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In defence of Naomi Klein's analysis of South Africa

By Patrick Bond

In response to Beware Electocrats: Naomi Klein on South Africa by Ronald Suresh Roberts in Radical Philosophy commentaries, July-August 2008, http://www.radicalphilosophy.com/default.asp?channel_id=2187&editorial_id=26668

Klein’s chapter on South Africa follows this exchange.

Protest in Durban demanding treatment for HIV/AIDS patients

Ronald Suresh Roberts: … In her discussion of non-African countries, Klein confronts the articulated logic of decision makers. But when she turns her attention to post-apartheid South Africa Klein is content to recycle the impressions of a small and like-minded clique of analysts such as fellow-Canadian activist Patrick Bond...

Patrick Bond: The first of RSR’s untruths. I lived in Toronto for a few months in 2003-04, but was never accused of being Canadian.

RSR: ... described as someone “who worked as an economic advisor in Mandela’s office during the first years of ANC rule.” Actually Bond is best known as an anti-government fund-raising maestro within global “social movements” circles.

PB: For good reason, no one else has ever accused me of being a fund-raising maestro.

RSR: His Centre for Civil Society has at times accepted money from USAID and the Ford Foundation and has had links at Board level with Ford, Kellogg and other such foundations.

PB: This is a strange manipulation. US AID defunded CCS in 2003 after the then-director, Adam Habib, opposed the war on Iraq – and was later branded a “terrorist” and banned from entry into the US. Ford has not extended new funding to CCS since the time I arrived in late 2004. CCS has an advisory board that meets once a year, and initially it included a couple of people from foundations, but not since 2004 -- and I personally have never met anyone associated with Kellogg. As the words above were being published, University of KwaZulu-Natal authorities were in the process of announcing the closure of CCS, on grounds of insufficient permanent funding (http://www.ukzn.ac.za/ccs). Anything written about CCS by Steven Gowans (RSR’s Canadian source) must be taken with a very large grain of salt, as his accounts are as error-ridden as RSR’s.

RSR: Klein decries neocon “transitionologists” as a “hypermobile class” that intellectually dominates “inherently inward-looking” native governments, softening them up for neoliberal restructuring. Yet she and some of her informants participate in the same condescension and hypermobility.

PB: Most of us reading these words are hypermobile, especially RSR (as so many in South Africa dearly hope). Condescension from the left is really only directed towards those who too rapidly followed Washington’s advice, without thinking about or acting on behalf of their own citizens’ interests.

RSR: To avoid duplicating the imperialism they supposedly resist, the ‘social movements’ elite may need to become a little more ``electocratic’’ than at present.

PB: That is, simply, too great a challenge, at least while the African National Congress (ANC) lock on voting prevents a genuine contestation in that sphere, i.e., until the trade unions split from the ruling party and start their own. My suspicion is that, with a few exceptions (Operation Khanyisa Movement in Johannesburg), it is only after labour splits from the nationalists that most social/community movements will consider moving forcefully into the electoral realm.

RSR: ... Klein uncritically recycles the Mbeki-bashing views of William Mervyn Gumede, a self-described Oppenheimer Scholar at St Anthony’s College, Oxford, and a former employee of the London Economist’s Intelligence Unit.

PB: Gumede needed funding to live, and won a competitive fellowship and writing job, but you won’t find in his work any bias towards imperial capital. RSR’s smeary attack-by-association not only doesn’t work, but instead recalls his own personal sponsorship – and corresponding pro-Mbeki hackery - from the South African president’s office via a major Afrikaner-dominated banking group.

RSR: ... by the time [John] Pilger published this essay in 2006 (based on a 1998 documentary), the electorate had given an even larger percentage of its vote to the ANC in 1999 (66 per cent) and then a larger still share in 2004 (70 per cent). If Pilger was correct, South Africa’s black voters were not merely misled, but chronically misleadable. Pilger doesn’t explain why that might be. Ah, the boundless stupidity of those millions.

PB: There is a simple reason, one parallel to US workers’ votes for the Democratic or Republican parties, or British workers’ votes: there is not yet a viable alternative party on the left. Where such have emerged, in Latin America where social movements and trade unions are more independent of the former ruling parties, such mass leftist parties have no problem gaining votes. It is only a matter of time before this occurs in South Africa, given so much seething socioeconomic dissatisfaction. RSR does not reveal that the larger vote share came on a dramatically diminished proportion of the population willing to go to the polls time after time, given the deterioration in their socioeconomic conditions since 1994.

RSR: ... The suggestion that millions of newly enfranchised blacks have been so quickly and so easily reduced to a quasi-comatose passivity is a proposition that must be expressed with great delicacy, to say the least.

PB: Given that South Africa has more social protests per person than probably any country in the world, the words put into Klein's mouth – “quasi-comatose passivity”?! -- are absurd. Given that Klein actively supports these protests against economic injustice, in solidarity when called upon by grassroots activists, makes her "condescending" critique of South African neoliberalism far more serious than RSR's occasional critique of the South African bourgeoisie.

RSR: Klein excels in this. Her favoured strategy is to find a black native informant who mentions the unmentionable, rendering it printable…

PB: First it’s the “Canadian” Bond, now the “black native informant”. RSR seems to need a moving target to insult. Why not address the critique head on?

RSR: And yet when it comes to plain factual matters Klein herself is frequently caught napping. At page 203 of her chapter on ``South Africa’s constricted freedom’’ Klein lists the apparent nets that descended upon the unwary natives and their political leadership. For instance she cites the Constitution’s property clause, which explicitly contemplates and allows for land reform, as though it absolutely bars land reform.

PB: This is a contentious issue, and a great many agricultural analysts and rural movements have noted the state's refusal to carry out the needed large-scale land expropriation. This point the ANC elite conceded themselves, in August 2008, by removing from consideration a proposed parliamentary bill with that intent.

RSR: Likewise, an ANC government that successfully litigated against intellectual property rights that had stymied cheap generic antiretrovirals gets faulted by Klein for upholding the very constraints they successfully fought down!

PB: This is nonsense, for although in 1997-99, the Mandela government's health ministry promoted antiretroviral medicines and passed a law providing for compulsory licensing so that intellectual property rights would not apply, by 2000 the Mbeki government was explicitly opposed to use of that law, to the medicines themselves, and to the civil society organisation (Treatment Action Campaign) most active in advocating access to the life-saving drugs.

RSR: Again, she emphasizes the interest bill on pre-democracy loans as though debt repudiation would have enhanced the democratic government’s cash flows for social spending ...

PB: Klein is correct; servicing the apartheid-era debt was the second-highest budgetary item under Mandela, at more than 20%, just below education spending. Mandela himself has said the same, as she quotes from a Jubilee South Africa documentary film.

RSR: ... without addressing the cash crunch that debt repudiation would entail as retaliating banks shut down credit lines.

PB: Prescribed assets would easily have dealt with this problem, as it had during the apartheid regime's mid-1980s credit crunch. Access to international finance was not much of an issue, as reflected in the very small rise in foreign debt in the first decade of democracy.

RSR: She suggests that the World Bank succeeded in ``making private-sector partnerships the service norm''. As strategy and policy adviser to the ANC minister who piloted the 1998 water law reforms, I personally insisted upon precisely the opposite bias, which is why section 19 of the 1997 Water Services Act establishes an explicit onus against public–private partnerships, of which there have been next to none. Moreover, section 3 of the 1998 Water Act effectively nationalizes water resources.

PB: This is sophism (and I also worked for the water minister, as a budget advisor, at exactly the same time as RSR). Even though too many municipalities were badly run and impoverished, hence distasteful to Paris and London water companies, a $1 billion apparatus (the Municipal Infrastructure Investment Unit) was established at the Development Bank of Southern Africa, with World Bank and US AID support, to make PPPs the norm (and the unit was readily embraced by the water ministry: http://www.dwaf.gov.za/DIR_ws/content/pds/AlternativeDeliveryMechanism/PDF%5CD4747%20Toolbox%20(4).pdf). The spirit of commodification was most explicitly introduced by that same water minister in his 1994 White Paper, which explicitly rejected subsidies to cover operating/maintenance costs even for poor rural recipients of new water systems - leading to most of those new systems' bankruptcy. The following year, the World Bank's main water staffer in the region insisted that the same minister not introduce the free lifeline water that was promised in the Reconstruction and Development Programme, and he complied, and by 1999 the Bank openly declared victory in its Country Assistance Strategy. RSR may have thought he put a damper on PPPs but he apparently was not paying attention. As for 'nationalising' water, yes, the current system is an improvement over Riparian Rights in which water was owned by whomever owned the land above it. But the real question to ask is whether the system set up by Roberts and his minister has delivered adequate decommodified water to the masses, and it is undeniable that thousands of social protests have occurred because the answer to the question is no.

RSR: Klein convinces herself that ‘currency controls’ needed to be imposed in 1994. Actually these were already thick on the ground, a result of the apartheid regime’s earlier battles with capital flight.

PB: Coming late to the scene, RSR doesn't understand that the SA Finance Ministry and Reserve Bank were rife with corruption prior to 1994 (one Bank employee was convicted of US$1 billion in forex fraud), or that the meagre 1985-95 "finrand" exchange controls merely put a premium on exporting money. Much more intense capital controls should have been applied so as to prevent the rich white people and companies that benefited from apartheid, from removing the loot so easily.

RSR: Klein repeatedly mentions an $850 million IMF deal ‘signed, conveniently enough, right before the elections’ of 1994; this deal then supposedly constrained the incoming government.

PB: Supposedly? Of course it constrained the ANC government. Here is the leading financial journalist's opinion: "The ANC wants to create an almost utopian society, described in the Reconstruction and Development Programme. But it has to build that society while keeping its promises to the IMF and its own commitment to ‘macroeconomic balance’" (Greta Steyn in Business Day, 30 May 1994). The IMF agreement included wage restraint and shrinkage of the fiscal debt, and informally compelled Mandela to reappoint the apartheid-era finance minister and central bank governor.

