Corruption and Neoliberalism: We are caught between those who have captured the state and those who want to

Leonard Gentle

The writer argues that neo-liberal capitalism breeds institutionalised corruption and is nothing less than a political victory of the super-rich over the working class and poor.

Recent revelations that ANC leaders and government officials were implicated in corruption in the form of dodgy tenders for services funded by the Covid Relief Fund, have sent public anger into overdrive.

Front companies won tenders for the procurement of PPE and the management of relief and other COVID-related measures. Public outrage reached heights last seen with the Gupta scandal of the Zuma years at this latest round of corruption.

Cyril Ramaphosa’s response via the ANC’s NEC, has been to send a letter to all ANC branches and calling on all ANC officials implicated to appear before the Integrity Commission and stand down from any governing portfolio.

Much of the media commentary has been to lambast Ramaphosa for “putting saving the ANC before saving the country” because these commentators wanted the implicated ones dealt with directly by law enforcement.

Recall that Ramaphosa was championed within the ANC as the saviour of the party after the Zuma-Gupta years – called “state capture” by then Public Protector Thuli Madonsela – by promising clean government. Amongst the South African elite and the media commentariat Ramaphosa’s victory was hailed as turning South Africa back from the abyss and with measures like new brooms in the NPA and tossing out Dudu Myeni, Hlaudi Motsoneng etc. Ramaphosa appeared to be serious about the cleaning up operation.

So the most recent scandal seemed to have sullied Ramaphosa’s reputation as the corruption-buster indelibly.

But amid all the anger, and after all the stories coming out of the Zondo Commission hearings, and with all the public eagerness to bring culprits to book there is almost no attempt to analyse why corruption continues and is so pervasive. Some politicians and commentators seem to think that what is needed is simply proper processes and full transparency when state tenders are awarded to companies.

Opposition parties, like the DA, argue that the ANC itself is corrupt and all that is necessary is to elect them in the next elections and corruption will be gone.

For many years the ANC’s stance has been to distinguish between instances of corruption and the ANC itself.  In the years of the Mandela and Mbeki governments corruption could be fingered at the old Apartheid order officials of the GNU who were opposed to “transformation” and who were intent on sabotaging the democratic order. In time the ANC shifted to place the blame onto the fresh blood who had joined the ANC after liberation and who did not know or experience the “culture and values” of the ANC over the course of its history.

But, if we are going to understand corruption and its sources. It is time to move beyond the superficial labels.

What is Corruption?

The act of having to bribe a public official to get things done has long been a kind of image and experience of colonial travellers making their way through African, Latin America or Asia. In the past it was seen as the outcome of poorly-paid officials needing to supplement their income and the readiness of tourists to get favours by flashing their dollars.

But as long as there have been states and governments people with money have tried to influence those with political authority. This is, in a sense, “normal”.

Throughout the history of capitalism, the rich have required a state to turn them into a ruling class. Achieving this goal ensures that laws are created, an executive carries out its responsibilities in terms of law, and a judiciary evaluates possible transgressions … all in ways that ensure that capitalism flourishes, without any rich person offering direct bribes to any official. When this or that section of the rich truly captures the state then all state departments observe proper and due processes, the legislature faithfully debates the most appropriate laws and the judiciary adjudicates- but all within an ideological framework that accepts the rightfulness of these capitalists to prosper.

To what extent the majority in society actually prosper is, of course, a different question.

In a functioning democracy ordinary people even have a chance to contest the content and application of laws.

It is those aspirant wealth seekers that do not have state power that have to resort to illegality, bribery and corruption.

In South Africa, under segregation and apartheid, the state served the interests of the monopolies which had historically earned their wealth from mining and were dependent on cheap labour and cheap energy. This was an example of a wealthy elite capturing state power and becoming a ruling class.

Various iterations of the state passed and enforced laws to ensure these requirements for capital accumulation backed by an ideology of white supremacy. Black exclusion from citizenship was bolstered by strategies such as repression, fomenting racial divisions, reviving tribalism, the Group Areas Act and the Bantustans.

A white bourgeoisie grew out of this configuration to have enormous wealth – the richest in Africa – expanding beyond mining and agriculture to manufacture, commerce and finance.

A comparable black capitalist class was excluded as a matter of state policy. Instead what emerged was a small layer of black entrepreneurs from the 1960s -tied to township commerce, and the bantustan investment circuits.

