directly linked to the level of strike action. While this cost might be acceptable occasionally in defence of workers living standards, it doesn’t make sense when it becomes the default way of conducting industrial relations and doesn’t in fact achieve the relief and improvement workers legitimately aspire to. This relief can only be achieved by an effective state supplying the environment in which workers can live with dignity, achieving higher living standards for themselves and their children.

The trade unions presently are not able to address this because they are wedded to an alliance with the ANC which once was meaningful and fruitful but now does not serve their members interest. Our present government has revealed itself to be a highly inefficient instrument, incapable of the policy changes needed to answer the demands of the poor and the working class. Neither can it address the low growth with inflation outlook that faces South Africa, something that both the middle class and the working class have an interest in changing. The trade unions are the only potential lever for changing the governing elite they are currently wedded to.

At some point unions have to lead on this question. Sadly, the state of our politics seems to be unable to provide an answer, a “way forward” that will actually serve the interests of workers, the poor and unemployed in an unequal and growing society. The working class and the poor in South Africa desperately need an independent voice that can lead not only the workers but the middle class and even the bosses to a better, more fruitful way of working. Zwelinzima Vavi has raised the issue of an open discussion of the alliance of organised labour with the ANC and SACP, but this has come to a head in a most unfortunate way. His sexual debacle has had the strange effect of forcing union leadership and all of us to take sides on the broader ideological divide. Sadly, the union movement (and all of us) are ill-prepared to discuss alternatives to the ruling elite “transformation” model and its governing party.

Economists of the left need to supply workable policies to support a political re-alignment. A new politics is needed that is able to unify society around policies that involve greater redistribution together with much greater efficiency in spending and investment by the state. The other side of this “bargain” would have to be significant concessions (including labour relations reform, subsidies and tax breaks) to businesses and individuals willing to invest. This is a programme I believe the middle classes would also support. Cosatu and other unions might want to take a leaf from the Brazilian Workers Party playbook. Ditching old school nationalisation rhetoric, Lula De Silva and the Workers Party came to power in Brazil on the basis of a radical reform of the state, ending corruption (which they singularly failed to do) and a policy of growth through redistribution, which succeeded in bringing significant improvements for the mass of the poor in Brazil.

Lots of questions remain: what has to change to make the state more efficient? Is the state consuming too large a portion of national wealth on high and unproductive salaries for itself? Why is the skilled professional middle classes so crucial in this equation? What is wrong with old style nationalisation? All that for another day - so many questions, so little time, so few answers.