RSR: But she neglects to mention that the IMF has been begging the ANC, with zero success in fifteen years, to take its money.

PB: Nonsense, the IMF did not beg SA to do anything by way of taking credit, because SA kept such strong relations with foreign creditors that it did not need to. The IMF did not beg SA to make any change in economic policy, because it did not need to: Mbeki’s team was imposing IMF policies on the populace from May 1994 in any event. The World Bank did make loans, and the Bank's International Finance Corporation also made major investments. The Bretton Woods Institutions were quite satisfied with SA, so much so that they allowed SA finance minister Trevor Manuel to chair their board of governors in 2000.

RSR: She even believes the minimum wage was not raised. It was. Repeatedly.

PB: This is the sophist in RSR again. What Klein actually writes, in the context of the IMF loan, is: "Raise the minimum wage to close the apartheid income gap? Nope. The IMF deal promises 'wage restraint.'" And indeed it did, so that the wage bill in the state budget shrunk, and only much later were the first minimum wages applied (after enormous lobbying by trade unions). Yet wages were and are so very low, that instead of the apartheid income gap shrinking, it actually widened steadily since 1994, to amongst the highest levels in the world. Klein is correct, RSR is wrong even when twisting her words.

RSR: Additionally, Klein implies that the ANC implemented a massive privatization plan. This is a major theme in Shock Doctrine; privatization is to political economy what sensory deprivation is to clinical psychology. In fact the ANC successfully resisted massive international pressure on privatization, and Mbeki took the steps that were required to allow such resistance to prevail. The ANC has privatized nothing strategic other than the telephone company.

PB: Successfully resisted? More like: tried hard and failed at every single attempt. Thanks to telecommunications privatisation, the cost of local calls skyrocketed as cross-subsidisation from long-distance (especially international) calls was phased out. As a result, out of 2.6 million new lines installed, at least 2.1 million disconnections occurred, due to unaffordability. More than 20,000 Telkom workers were fired, leading to ongoing labour strife. Telkom’s 2003 Initial Public Offering on the New York Stock Exchange raised only $500 million, with an estimated $5 billion of Pretoria’s own funding of Telkom’s late 1990s capital expansion lost in the process. In the field of transport, in addition to the vast increase in commercialised toll roads, private ‘kombi-taxi’ minivans remain extremely dangerous - and ungovernable - due to profitability pressures, and the ANC failed to build up public transport. Air transport privatisation included a) the collapse of the first regional state-owned airline following privatisation, b) South African Airways’ disastrous corporatisation mismanagement by a chief executive imported from the US and subsequent renationalisation of the 30% share owned by (bankrupted) SwissAir, and c) major security glitches and labour unrest at the privatised airports company. Constant strife with the ANC-aligned trade union threw ports privatisation into question. And the increasingly corporatised rail service shut down many feeder routes that, although unprofitable, were crucial to rural economies. The electricity sector commercialised rapidly, with Johannesburg’s power supply sold to the notorious US firm AES, and 30% of national generation capacity up for sale now. The commercialisation of Eskom left 30,000 unemployed during the 1990s, pushing up tariffs for residential customers as cross-subsidies came under attack, as well as slowing the rural electricity grid’s expansion, and disconnecting millions of people who fell into arrears on inflated bills. And as noted already, virtually all local governments adopted a 100% cost recovery policy for water during the late 1990s, at the urging of central government and the World Bank.

RSR: While Patrick Bond at least quotes Mbeki’s many and varied assaults upon the Washington Consensus before caricaturing them as lip service (as in his book Talking Left, Walking Right) ...

PB: Ahem, that’s Talk Left Walk Right.

RSR: .. Klein proceeds as though Mbeki’s vigorous and long-standing critiques, such as his speech at the ILO Conference in June 2003, simply do not exist.

PB: Thankfully, she doesn’t cite all that nonsensical anti-imperialist rhetoric, because it’s merely a distraction, part of the shock treatment.

RSR: When Klein turns her attention to the Truth and Reconciliation Commission (TRC), which investigated the apartheid past, she suggests that the ANC played a role in limiting its political effects. She suggests that the ANC wanted a narrow torture-focused process that neglected apartheid’s systemic aspects. Again I was a direct participant in the formative debates surrounding the Truth Commission, and at the time I co-authored a book with Professor Kader Asmal, the human rights lawyer and ANC minister who had first floated the idea in a 1992 lecture. We explicitly advocated a systematic focus and rejected precisely the narrow torture-based approach that Klein criticizes.

PB: If so, RSR lost, and should have the humility to admit that only murder/torture “counted” in the TRC, and hence a larger group of victims had to go to the US courts – using the Alien Tort Claims Act – in search of justice. Because thanks to Mbeki, such justice would not be available in SA. (Mbeki took the side of Bush, Brown, Merkel and the corporations in the reparations debate, a point RSR somehow neglects.)

RSR: We emphasized the role of business, which Klein claims the ANC tried to play down…

PB: Simply put, RSR lost again. Making profits from apartheid and then lying about it to the TRC was big business' ANC-approved practice, as periodically codified at the tycoons' funerals, dutifully attended by ANC leaders. The refusal to support apartheid victims in the New York court was not due to Alex Boraine, it was Mbeki’s explicit choice in mid-2003, although a letter from US Secretary of State Colin Powell seemed to clinch it.

RSR: The plain truth is that Klein’s account of South Africa is clogged with propaganda. This is all the more poignant because of her undoubtedly progressive intentions. Many of the guiding assumptions of Shock Doctrine do not fit the South African situation, but rather than revise her theory Klein prefers to misrepresent the ``case''. In fact, the last thing sought by the colonial status quo in South Africa is ``shock'' of any kind.

PB: My own view, on the contrary, is that the colonial status quo needed three kinds of shock consistent, with Klein’s thesis. First was the murder or maiming or torture of tens of thousands of black South Africans by the state and ``Third Force'' in the decade prior to democracy, so as to soften up the liberation forces; second being the shock of happiness that apartheid ended, mixed with a euphoric trust that the party they voted into power would reduce poverty, unemployment, inequality, homelessness and illness (followed by an aftershock -- that the reverse happened); and a third being the repeated pounding the SA currency took from international financial speculators (1996, 1998, 2001, 2006, 2008). Once those psycho-social shocks set in, weariness of fighting combined with a political honeymoon. That allowed the small group of neoliberal state managers to impose policies such as the 1994 White Papers dealing with water and housing, the 1995 infrastructure plan, the 1996 Growth, Employment and Redistribution strategy (especially in the wake of the 1996 currency crisis) and myriad other policies. In these ways, the guiding assumptions of Shock Doctrine work very well when applied to SA.

RSR: Instead, for obvious reasons, they seek a kind of continuity that was vividly described by one Anglo-American official in the 1980s as ``permanent transition''. He meant the continuation of state powerlessness: the powerlessness of the apartheid state, buffeted by sanctions and pariah status before 1994 ought to give way to a new powerlessness of the democratic state, which must be weakened by factionalism and delegitimized (not least by reckless internal talk of ``betrayal'') so that private and international interests can continue to dominate the field as the only entities capable of collective action.

PB: The apartheid state was not powerless, by any means -- but the crucial missing link here is that ``private and international interests'' were conjoined with the rise of the betrayal-oriented ANC elite, both within the state and out, ably led by Mbeki. RSR’s failure to grapple properly with this factor is revealing.

RSR: This is why the choice of Klein’s chief source in this chapter, William Gumede, is so profoundly problematic. Klein thoroughly buys Gumede’s anti-Mbeki line. In January 2005 the Economist had the following peculiar sentence in a hostile profile of Mbeki, based on Gumede’s book: “Mr Mbeki and a team of friends [sic] – Trevor Manual as finance minister, Tito Mboweni at the central bank – pushed through a set of tough economic reforms known as GEAR (the Growth, Employment and Redistribution Plan) to cut the deficit, lower inflation, cut tariffs and bureaucracy and privatize some state firms. These reforms left opponents reeling. Those who wanted to see a state-dominated economy were barged aside.”

PB: That particular shock to the left, which I witnessed when I was chief drafter of the ill-fated National Growth and Development Strategy working in Mandela’s office, began building in February 1996, when the currency crashed by a third following a (false) rumour Mandela was ill. Those left reeling included our Reconstruction and Development Programme office (shut down within days of the currency crash), and the trade unions, whose leader Mbhazima Shilowa uttered the famous words about GEAR in July 1996: “Something has gone terribly wrong”.

RSR: But since when has the Economist taken up cudgels on behalf of labour unions that were allegedly ``barged aside'' by market measures? Klein’s book itself demonstrates what everybody knows: the Economist traditionally proselytizes in favour of the sort of economic reforms embraced by Augusto Pinochet and other neoliberal ``modernisers'' …

PB: Yes, they were obviously celebrating in that sentence, above, as they always have regarding ANC neoliberalism -- only now they are a bit more aware of how little legitimacy these policies have within the ANC mass base.

RSR: On AIDS policy, in particular, Mbeki has steadfastly resisted the Big Pharma disaster capitalist logic, peddled by Jeffrey Sachs himself, who advocates a medical form of shock therapy in the form of massive drug-buying binges – a strategy criticized by William Easterley [sic] in The White Man’s Burden.

PB: Citing World Banker Easterly so favourably may be satisfying to AIDS denialists who don't like anti-retroviral medicines, including Mbeki, but won’t change the reality that tens of thousands of treatment activists handed Mbeki, Clinton/Gore and Big Pharma a massive defeat, by decommodifying and deglobalising the production of generic AIDS medicines which will save millions of lives. RSR could not come to grips with this in his praise-book for Mbeki, and somehow still believes that the successful campaign to bring generic anti-retrovirals to Africa was supported by Big Pharma, all evidence to the contrary notwithstanding.

RSR: And yet, despite her generally unremitting criticisms of Sachs, Klein gives Mbeki no credit here, scared away as she is by the propaganda that has caricatured his position as an ill-defined ``AIDS denialism''.