But under neo-liberalism this has all changed

Neo-liberalism and Corruption

The word “neo-liberalism” probably gets most people’s eyes glazing over. Many think that it refers to an economic theory. Among these many say that it is about cutting the role of the state in the economy and allowing the “free market” to allocate resources because it is the most efficient at doing so.

Of course, it is true that ideologues of neo-liberalism say these things but we must distinguish between what they say and what they actually do. Neo-liberalism started as “monetarism” in the 1970s, was championed as privatisation and cutting state “wastefulness” in the 1980s, and became about “fiscal discipline” in the 1990s. Today neo-liberalism is the global architecture and the default “common sense” of all governments.

Because many commentators continue to think of neo-liberalism as “just another economic theory” they fail to understand shifts in the world today.

So, when governments in the Rich countries opened the taps and threw billions of dollars at the banks in response to the 2008 Financial Crisis, some commentators said that neo-liberalism was dead. So they couldn’t understand why austerity was imposed by all governments after 2010.

In South Africa many commentators would have us believe that neo-liberalism is only the stance of Treasury and the Minister of Finance and that there is a great fight within government and within the Tripartite Alliance between the cadres and the neo-liberals in Treasury. Yet they can’t explain why within every such struggle, and notwithstanding ANC resolutions to the contrary – whether about industrial strategy, the NHI, changing the remit of, or nationalising, the Reserve Bank etc. – and no matter who is the Finance Minister, neo-liberal policies continue.

But what then is neo-liberalism?

It is nothing less than a political victory of the super-rich over the working class and poor – the financiers, the globalised, the 1%-ers over every vestige of what emerged after World War 2.

After WW2 there was a period up to the 1980s in which it was accepted that capitalism needed to be regulated, that a system of monetary control was necessary to stabilise global trade, and that huge parts of our social lives – water, sanitation, education, healthcare, electricity etc. would be supplied by states. This varied across the world: from West – the US which anchored the post War reconstruction – to the East – where huge swathes of humanity (China, Russia, the Eastern bloc) were under direct state control. While Western Europe all had one form or other of welfare states.

In the global South, as soon as national liberation movements won independence their goal was to establish an equivalent of a national welfare state.

The political victory that neo-liberalism represented from the 1980s has meant that all this has been overthrown. Today every facet of human social life is now mediated by commercial relations. Without listing them all we will focus on two areas – within enterprises and within different departments of the state.

For most of the history of capitalism businesses had an internal division of labour in which different components were brought together through management to produce commodities for profit. But now, with neo-liberalism, it is accepted that each component is now a “cost-centre” or a “business unit” or even a separate, outsourced business itself –whose relations to one another is not so much a function of management but of commercial profit.

In the earlier stages of neo-liberalism the privatisation of public services took the form of the selling-off of state enterprises to private businesses. But, in time, instead of selling off state enterprises every state department began to adopt the methods of outsourcing and linking different functions through business units. Known under various pseudonyms like Commercialisation, “Public-Private Partnerships”, Private Finance Initiatives, New Public Management etc. – today the state has directly become the site of private business.

Despite its ideologues claiming that neo-liberalism is about reducing the state’s role in the economy, today whole swathes of private capital are directly accumulating by feeding off the state – management contracts, outsourcing, tendering for supply-chains, financing and underwriting state functions.

In Britain the National Health Service is still a state-owned enterprise and people receive medical care free at the moment of need. But it is managed by a private company, supplied by huge private contracts, outsources practically every activity to a private company and every hospital is a Trust managed and in hock to a private business.

In South Africa we had the notorious Life-Esidimeni scandal in 2018 where mentally-ill patients in the public healthcare were found abandoned in poorly-run NGOs in Gauteng. But this was because the Department of Health had outsourced their care – first to the private hospital group, Life Health, and then onto NGOs. Eskom is owned by the state. But, it sources coal from lucrative private businesses (the competition between the Gupta-owned Optima and Glencore, a company whose original founder was once indicted in the US for corruption, was at the heart of the scandal of the Zuma years) and even buys electricity into the grid from private businesses.

Today it can be said without any irony that much of what is called the public sector is simply a site for the private sector to make business – through tendering and outsourcing. Far from reducing the role of the state in the economy neo-liberalism has expanded the state, albeit in a different set of functions.  State officials, lawyers, bureaucrats and other functionaries are less involved in the delivery of public services. Instead they adjudicate systems of tendering, choosing and evaluating possible contracts. This means that business people have the incentive to know who decides on the tenders, and state officials are easy prey to sweeteners to decide who gets the contract.