PB: No, Mbeki deserves blame for what is often termed “genocide”, namely denying millions of his subjects the medicines for so long, as is well documented.

RSR: The rise of factionalism inside the ANC is not now and never was about the country’s location on a policy spectrum between right-wing ‘shock doctors’ and left-wing progressives.

PB: Most people in South Africa believe differently.

RSR: Since the defenestration of Mbeki at the ANC conference last December, the new leadership has reiterated the old economic policy commitments…

PB: This is a point, finally, that I agree with. But the trade unionists and Communists do not agree and intend fighting within the Zuma camp for post-neoliberal policies, and given their social weight, the future is indeed hard to predict.

RSR: Klein herself is, of course, a powerful part of the global media, with her well-meaning and yet stubbornly Orientalist representations of African politics, complete with a ``culture-shocked'' Mandela and a chronically paralysed native electorate, falsely unconscious of its authentic best interests.

PB: It’s this sort of language that made RSR infamous as a political hack in his SA days, labelled by one of the main newspapers “The unlikeable Mr Roberts”. (A lawsuit for defamation, and appeal, both failed, suggesting how little RSR’s spin gets traction now in South Africa.) It’s this systematic distortion of reality that runs rife through his own book about Mbeki, Fit to Govern (which Percy Ngonyama and I debated with him and reviewed here -- http://www.nu.ac.za/ccs/default.asp?2,40,3,1255). It’s his ongoing defense of Mbekism that requires such fibbing for the likes of Radical Philosophy, but which really amounts to wasting readers' time and energy. Instead, have a look at Klein's excellent writing about South Africa, which she generously posted free for us all: http://www.ukzn.ac.za/ccs/default.asp?3,28,10,2916

Democracy Born In Chains: South Africa’s Constricted Freedom

By Naomi Klein

Chapter 10 of The Shock Doctrine, 2007, pp.194-217.

Reconciliation means that those who have been on the underside of history must see that there is a qualitative difference between repression and freedom. And for them, freedom translates into having a supply of clean water, having electricity on tap; being able to live in a decent home and have a good job; to be able to send your children to school and to have accessible health care. I mean, what’s the point of having made this transition if the quality of life of these people is not enhanced and improved? If not, the vote is useless. -- Archbishop Desmond Tutu, chair of South Africa’s Truth and Reconciliation Commission, 2001 [1]

Before transferring power, the Nationalist Party wants to emasculate it. It is trying to negotiate a kind of swap where it will give up the right to run the country its way in exchange for the right to stop blacks from running it their own way. Allister Sparks, South African journalist [2]

In January 1990, Nelson Mandela, age seventy-one, sat down in his prison compound to write a note to his supporters outside. It was meant to settle a debate over whether twenty-seven years behind bars, most of it spent on Robben Island off the coast of Cape Town, had weakened the leader’s commitment to the economic transformation of South Africa’s apartheid state.

The note was only two sentences long, and it decisively put the matter to rest: “The nationalisation of the mines, banks and monopoly industries is the policy of the ANC, and the change or modification of our views in this regard is inconceivable. Black economic empowerment is a goal we fully support and encourage, but in our situation state control of certain sectors of the economy is unavoidable.”[3] History, it turned out, was not over just yet, as Fukuyama had claimed. In South Africa, the largest economy on the African continent, it seemed that some people still believed that freedom included the right to reclaim and redistribute their oppressors’ ill-gotten gains.

That belief had formed the basis of the policy of the African National Congress for thirty-five years, ever since it was spelled out in its statement of core principles, the Freedom Charter. The story of the charter’s drafting is the stuff of folklore in South Africa, and for good reason. The process began in 1955, when the party dispatched fifty thousand volunteers into the townships and countryside. The task of the volunteers was to collect “freedom demands” from the people---their vision of a postapartheid world in which all South Africans had equal rights. The demands were handwritten on scraps of paper: “Land to be given to all landless people,” “Living wages and shorter hours of work,” “Free and compulsory education, irrespective of color, race or nationality,” “The right to reside and move about freely” and many more.[4] When the demands came back, leaders of the African National Congress synthesized them into a final document, which was officially adopted on June 26, 1955, at the Congress of the People, held in Kliptown, a “buffer zone” township built to protect the white residents of Johannesburg from the teeming masses of Soweto.

Roughly three thousand delegates---black, Indian, “colored” and a few white---sat together in an empty field to vote on the contents of the document. According to Nelson Mandela’s account of the historic Kliptown gathering, “the charter was read aloud, section by section, to the people in English, Sesotho and Xhosa. After each section, the crowd shouted its approval with cries of ‘Afrika!’ and ‘Mayibuye!’ “[5] The first defiant demand of the Freedom Charter reads, “The People Shall Govern!” In the mid-fifties, that dream was decades away from fulfillment. On the Congress’s second day, the gathering was violently broken up by police, who claimed the delegates were plotting treason.

For three decades, South Africa’s government, dominated by white Afrikaners and British, banned the ANC and the other political parties that were intent on ending apartheid. Throughout this period of intense repression, the Freedom Charter continued to circulate, passed from hand to hand in the revolutionary underground, its power to inspire hope and resistance undiminished. In the 1980s, it was picked up by a new generation of young militants who emerged in the townships. Fed up with patience and good behavior and braced to do whatever it took to topple white domination, the young radicals stunned their parents with their fearlessness. They took to the streets without illusion, chanting, “Neither bullets nor tear gas will stop us.” They faced massacre after massacre, buried friends, kept singing and kept coming. When the militants were asked what they were fighting against, they answered, “Apartheid” or “Racism”; asked what they were fighting for, many replied “Freedom” and, often, “The Freedom Charter.” The charter enshrines the right to work, to decent housing, to freedom of thought, and, most radically, to a share in the wealth of the richest country in Africa, containing, among other treasures, the largest goldfield in the world.

“The national wealth of our country, the heritage of South Africans, shall be restored to the people; the mineral wealth beneath the soil, the Banks and monopoly industry shall be transferred to the ownership of the people as a whole; all other industry and trade shall be controlled to assist the well-being of the people,” the charter states.[6] At the time of its drafting, the charter was viewed by some in the liberation movement as positively centrist, by others as unforgivably weak. The Pan-Africanists castigated the ANC for conceding too much to white colonizers (why did South Africa belong to “everyone, black and white?” they asked; the manifesto should have demanded, as the Jamaican black nationalist Marcus Garvey had, “Africa for the Africans.”) The staunch Marxists dismissed the demands as “petty bourgeois”: it wasn’t revolutionary to divide the ownership of the land among all people; Lenin said that private property itself must be abolished.

What was taken as a given by all factions of the liberation struggle was that apartheid was not only a political system regulating who was allowed to vote and move freely. It was also an economic system that used racism to enforce a highly lucrative arrangement: a small white elite had been able to amass enormous profits from South Africa’s mines, farms and factories because a large black majority was prevented from owning land and forced to provide its labor for far less than it was worth---and was beaten and imprisoned when it dared to rebel. In the mines, whites were paid up to ten times more than blacks, and, as in Latin America, the large industrialists worked closely with the military to have unruly workers disappeared. [7]

What the Freedom Charter asserted was the baseline consensus in the liberation movement that freedom would not come merely when blacks took control of the state but when the wealth of the land that had been illegitimately confiscated was reclaimed and redistributed to the society as a whole. South Africa could no longer be a country with Californian living standards for whites and Congolese living standards for blacks, as the country was described during the apartheid years; freedom meant that it would have to find something in the middle.

That was what Mandela was confirming with his two-sentence note from prison: he still believed in the bottom line that there would be no freedom without redistribution. With so many other countries now also “in transition,” it was a statement with enormous implications. If Mandela led the ANC to power and nationalized the banks and the mines, the precedent would make it far more difficult for Chicago School economists to dismiss such proposals in other countries as relics of the past and insist that only unfettered free markets and free trade had the ability to redress deep inequalities.

On February 11, 1990, two weeks after writing that note, Mandela walked out of prison a free man, as close to a living saint as existed anywhere in the world. South Africa’s townships exploded in celebration and renewed conviction that nothing could stop the struggle for liberation. Unlike the movement in Eastern Europe, South Africa’s was not beaten down but a movement on a roll. Mandela, for his part, was suffering from such an epic case of culture shock that he mistook a camera microphone for “some newfangled weapon developed while I was in prison.”[8] It was definitely a different world from the one he had left twenty-seven years earlier. When Mandela was arrested in 1962, a wave of Third World nationalism was sweeping the African continent; now it was torn apart by war. While he was in prison, socialist revolutions had been ignited and extinguished: Che Guevara had been killed in Bolivia in 1967; Salvador Allende had died in the coup of 1973; Mozambique’s liberation hero and president, Samora Machel, had perished in a mysterious plane crash in 1986. The late eighties and early nineties saw the fall of the Berlin Wall, the repression in Tiananmen Square and the collapse of Communism.

Amid all this change there was little time for catching up: immediately on his release, Mandela had a people to lead to freedom while preventing a civil war and an economic collapse---both of which looked like distinct possibilities.

If there was a third path between Communism and capitalism---a way of democratizing the country and redistributing wealth at the same time--- South Africa under the ANC looked uniquely positioned to turn that persistent dream into reality. It wasn’t only the global outpouring of admiration and support for Mandela but also the particular way in which the antiapartheid struggle had taken shape in the preceding years. In the eighties, it had become a truly global mass movement, and outside South Africa, the weapon that activists wielded most effectively was the corporate boycott--- both of South African--made products and of international firms that did business with the apartheid state. The goal of the boycott strategy was to put enough of a squeeze on the corporate sector that it would lobby the intransigent South African government to end apartheid. But there was also a moral component to the campaign: many consumers firmly believed that companies that were profiting from white supremacist laws deserved to take a financial hit.

It was this attitude that gave the ANC a unique opportunity to reject the free-market orthodoxy of the day. Since there was already widespread agreement that corporations shared responsibility for the crimes of apartheid, the stage was set for Mandela to explain why key sectors of South Africa’s economy needed to be nationalized just as the Freedom Charter demanded. He could have used the same argument to explain why the debt accumulated under apartheid was an illegitimate burden to place on any new, popularly elected government. There would have been plenty of outrage from the IMF, the U.S. Treasury and the European Union in the face of such undisciplined behavior, but Mandela was also a living saint---there would have been enormous popular support for it as well.

We will never know which of these forces would have proved more powerful.

In the years that passed between Mandela’s writing his note from prison and the ANC’s 1994 election sweep in which he was elected president, something happened to convince the party hierarchy that it could not use its grassroots prestige to reclaim and redistribute the country’s stolen wealth. So, rather than meeting in the middle between California and the Congo, the ANC adopted policies that exploded both inequality and crime to such a degree that South Africa’s divide is now closer to Beverly Hills and Baghdad. Today, the country stands as a living testament to what happens when economic reform is severed from political transformation. Politically, its people have the right to vote, civil liberties and majority rule. Yet economically, South Africa has surpassed Brazil as the most unequal society in the world.

I went to South Africa in 2005 to try to understand what had happened in the transition, in those key years between 1990 and 1994, to make Mandela take a route that he had described so unequivocally as “inconceivable.” The ANC went into negotiations with the ruling National Party determined to avoid the kind of nightmare that neighboring Mozambique had experienced when the independence movement forced an end to Portuguese colonial rule in 1975. On their way out the door, the Portuguese threw a vindictive temper tantrum, pouring cement down elevator shafts, smashing tractors and stripping the country of all they could carry. To its enormous credit, the ANC did negotiate a relatively peaceful handover.

However, it did not manage to prevent South Africa’s apartheid-era rulers from wreaking havoc on their way out the door. Unlike their counterparts in Mozambique, the National Party didn’t pour concrete---their sabotage, equally crippling, was far subtler, and was all in the fine print of those historic negotiations.
The talks that hashed out the terms of apartheid’s end took place on two parallel tracks that often intersected: one was political, the other economic.

Most of the attention, naturally, focused on the high-profile political summits between Nelson Mandela and F. W. de Klerk, leader of the National Party.

De Klerk’s strategy in these negotiations was to preserve as much power as possible. He tried everything---breaking the country into a federation, guaranteeing veto power for minority parties, reserving a certain percentage of the seats in government structures for each ethnic group---anything to prevent simple majority rule, which he was sure would lead to mass land expropriations and the nationalizing of corporations. As Mandela later put it, “What the National Party was trying to do was to maintain white supremacy with our consent.” De Klerk had guns and money behind him, but his opponent had a movement of millions. Mandela and his chief negotiator, Cyril Ramaphosa, won on almost every count.[9] Running alongside these often explosive summits were the much lower profile economic negotiations, primarily managed on the ANC side by Thabo Mbeki, then a rising star in the party, now South Africa’s president.

As the political talks progressed, and it became clear to the National Party that Parliament would soon be firmly in the hands of the ANC, the party of South Africa’s elites began pouring its energy and creativity into the economic negotiations. South Africa’s whites had failed to keep blacks from taking over the government, but when it came to safeguarding the wealth they had amassed under apartheid, they would not give up so easily.

In these talks, the de Klerk government had a twofold strategy. First, drawing on the ascendant Washington Consensus that there was now only one way to run an economy, it portrayed key sectors of economic decision making--- such as trade policy and the central bank---as “technical” or “administrative.” Then it used a wide range of new policy tools---international trade agreements, innovations in constitutional law and structural adjustment programs--- to hand control of those power centers to supposedly impartial experts, economists and officials from the IMF, the World Bank, the General Agreement on Tariffs and Trade (GATT) and the National Party---anyone except the liberation fighters from the ANC. It was a strategy of balkanization, not of the country’s geography (as de Klerk had originally attempted) but of its economy.
This plan was successfully executed under the noses of ANC leaders, who were naturally preoccupied with winning the battle to control Parliament. In the process, the ANC failed to protect itself against a far more insidious strategy---in essence, an elaborate insurance plan against the economic clauses in the Freedom Charter ever becoming law in
South Africa. “The people shall govern!” would soon become a reality, but the sphere over which they would govern was shrinking fast.

While these tense negotiations between adversaries were unfolding, the ANC was also busily preparing within its own ranks for the day when it would take office. Teams of ANC economists and lawyers formed working groups charged with figuring out exactly how to turn the general promises of the Freedom Charter---for housing amentites and health care---into practical policies. The most ambitious of these plans was Make Democracy Work, an economic blueprint for South Africa’s post-apartheid future, written while the high-level negotiations were taking place. What the party loyalists didn’t know at the time was that while they were hatching their ambitious plans, the negotiating team was accepting concessions at the bargaining table that would make their implementation a practical impossibility. “It was dead before it was even launched,” the economist Vishnu Padayachee told me of Make Democracy Work. By the time the draft was complete, “there was a new ball game.” As one of the few classically trained economists active in the ANC, Padayachee was enlisted to play a leading role in Make Democracy Work (“doing the number-crunching,” as he puts it). Most of the people he worked alongside in those long policy meetings went on to top posts in the ANC government, but Padayachee did not. He has turned down all the offers of government jobs, preferring academic life in Durban, where he teaches, writes and owns the much-loved Ike’s Bookshop, named after Ike Mayet, the first non-white South African bookseller. It was there, surrounded by carefully preserved out-of-print volumes on African history, that we met to discuss the transition.

Padayachee entered the liberation struggle in the seventies, as an adviser to South Africa’s trade union movement. “We all had the Freedom Charter stuck on the back of our doors in those days,” he recalled. I asked him when he knew its economic promises were not going to be realized. He first suspected it, he said, in late 1993, when he and a colleague from the Make Democracy Work group got a call from the negotiating team who were in the final stages of haggling with the National Party. The call was a request for them to write a position paper on the pros and cons of making South Africa’s central bank an independent entity, run with total autonomy from the elected government---oh, and the negotiators needed it by morning.
“We were caught completely off guard,” recalled Padayachee, now in his early fifties. He had done his graduate studies at
Johns Hopkins University in Baltimore. He knew that at the time, even among free-market economists in the U.S., central bank independence was considered a fringe idea, a pet policy of a handful of Chicago School ideologues who believed that central banks should be run as sovereign republics within states, out of reach of the meddling hands of elected lawmakers.(*)[10]

For Padayachee and his colleagues, who strongly believed that monetary policy needed to serve the new government’s “big goals of growth, employment and redistribution,” the ANC’s position was a no-brainer: “There was not going to be an independent central bank in South Africa.” Padayachee and a colleague stayed up all night writing a paper that gave the negotiating team the arguments it needed to resist this curveball from the National Party. If the central bank (in South Africa called the Reserve Bank) was run separately from the rest of the government, it could restrict the ANC’s ability to keep the promises in the Freedom Charter. Besides, if the central bank was not accountable to the ANC government, to whom, exactly, would it be accountable? The IMF? The Johannesburg Stock Exchange?

Obviously, the National Party was trying to find a backdoor way to hold on to power even after it lost the elections---a strategy that needed to be resisted at all costs. “They were locking in as much as possible,” Padayachee recalled.

“That was a clear part of the agenda.” Padayachee faxed the paper in the morning and didn’t hear back for weeks. “Then, when we asked what happened, we were told, ‘Well, we gave that one up.’ “ Not only would the central bank be run as an autonomous entity within the South African state, with its independence enshrined in the new constitution, but it would be headed by the same man who ran it under apartheid, Chris Stals. It wasn’t just the central bank that the ANC had given up: in another major concession, Derek Keyes, the white finance minister under apartheid, would also remain in his post---much as the finance ministers and central bank heads from Argentina’s dictatorship somehow managed to get their jobs back under democracy. The New York Times praised Keyes as “the country’s ranking apostle of low-spending business-friendly government.”[11] Until that point, Padayachee said, “we were still buoyant, because, my God, this was a revolutionary struggle; at least there’d be something to come out of it.” When he learned that the central bank and the treasury would be run by their old apartheid bosses, it meant “everything would be lost in terms of economic transformation.” When I asked him whether he thought the negotiators realized how much they had lost, after some hesitation, he replied, “Frankly, no.” It was simple horse-trading: “In the negotiations, something had to be given, and our side gave those things---I’ll give you this, you give me that.” From Padayachee’s point of view, none of this happened because of some grand betrayal on the part of ANC leaders but simply because they were outmaneuvered on a series of issues that seemed less than crucial at the time--- but turned out to hold South Africa’s lasting liberation in the balance.

What happened in those negotiations is that the ANC found itself caught in a new kind of web, one made of arcane rules and regulations, all designed to confine and constrain the power of elected leaders. As the web descended on the country, only a few people even noticed it was there, but when the new government came to power and tried to move freely, to give its voters the tangible benefits of liberation they expected and thought they had voted for, the strands of the web tightened and the administration discovered that its powers were tightly bound. Patrick Bond, who worked as an economic adviser in Mandela’s office during the first years of ANC rule, recalls that the in-house quip was “Hey, we’ve got the state, where’s the power?” As the new government attempted to make tangible the dreams of the Freedom Charter, it discovered that the power was elsewhere.

Want to redistribute land? Impossible---at the last minute, the negotiators agreed to add a clause to the new constitution that protects all private property, making land reform virtually impossible. Want to create jobs for millions of unemployed workers? Can’t---hundreds of factories were actually about to close because the ANC had signed on to the GATT, the precursor to the World Trade Organization, which made it illegal to subsidize the auto plants and textile factories. Want to get free AIDS drugs to the townships, where the disease is spreading with terrifying speed? That violates an intellectual property rights commitment under the WTO, which the ANC joined with no public debate as a continuation of the GATT.