This has become a fact of life across the world. Which is why corruption has become systemic across the world.

Corruption in South Africa: Neoliberalism of a Special Type

In the last years of the Apartheid regime – from 1987 – the De Klerk regime embraced neo-liberalism, privatising ISKOR and the Reserve Bank and commercialising Eskom. And after 1994 White Business saw the importance of having a black bourgeoisie. After suppressing black businesses for decades under Apartheid South Africa’s elite moved to hand-pick and nurture a layer of politically-connected black businesses – Sanlam’s Metropolitan subsidiary set up NAIL, while Anglo unbundled its Johnnic/JCI subsidiary and offered it to a consortium of aspirant black businesses.

It is in this period – to be followed by the BEE legislation of the subsequent ANC governments – that a black bourgeoisie was created. One, nominally centred on finance, insurance and mining but whose existence is dependent on the share price behaviour on the JSE. One which is entirely dependent on the largesse of white capital and the state.

But, while there is this abiding feature, there is a distinction: between those first generation beneficiaries and the generation who have come later. While the immediately post-1994 layer are economic insiders for whom following “due process” and the “rule of law” are shades of capitalist relations with the state of a bygone era of state capture, the second generation comprises those who are “tenderprenuers”. Those who are entirely reliant on tenders from a neo-liberal state – management contracts, procurement, outsourcing etc. They need the friendly support of a state official who is going to award them the contract.

They are forced to do so because they haven’t captured the state.

In this they are joined by white tenderprenuers who need a black cover to win state contracts, because of BEE legislation.

In this we are reaping the whirlwind of failing to fight capitalism in our negotiated settlement and now we find ourselves imbedded in a neo-liberal capitalism with all its institutionalised corruption.

Corruption as a means to fight political battles

Today there is not a government in the world which has not been embroiled in either a corruption scandal itself or who has emerged as claiming to be a “corruption-buster”. This has established a new fault line in politics in many countries. Instead of political parties fighting for power on the basis of some kind of programme – distribute wealth versus saving tradition, Left versus Right, Liberal versus Conservative etc. – they campaign over who can get tough on corruption.

Donald Trump’s 2016 campaign was on the basis that he was a billionaire outsider who was rich enough not to have to use political power to make money. As such he claimed he could “clean the Washington swamp” represented by the “corrupt Hilary Clinton”.

Brazil’s Bolsanaro only won power, firstly through a coup against President Dilma Roussos claiming corruption, and then through a programme called Operation Car Wash” in which the popular ex-president Lula Da Silva was falsely jailed for corruption.

France’s Macron narrowly won the 2019 elections by breaking from his party which had been widely seen as corrupt and where the favourite for the Republican Party, Francois Fillon, faced charges of corruption.

Israel’s Prime Minister, Benjamin Netanyahu is running the country while being indicted for corruption. South Korea has known nothing since the 1990s other than public scandals over which government has had a more corrupt relationship with the chaebols (the wealthy families who own industries and banks)

But in South Africa, of course, amongst the elite there is no question of ditching Ramaphosa or championing some new saviour because there is no acceptable alternative candidate – the DA is in a mess of internal squabbles and has no moral authority within South Africa to take any kind of decisive action. The ANC’s status as the only formation capable of being both the candidate of White Monopoly Capital and yet able to keep the masses enthral is unassailable.

Only an ANC government could have implemented a Coviod-19 Lock Down and had the public, in the main, respect this measure whatever the cost to their own well-being. From the side of the elite – long calling for more privatisation and more austerity only an ANC government can get away with freezing public sector wages, going to the IMF and, in 2019, raising VAT without there being a mass uprising.

But this does not mean that Ramaphosa in is not under pressure when his clients are not happy with his performance. And the corruption scandals around PPE procurement seems to be one such scandal too far.

Ramapohosa’s referring matters to the ANC branches itself is a tacit acceptance that they ANC itself is corrupt and that the blame lies within.  That is a huge gamble and a signal that he is confident that he is the commander of the ANC and the only viable candidate for the “necessary reforms” called for by the elite and the IMF.

For the rest of us, we fall between the hammer of corruption of the rising tenderpreneurs and the anvil of the neo-liberal reforms of austerity the ANC government has just agreed with the IMF.

It is time for new mass struggles.

More stories in Issue 121

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