Need money to build more and larger houses for the poor and to bring free electricity to the townships? Sorry---the budget is being eaten up servicing the massive debt, passed on quietly by the apartheid government. Print more money? Tell that to the apartheid-era head of the central bank. Free water for all? Not likely. The World Bank, with its large in-country contingent of economists, researchers and trainers (a self-proclaimed “Knowledge Bank”), is making private-sector partnerships the service norm. Want to impose currency controls to guard against wild speculation? That would violate the $850 million IMF deal, signed, conveniently enough, right before the elections. Raise the minimum wage to close the apartheid income gap? Nope. The IMF deal promises “wage restraint.”[12] And don’t even think about ignoring these commitments---any change will be regarded as evidence of dangerous national untrustworthiness, a lack of commitment to “reform,” an absence of a “rules-based system.” All of which will lead to currency crashes, aid cuts and capital flight. The bottom line was that South Africa was free but simultaneously captured; each one of these arcane acronyms represented a different thread in the web that pinned down the limbs of the new government.

A longtime antiapartheid activist, Rassool Snyman, described the trap to me in stark terms. “They never freed us. They only took the chain from around our neck and put it on our ankles.” Yasmin Sooka, a prominent South African human rights activist, told me that the transition “was business saying, ‘We’ll keep everything and you [the ANC] will rule in name. . . . You can have political power, you can have the façade of governing, but the real governance will take place somewhere else.’ “(**)[13] It was a process of infantilization that is common to so-called transitional countries---new governments are, in effect, given the keys to the house but not the combination to the safe.

Part of what I wanted to understand was how, after such an epic struggle for freedom, any of this could have been allowed to happen. Not just how the leaders of the liberation movement gave up the economic front, but how the ANC’s base---people who had already sacrificed so much---let their leaders give it up. Why didn’t the grassroots movement demand that the ANC keep the promises of the Freedom Charter and rebel against the concessions as they were being made? I put the question to William Gumede, a third-generation ANC activist who, as a leader of the student movement during the transition, was on the streets in those tumultuous years. “Everyone was watching the political negotiations,” he recalled, referring to the de Klerk--Mandela summits. “And if people felt it wasn’t going well there would be mass protests. But when the economic negotiators would report back, people thought it was technical; no one was interested.” This perception, he said, was encouraged by Mbeki, who portrayed the talks as “administrative” and of no popular concern (much like the Chileans with their “technified democracy”). As a result, he told me, with great exasperation, “We missed it! We missed the real story.” Gumede, who today is one of South Africa’s most respected investigative journalists, says he came to understand that it was in those “technical” meetings that the true future of his country was being decided---though few understood it at the time.

Like many people I spoke with, Gumede reminded me that South Africa was very much on the brink of civil war throughout the transition period---townships were being terrorized by gangs who had been armed by the National Party, police massacres were still taking place, leaders were still being assassinated and there was constant talk of the country descending into a bloodbath. “I was focusing on the politics---mass action, going to Bisho [site of a definitive showdown between demonstrators and police], shouting, ‘Those guys must go!’ “ Gumede recalled. “But that was not the real struggle---the real struggle was over economics. And I am disappointed in myself for being so naive. I thought I was politically mature enough to understand the issues. How did I miss this?” Since then, Gumede has been making up for lost time. When we met, he was in the middle of a national firestorm sparked by his new book, Thabo Mbeki and the Battle for the Soul of the ANC. It is an exhaustive exposé of precisely how the ANC negotiated away the country’s economic sovereignty in those meetings he was too busy to pay attention to at the time. “I wrote the book out of anger,” Gumede told me. “Anger at myself and at the party.”

It’s hard to see how the outcome could have been different. If Padayachee is right and the ANC’s own negotiators failed to grasp the enormity of what they were bargaining away, what chance was there for the movement’s street fighters? During those key years when the deals were being signed, South Africans were in a constant state of crisis, ricocheting between the intense exuberance of watching Mandela walk free and the rage of learning that Chris Hani, the younger militant many hoped would succeed Mandela as leader, had been shot dead by a racist assassin. Other than a handful of economists, nobody wanted to talk about the independence of the central bank, a topic that works as a powerful soporific even under normal circumstances.

Gumede points out that most people simply assumed that no matter what compromises had to be made to get into power, they could be unmade once the ANC was firmly in charge. “We were going to be the government---we could fix it later,” he said.

What ANC activists didn’t understand at the time was that it was the nature of democracy itself that was being altered in those negotiations, changed so that---once the web of constraints had descended on their country---there would effectively be no later.

In the first two years of ANC rule, the party still tried to use the limited resources it had to make good on the promise of redistribution. There was a flurry of public investment---more than a hundred thousand homes were built for the poor, and millions were hooked up to water, electricity and phone lines.[14] But, in a familiar story, weighed down by debt and under international pressure to privatize these services, the government soon began raising prices. After a decade of ANC rule, millions of people had been cut off from newly connected water and electricity because they couldn’t pay the bills.(***) At least 40 percent of the new phones lines were no longer in service by 2003.[15] As for the “banks, mines and monopoly industry” that Mandela had pledged to nationalize, they remained firmly in the hands of the same four white-owned megaconglomerates that also control 80 percent of the Johannesburg Stock Exchange.[16] In 2005, only 4 percent of the companies listed on the exchange were owned or controlled by blacks.[17] Seventy percent of South Africa’s land, in 2006, was still monopolized by whites, who are just 10 percent of the population.[18] Most distressingly, the ANC government has spent far more time denying the severity of the AIDS crisis than getting lifesaving drugs to the approximately 5 million people infected with HIV, though there were, by early 2007, some positive signs of progress.[19] Perhaps the most striking statistic is this one: since 1990, the year Mandela left prison, the average life expectancy for South Africans has dropped by thirteen years.[20] Underlying all these facts and figures is a fateful choice made by the ANC after the leadership realized it had been outmaneuvered in the economic negotiations.

At that point, the party could have attempted to launch a second liberation movement and break free of the asphyxiating web that had been spun during the transition. Or it could simply accept its restricted power and embrace the new economic order. The ANC’s leadership chose the second option. Rather than making the centerpiece of its policy the redistribution of wealth that was already in the country---the core of the Freedom Charter on which it had been elected---the ANC, once it became the government, accepted the dominant logic that its only hope was to pursue new foreign investors who would create new wealth, the benefits of which would trickle down to the poor. But for the trickle-down model to have a hope of working, the ANC government had to radically alter its behavior to make itself appealing to investors.

This was not an easy task, as Mandela had learned when he walked out of prison. As soon as he was released, the South African stock market collapsed in panic; South Africa’s currency, the rand, dropped by 10 percent.[21] A few weeks later, De Beers, the diamond corporation, moved its headquarters from South Africa to Switzerland.[22] This kind of instant punishment from the markets would have been unimaginable three decades earlier, when Mandela was first imprisoned. In the sixties, it was unheard of for multinationals to switch nationalities on a whim and, back then, the world money system was still firmly linked to the gold standard. Now South Africa’s currency had been stripped of controls, trade barriers were down and most trading was short-term speculation.

Not only did the volatile market not like the idea of a liberated Mandela, but just a few misplaced words from him or his fellow ANC leaders could lead to an earth-shaking stampede by what the New York Times columnist Thomas Friedman has aptly termed “the electronic herd.”[23] The stampede that greeted Mandela’s release was just the start of what became a call-and response between the ANC leadership and the financial markets---a shock dialogue that trained the party in the new rules of the game. Every time a top party official said something that hinted that the ominous Freedom Charter might still become policy, the market responded with a shock, sending the rand into free fall. The rules were simple and crude, the electronic equivalent of monosyllabic grunts: justice---expensive, sell; status quo---good, buy.

When, shortly after his release, Mandela once again spoke out in favor of nationalization at a private lunch with leading businessmen, “the All-Gold Index plunged by 5 per cent.”[24] Even moves that seemed to have nothing to do with the financial world but betrayed some latent radicalism seemed to provoke a market jolt. When Trevor Manuel, an ANC minister, called rugby in South Africa a “white minority game” because its team was an all-white one, the rand took another hit.[25] Of all the constraints on the new government, it was the market that proved most confining---and this, in a way, is the genius of unfettered capitalism: it’s self-enforcing. Once countries have opened themselves up to the global market’s temperamental moods, any departure from Chicago School orthodoxy is instantly punished by traders in New York and London who bet against the offending country’s currency, causing a deeper crisis and the need for more loans, with more conditions attached. Mandela acknowledged the trap in 1997, telling the ANC’s national conference, “The very mobility of capital and the globalisation of the capital and other markets, make it impossible for countries, for instance, to decide national economic policy without regard to the likely response of these markets.”[26]

The person inside the ANC who seemed to understand how to make the shocks stop was Thabo Mbeki, Mandela’s right hand during his presidency and soon to be his successor. Mbeki had spent many of his years of exile in England, studying at the University of Sussex, then moving to London. In the eighties, while the townships of his country were flooded with tear gas, he was breathing in the fumes of Thatcherism. Of all the ANC leaders, Mbeki was the one who mingled most easily with business leaders, and before Mandela’s release, he organized several secret meetings with corporate executives who were afraid of the prospect of black majority rule. In 1985, after a night of drinking Scotch with Mbeki and a group of South African businesspeople at a Zambian game lodge, Hugh Murray, the editor of a prestigious business magazine, commented, “The ANC supremo has a remarkable ability to instill confidence, even in the most fraught circumstances.”[27] Mbeki was convinced that the key to getting the market to calm down was for the ANC to instill that kind of clubby confidence on a much larger scale.

According to Gumede, Mbeki took on the role of free-market tutor within the party. The beast of the market had been unleashed, Mbeki would explain; there was no taming it, just feeding it what it craved: growth and more growth.

So, rather than calling for the nationalization of the mines, Mandela and Mbeki began meeting regularly with Harry Oppenheimer, former chairman of the mining giants Anglo-American and De Beers, the economic symbols of apartheid rule. Shortly after the 1994 election, they even submitted the ANC’s economic program to Oppenheimer for approval and made several key revisions to address his concerns, as well as those of other top industrialists.[28] Hoping to avoid getting another shock from the market, Mandela, in his first postelection interview as president, carefully distanced himself from his previous statements favoring nationalization. “In our economic policies . . . there is not a single reference to things like nationalization, and this is not accidental,” he said. “There is not a single slogan that will connect us with any Marxist ideology.”(****)[29] The financial press offered steady encouragement for this conversion: “Though the ANC still has a powerful leftist wing,” The Wall Street Journal observed, “Mr. Mandela has in recent days sounded more like Margaret Thatcher than the socialist revolutionary he was once thought to be.”[30]

The memory of its radical past still clung to the ANC, and despite the new government’s best efforts to appear unthreatening, the market kept inflicting its painful shocks: in a single month in 1996, the rand dropped 20 percent, and the country continued to hemorrhage capital as South Africa’s jittery rich moved their money offshore.[31] Mbeki convinced Mandela that what was needed was a definitive break with the past. The ANC needed a completely new economic plan--- something bold, something shocking, something that would communicate, in the broad, dramatic strokes the market understood, that the ANC was ready to embrace the Washington Consensus.

As in Bolivia, where the shock therapy program was prepared with all the secrecy of a covert military operation, in South Africa only a handful of Mbeki’s closest colleagues even knew that a new economic program was in the works, one very different from the promises they had all made during the 1994 elections. Of the people on the team, Gumede writes, “all were sworn to secrecy and the entire process was shrouded in deepest confidentiality lest the left wing get wind of Mbeki’s plan.”[32] The economist Stephen Gelb, who took part in drafting the new program, admitted that “this was ‘reform from above’ with a vengeance, taking to an extreme the arguments in favour of insulation and autonomy of policymakers from popular pressures.”[33] (This emphasis on secrecy and insulation was particularly ironic given that, under the tyranny of apartheid, the ANC had pulled off a remarkably open and participatory process to come up with the Freedom Charter.

Now, under a new order of democracy, the party was opting to hide its economic plans from its own caucus.) In June 1996, Mbeki unveiled the results: it was a neoliberal shock therapy program for South Africa, calling for more privatization, cutbacks to government spending, labor “flexibility,” freer trade and even looser controls on money flows. According to Gelb, its overriding aim “was to signal to potential investors the government’s (and specifically the ANC’s) commitment to the prevailing orthodoxy.”[34] To make sure the message was loud and clear to traders in New York and London, at the public launch of the plan, Mbeki quipped, “Just call me a Thatcherite.”[35]

Shock therapy is always a market performance---that is part of its underlying theory. The stock market loves overhyped, highly managed moments that send stock prices soaring, usually provided by an initial public stock offering, the announcement of a huge merger or the hiring of a celebrity CEO. When economists urge countries to announce a sweeping shock therapy package, the advice is partially based on an attempt to imitate this kind of high-drama market event and trigger a stampede---but rather than selling an individual stock, they are selling a country. The hoped-for response is “Buy Argentine stocks!” “Buy Bolivian bonds!” A slower, more careful approach, on the other hand, may be less brutal, but it deprives the market of these hype-bubbles, during which the real money gets made. Shock therapy is always a significant gamble, and in South Africa it didn’t work: Mbeki’s grand gesture failed to attract long-term investment; it resulted only in speculative betting that ended up devaluing the currency even further.

The shock of the base

“The new convert is always more zealous at these things. They want to please even more,” remarked the Durban-based writer Ashwin Desai when we met to discuss his memories of the transition. Desai spent time in jail during the liberation struggle, and he sees parallels between the psychology in prisons and the ANC’s behavior in government. In prison, he said, “if you please the warden more, you get a better status. And that logic obviously transposed itself into some of the things that South African society did. They did want to somehow prove that they were much better prisoners. Much more disciplined prisoners than other countries, even.” The ANC base, however, proved distinctly more unruly---which created a need for yet more discipline.

According to Yasmin Sooka, one of the jurors on South Africa’s Truth and Reconciliation Commission, the discipline mentality reached into every aspect of the transition---including the quest for justice. After hearing years of testimony about torture, killings and disappearances, the truth commission turned to the question of what kind of gestures could begin to heal the injustices. Truth and forgiveness were important, but so was compensation for the victims and their families. It made little sense to ask the new government to make compensation payouts, as these were not its crimes, and anything spent on reparations for apartheid abuses was money not spent building homes and schools for the poor in the newly liberated nation.

Some commissioners felt that multinational corporations that had benefited from apartheid should be forced to pay reparations. In the end the Truth and Reconciliation Commission made the modest recommendation of a onetime 1 percent corporate tax to raise money for the victims, what it called “a solidarity tax.” Sooka expected support for this mild recommendation from the ANC; instead, the government, then headed by Mbeki, rejected any suggestion of corporate reparations or a solidarity tax, fearing that it would send an antibusiness message to the market. “The president decided not to hold business accountable,” Sooka told me. “It was that simple.” In the end, the government put forward a fraction of what had been requested, taking the money out of its own budget, as the commissioners had feared.

South Africa’s Truth and Reconciliation Commission is frequently held up as a model of successful “peace building,” exported to other conflict zones from Sri Lanka to Afghanistan. But many of those who were directly involved in the process are deeply ambivalent. When he unveiled the final report in March 2003, the commission’s chairman, Archbishop Desmond Tutu, confronted journalists with freedom’s unfinished business. “Can you explain how a black person wakes up in a squalid ghetto today, almost 10 years after freedom? Then he goes to work in town, which is still largely white, in palatial homes. And at the end of the day, he goes back home to squalor? I don’t know why those people don’t just say, ‘To hell with peace. To hell with Tutu and the truth commission.’ “[36] Sooka, who now heads South Africa’s Foundation for Human Rights, says that she feels that although the hearings dealt with what she described as “outward manifestations of apartheid such as torture, severe ill treatment and disappearances,” it left the economic system served by those abuses “completely untouched”---an echo of the concerns about the blindness of “human rights” expressed by Orlando Letelier three decades earlier. If she had the process to do over again, Sooka said, “I would do it completely differently.

I would look at the systems of apartheid---I would look at the question of land, I would certainly look at the role of multinationals, I would look at the role of the mining industry very, very closely because I think that’s the real sickness of South Africa. . . . I would look at the systematic effects of the policies of apartheid, and I would devote only one hearing to torture because I think when you focus on torture and you don’t look at what it was serving, that’s when you start to do a revision of the real history.”

Reparations in reverse

The fact that the ANC dismissed the Commission’s call for corporate reparations is particularly unfair, Sooka pointed out, because the government continuesto pay the apartheid debt. In the first years after the handover, it cost the new government 30 billion rand annually (about $4.5 billion) in servicing---a sum that provides a stark contrast with the paltry total of $85 million that the government ultimately paid out to more than nineteen thousand victims of apartheid killings and torture and their families. Nelson Mandela has cited the debt burden as the single greatest obstacle to keeping the promises of the Freedom Charter. “That is 30 billion [rand] we did not have to build houses as we planned, before we came into government, to make sure that our children go to the best schools, that unemployment is properly addressed and that everybody has the dignity of having a job, a decent income, of being able to provide shelter to his beloved, to feed them. . . .

We are limited by the debt that we inherited.”[37] Despite Mandela’s acknowledgment that paying the apartheid bills has become a disfiguring burden, the party has opposed all suggestions that it default.
The fear is that even though there is a strong legal case that the debts are “odious,” any move to default would make South Africa look dangerously radical in the eyes of investors, thus provoking another market shock.

Dennis Brutus, a longtime ANC member and a former prisoner on Robben Island, ran directly into that wall of fear. In 1998, seeing the financial stress the new government was under, he and a group of South African activists decided that the best way they could support the ongoing struggle was to start a “debt jubilee” movement. “I must say, I was so naive,” Brutus, now in his seventies, told me. “I expected that the government would express appreciation to us, that the grass roots are taking up the issue of debt, you know, that it would reinforce the government taking up debt.” To his astonishment, “the government repudiated us and said, ‘No, we don’t accept your support.’ “

What makes the ANC’s decision to keep paying the debt so infuriating to activists like Brutus is the tangible sacrifice made to meet each payment. For instance, between 1997 and 2004, the South African government sold eighteen state-owned firms, raising $4 billion, but almost half the money went to servicing the debt.[38] In other words, not only did the ANC renege on Mandela’s original pledge of “the nationalisation of the mines, banks and monopoly industry” but because of the debt, it was doing the opposite---selling off national assets to make good on the debts of its oppressors.

Then there is the matter of where, precisely, the money is going. During the transition negotiations, F. W. de Klerk’s team demanded that all civil servants be guaranteed their jobs even after the handover; those who wanted to leave, they argued, should receive hefty lifelong pensions. This was an extraordinary demand in a country with no social safety net to speak of, yet it was one of several “technical” issues on which the ANC ceded ground.[39] The concession meant that the new ANC government carried the cost of two governments---its own, and a shadow white government that was out of power. Forty percent of the government’s annual debt payments go to the country’s massive pension fund. The vast majority of the beneficiaries are former apartheid employees.(*****)[40]

In the end, South Africa has wound up with a twisted case of reparations in reverse, with the white businesses that reaped enormous profits from black labor during the apartheid years paying not a cent in reparations, but the victims of apartheid continuing to send large paychecks to their former victimizers. And how do they raise the money for this generosity? By stripping the state of its assets through privatization---a modern form of the very looting that the ANC had been so intent on avoiding when it agreed to negotiations, hoping to prevent a repeat of Mozambique. Unlike what happened in Mozambique, however, where civil servants broke machinery, stuffed their pockets and then fled, in South Africa the dismantling of the state and the pillaging of its coffers continue to this day.

When I arrived in South Africa, the fiftieth anniversary of the signing of the Freedom Charter was approaching, and the ANC had decided to mark the event with a media spectacle. The plan was for Parliament to relocate for the day from its usual commanding home in Cape Town to the far more humble surroundings of Kliptown, where the charter was first ratified. The South African president, Thabo Mbeki, was going to take the occasion to rename Kliptown’s main intersection the Walter Sisulu Square of Dedication, after one of the ANC’s most revered leaders. Mbeki would also inaugurate a new Freedom Charter Monument, a brick tower in which the words of the Charter had been engraved on stone tablets, and light an eternal “flame of freedom.” Adjacent to this building, work was progressing on another monument, this one called the Freedom Towers, a pavilion of black and white concrete pillars designed to symbolize the charter’s famous clause that says, “South Africa belongs to all those who live in it, black and white.”[41] The overall message of the event was hard to miss: fifty years ago, the party had promised to bring freedom to South Africa and now it had delivered---it was the ANC’s own “mission accomplished” moment.

Yet there was something strange about the event. Kliptown---an impoverished township with dilapidated shacks, raw sewage in the streets and an unemployment rate of 72 percent, far higher than under apartheid---seems more like a symbol of the Freedom Charter’s broken promises than an appropriate backdrop for such a slickly produced celebration.[42] As it turned out, the anniversary events were staged and art-directed not by the ANC but by an odd entity called Blue IQ. Though officially an arm of the provincial government, Blue IQ “operates in a carefully constructed environment which makes it look and feel more like a private sector company than a government department,” according to its very glossy, and very blue, brochure.

Its goal is to drum up new foreign investment in South Africa---part of the ANC program of “re-distribution through growth.” Blue IQ had identified tourism as a major growth area for investment, and its market research showed that for tourists visiting South Africa, a large part of the attraction is the ANC’s global reputation for having triumphed over oppression. Hoping to build on this powerful draw, Blue IQ determined that there was no better symbol of the South African triumphover- adversity narrative than the Freedom Charter. With that in mind, it launched a project to transform Kliptown into a Freedom Charter theme park, “a world-class tourist destination and heritage site offering local and international visitors a unique experience”---complete with museum, a freedom-themed shopping mall and a glass-and-steel Freedom Hotel.

What is now a slum is set to be remade “into a desirous and prosperous” Johannesburg suburb, while many of its current residents will be relocated to slums in less historic locales.[43] With its plans to rebrand Kliptown, Blue IQ is following the free-market playbook---providing incentives for business to invest, in the hope that it will create jobs down the road. What sets this particular project apart is that, in Kliptown, the foundation on which the entire trickle-down apparatus rests is a fifty-year-old piece of paper that called for a distinctly more direct road to poverty elimination. Redistribute the land so millions can sustain themselves from it, demanded the framers of the Freedom Charter, and take back the mines so the bounty can be used to build houses and infrastructure and create jobs in the process. In other words, cut out the middleman.

Those ideas may sound like utopian populism to many ears, but after so many failed experiments in Chicago School orthodoxy, the real dreamers may be those who still believe that a scheme like the Freedom Charter theme park, which provided handouts to corporations while further disposessing the neediest people, will solve the pressing health and economic problems for the 22 million South Africans still living in poverty.[44] After more than a decade since South Africa made its decisive turn toward Thatcherism, the results of its experiment in trickle-down justice are scandalous: . Since 1994, the year the ANC took power, the number of people living on less than $1 a day has doubled, from 2 million to 4 million in 2006.[45]

Between 1991 and 2002, the unemployment rate for black South Africans more than doubled, from 23 percent to 48 percent.[46] Of South Africa’s 35 million black citizens, only five thousand earn more than $60,000 a year. The number of whites in that income bracket is twenty times higher, and many earn far more than that amount.[47] The ANC government has built 1.8 million homes, but in the meantime 2 million people have lost their homes.[48] Close to 1 million people have been evicted from farms in the first decade of democracy.[49] Such evictions have meant that the number of shack dwellers has grown by 50 percent. In 2006, more than one in four South Africans lived in shacks located in informal shantytowns, many without running water or electricity.[50] Perhaps the best measure of the betrayed promises of freedom is the way the Freedom Charter is now regarded in different parts of South African society.

Not so long ago, the document represented the ultimate threat to white privilege in the country; today it is embraced in business lounges and gated communities as a statement of good intentions, at once flattering and totally unthreatening, on a par with a flowery corporate code of conduct. But in the townships where the document adopted in a field in Kliptown was once electric with possibility, its promises are almost too painful to contemplate. Many South Africans boycotted the government-sponsored anniversary celebrations completely. “What is in the Freedom Charter is very good,” S’bu Zikode, a leader of Durban’s burgeoning shack dwellers’ movement, told me. “But all I see is the betrayal.” In the end, the most persuasive argument for abandoning the redistribution promises of the Freedom Charter was the least imaginative one: everyone is doing it. Vishnu Padayachee summed up for me the message that the ANC leadership was getting from the start from “Western governments, the IMF and the World Bank. They would say, ‘The world has changed; none of that left stuff means anything anymore; this is the only game in town.’ “ As Gumede writes, “It was an onslaught for which the ANC was wholly unprepared.

Key economic leaders were regularly ferried to the head offices of international organizations such as the World Bank and IMF, and during 1992 and 1993 several ANC staffers, some of whom had no economic qualifications at all, took part in abbreviated executive training programs at foreign business schools, investment banks, economic policy think tanks and the World Bank, where they were ‘fed a steady diet of neo-liberal ideas.’ It was a dizzying experience. Never before had a government-in-waiting been so seduced by the international community.”[51] Mandela received a particularly intense dose of this elite form of schoolyard peer pressure when he met with European leaders at the 1992 World Economic Forum in Davos. When he pointed out that South Africa wanted to do nothing more radical than what Western Europe had done under the Marshall Plan after the Second World War, the Dutch minister of finance dismissed the parallel. “That was what we understood then. But the economies of the world are interdependent. The process of globalization is taking root. No economy can develop separately from the economies of other countries.”[52]

As leaders like Mandela traveled the globalization circuit, it was pounded into them that even the most left-wing governments were embracing the Washington Consensus: the Communists in Vietnam and China were doing it, and so were the trade unionists in Poland and the social democrats in Chile, finally free from Pinochet. Even Russians had seen the neoliberal light---at the time the ANC was in its heaviest negotiations, Moscow was in the midst of a corporatist feeding frenzy, selling off its state assets to apparatchiks-turned-entrepreneurs as fast as it could. If Moscow had given in, how could a raggedy band of freedom fighters in South Africa resist such a forceful global tide? That, at least, was the message being peddled by the lawyers, economists and social workers who made up the rapidly expanding “transition” industry--- the teams of experts who hop from war-torn country to crisis-racked city, regaling overwhelmed new politicians with the latest best practice from Buenos Aires, the most inspiring success story from Warsaw, the most fearsome roar from the Asian Tigers. “Transitionologists” (as the NYU political scientist Stephen Cohen has called them) have a built-in advantage over the politicians they advise: they are a hypermobile class, while the leaders of liberation movements are inherently inward-looking.[53]

By their very nature, people spearheading intense national transformations are narrowly focused on their own narratives and power struggles, often unable to pay close attention to the world beyond their borders. That’s unfortunate, because if the ANC leadership had been able to cut through the transitionology spin and find out for itself what was really going on in Moscow, Warsaw, Buenos Aires and Seoul, it would have seen a very different picture.

Footnotes to `Democracy born in chains

* Milton Friedman often joked that if he had his way, central banks would be based so purely on “economic science” that they would be run by giant computers---no humans required.

** It was the Chicago Boys in Chile, fittingly, who pioneered this process of democracy-proofing capitalism, or building what they called “new democracy.” In Chile, before handing over power to an elected government after seventeen years of junta rule, the Chicago Boys rigged the constitution and the courts so it was legally next to impossible to reverse their revolutionary laws. They had many names for this process: building a “technified democracy,” a “protected democracy,” or, as Pinochet’s young minister José Piñera put it, ensuring “insulation from politics.” Alvaro Bardón, Pinochet’s undersecretary of the economy, explained the classic Chicago School reasoning: “If we acknowledge economics as a science, this immediately implies less power for government or the political structure, since both lose responsibility for making such decisions.”

*** The question of whether more people have been cut off from new services than connected to them is highly contested in South Africa. At least one credible study has found that the cutoffs outnumber the connections: the government says it has connected nine million people to water; the study calculated ten million disconnections.

**** In fact, the ANC’s official economic platform, on which it had been elected, called for “increasing the public sector in strategic areas through, for example, nationalisation.” Then there was the Freedom Charter, which continued to be the party’s manifesto.

***** In fact, this one apartheid-era burden is simultaneously driving the growth of the country’s overall debt and putting billions of rand of public money out of reach every year. A “technical” accounting change in 1989 switched the state pension fund from a “pay as you go” system, in which benefits are paid from contributions made in any given year, to a “fully funded” system, in which the fund has to have on hand enough capital to pay out 70 to 80 percent of its total liabilities at any given time---not a scenario it will ever face. As a result, the fund ballooned from 30 billion rand in 1989 to more than 300 billion rand in 2004---certainly qualifying as a debt shock. What this means for South Africans is that the huge pool of capital administered independently by the pension fund has been cordoned off and placed out of reach for spending on housing, health care or basic services. The pension agreement was actually negotiated on the ANC side by Joe Slovo, the legendary leader of the South African Communist Party, a fact that continues to be a source of great resentment in the country today.

Endnotes to `Democracy born in chains’

1. “South Africa; Tutu Says Poverty, Aids Could Destabilise Nation,” AllAfrica.com, November 2001.
2. Martin J. Murray, The Revolution Deferred (London: Verso, 1994), 12.
3. “ANC Leader Affirms Support for State Control of Industry,” Times (
London), January 26, 1990.
4. Ismail Vadi, The Congress of the People and Freedom Charter Campaign, foreword by Walter Sisulu (New Delhi: Sterling Publishers, 1995), http://www.sahistory.org.za.
5. Nelson Mandela, A Long Walk to Freedom: The Autobiography of Nelson Mandela (New York: Little, Brown and Company, 1994), 150.
6. The Freedom Charter, adopted at the Congress of the People, Kliptown, on
June 26, 1955, http://www.anc.org.za.
7. William Mervin Gumede, Thabo Mbeki and the
Battle for the Soul of the ANC (Cape Town: Zebra Press, 2005), 219--20.
8. Mandela, A Long Walk to Freedom, 490-91.
9. Simple majority rule was actually delayed until 1999. Until then, executive power was shared among all the political parties that won more than 5 percent of the popular vote. Unpublished interview with Nelson Mandela by the filmmaker Ben Cashdan, 2001; Hein Marais, South Africa: Limits to Change: The Political Economy of Transition (
Cape Town: University of Cape Town Press, 2001), 91-92.
10. Milton Friedman, “Milton Friedman---Banquet Speech,” given at the Nobel Banquet,
December 10, 1976, http://www.nobelprize.org.
11. Bill Keller, “Can Both Wealth and Justice Flourish in a New
South Africa?”, New York Times, May 9, 1994.
12. Mark Horton, “Role of Fiscal Policy in Stabilization and Poverty Alleviation,” in Post-Apartheid
South Africa: The First Ten Years, ed. Michael Nowak and Luca Antonio Ricci (Washington DC: International Monetary Fund, 2005), 84.
13. Juan Gabriel Valdés, Pinochet’s Economists: The Chicago School in Chile (Cambridge: Cambridge University Press, 1995), 31, 33, quoting Pinochet’s minister of economy Pablo Baraona’s definition of the “new democracy”; Robert Harvey, “Chile’s Counter- Revolution: The Fight Goes On,” The Economist, February 2, 1980 (Harvey was quoting Sergio Fernandez, the minister of the interior); José Piñera, “Wealth Through Ownership: Creating Property Rights in Chilean Mining,” Cato Journal 24, no. 3 (Fall 2004): 298.
14. James Brew, “
South Africa---Habitat: A Good Home Is Still Hard to Own,” Inter Press Service, March 11, 1997.
15. David McDonald, “Water: Attack the Problem Not the Data,” Sunday Independent (
London), June 19, 2003.
16. Bill Keller, “Cracks in
South Africa’s White Monopolies,” New York Times, June 17, 1993.
17. Gumede cites Businessmap statistics asserting that “around 98 per cent of executive directors of JSE-listed companies are white, and they preside over 97 percent of the exchange’s total value.” Simon Robinson, “The New Rand Lords,” Time,
April 25, 2005; Gumede, Thabo Mbeki and the Battle for the Soul of the ANC, 220.
18. Gumede, Thabo Mbeki and the
Battle for the Soul of the ANC, 112.
19. Moyiga Nduru, “
S. Africa: Politician Washed Anti-AIDS Efforts Down the Drain,” Inter Press Service, April 11, 2006.
20. “Study: AIDS Slashes SA’s Life Expectancy,” Mail & Guardian (
Johannesburg), December 11, 2006.
21. The rand recovered slightly by the end of the day, closing 7 percent lower. Jim Jones, “Foreign Investors Take Fright at Hardline Stance,” Financial Times (
London), February 13, 1990.
22. Steven Mufson, “
South Africa 1990,” Foreign Affairs [Special Edition: America and the World], 1990/1991.
23. Thomas L. Friedman, The Lexus and the Olive Branch (
New York: Random House, 2000), 113.
24. Gumede, Thabo Mbeki and the
Battle for the Soul of the ANC, 69.
25. Ibid., 85; “
South Africa: Issues of Rugby and Race,” The Economist, August 24, 1996.
26. Nelson Mandela, “Report by the President of the ANC to the 50th National Conference of the African National Congress,”
December 16, 1997.
27. Gumede, Thabo Mbeki and the
Battle for the Soul of the ANC, 33-39, 69.
28. Ibid., 79.
29.
Marais, South Africa, 122;  ANC, Ready to Govern: ANC Policy Guidelines for a Democratic South Africa, Adopted at the National Conference, May 28-31, 1992, http://www.anc.org.za.
30. Ken Wells, “
U.S. Investment in South Africa Quickens,” Wall Street Journal, October 6, 1994.
31. Gumede, Thabo Mbeki and the
Battle for the Soul of the ANC, 88.
32. Ibid., 87.
33.
Marais, South Africa, 162.
34. Ibid., 170.
35. Gumede, Thabo Mbeki and the
Battle for the Soul of the ANC, 89.
36. Ginger Thompson, “South African Commission Ends Its Work,” New York Times,
March 22, 2003.
37. ANC, “The State and Social Transformation,” discussion document, November 1996, www.anc.org.za; Ginger Thompson, “
South Africa to Pay $3,900 to Each Family of Apartheid Victims,” New York Times, April 16,
2003
; Mandela unpublished interview with Cashdan, 2001.
38. Gumede, Thabo Mbeki and the
Battle for the Soul of the ANC, 108.
39. Ibid., 119.
40. South African Communist Party, “The Debt Debate: Confusion Heaped on Confusion”, November-December 1998, http://www.sacp.org.za; Jeff Rudin, “Apartheid Debt: Questions and Answers,” Alternative Information and Development Centre, March 16, 1999, http://www.aidc.org.za; Congress of South Africa Trade Unions, “Submission on the Public Investment Corporation Draft Bill,” June 25, 2004, http://www.cosatu.org.za; Rudin, “Apartheid Debt”; South African Communist Party, “The Debt Debate.”
41. “The Freedom Charter.”
42. Nomvula Mokonyane, “Budget Speech for 2005/06 Financial Year by MEC for Housing in
Gauteng,” Speech made in the Guateng Legislature on June
13, 2005
, http://www.info.gov.za.
43. Lucille Davie and Mary Alexander, “Kliptown and the Freedom Charter,”
June 27, 2005, http://www.southafrica.info; Blue IQ, The Plan for a Smart Province---Guateng.
44. Gumede, Thabo Mbeki and the
Battle for the Soul of the ANC, 215.
45. Scott Baldauf, “Class Struggle:
South Africa’s New, and Few, Black Rich,” Christian Science Monitor, October 31, 2006; Human Development Report 2006, United Nations Development Programme, http://www.undp.org.
46. “
South Africa: The Statistics,” Le Monde Diplomatique, September
2006; Michael Wines and Sharon LaFraniere, “Decade of Democracy Fills Gaps in
South Africa,” New York Times, April 26, 2004.
47. Simon Robinson, “The New Rand Lords.”
48. Michael Wines, “Shantytown Dwellers in
South Africa Protest the Sluggish Pace of Change,” New York Times, December 25, 2005.
49. Mark Wegerif, Bev Russell and Irma Grundling, Summary of Key Findings from the National Evictions Survey, Polokwane, South Africa: Nkuzi Development Association, 2005, 7, http://www.nkuzi.org.za.
50. Wines, “Shantytown Dwellers in
South Africa Protest ...”
51. Gumede, Thabo Mbeki and the
Battle for the Soul of the ANC, 72. Internal quotation: Asghar Adelzadeh, “From the RDP to GEAR: The Gradual Embracing of Neoliberalism in Economic Policy,” Transformation 31, 1996.
52. Ibid., 70.
53. Stephen F. Cohen, Failed Crusade:
America and the Tragedy of Post-Communist Russia (New York: W. W. Norton & Company, 2001), 30.

Comments

One year after The Shock Doctrine, a response to the attacks

www.naomiklein.org

One Year After the Publication of /The Shock Doctrine/, A Response to the Attacks

By Naomi Klein, September 2, 2008

Exactly one year ago, I set off on a book tour to promote /The Shock Doctrine/. The plan was for it to last three months, quite long by publishing standards. Twelve months later, it is still going <http://www.naomiklein.org/meet-naomi/tour-dates>. But this has been no ordinary book tour. Everywhere I have traveled– from Calgary, Alberta to Cochabamba, Bolivia – I have heard more stories about how shock strategies have been used to impose unwanted pro-corporate policies. I have also been part of stimulating debates and discussions about how the current round of crises – oil, food, financial markets, heavy weather -- can be transformed into opportunities for progressive change.

And there have been other kinds of responses too. /The Shock Doctrine/ is a direct attack on the intellectuals and institutions that have disseminated corporatist ideology around the world. When I wrote the book, I fully expected to get hit back. Yet for eight months following publication, there was an eerie silence from the “free-market” ideologues. Sure, a few dismissive reviews appeared in the business press <http://www.naomiklein.org/articles/2007/10/business-press-unrequited-love>. But not a word from the Washington think tanks that I name in the book. Nothing from the University of Chicago economics department. Even /The Economist/ magazine, which used to attack me gleefully and with great regularity, never mentioned the book in print. An American television producer, who was trying to find an opponent to debate me on-air, confided that she had never been turned down so consistently. "They seem to think if they ignore you, you'll go away."

Well, the silence from the right has certainly been broken. In recent months, several articles and reports have come out claiming to debunk my thesis. The most prominent are a “background paper” <http://www.cato.org/pubs/bp/bp102.pdf> published by The Cato Institute, extended into a full length book in Swedish (!), and a lengthy essay <http://www.tnr.com/story_print.html?id=69067f1c-d089-474b-a8a0-945d1deb420b> in /The New Republic/ by senior editor Jonathan Chait.

Several readers have written to this site <http://www.shockdoctrine.com> asking me to respond to these attacks, if only to help them defend the book more effectively. I resisted at first (clinging to my summer vacation…) but I appreciate the feedback and several points do need correcting. Since the reports by Cato and /The New Republic/ – though purporting to come from radically different points on the political spectrum – share some marked similarities, I’ve decided to tackle them together. Here goes.

*Sorry Boys, Milton Friedman Supported The War*

Both Jonathan Chait and The Cato Institute claim that the late economist Milton Friedman was a staunch opponent of the invasion of Iraq. The Cato paper states of me that, “She claims that Friedman was a ‘neoconservative’ and thus in favor of an aggressive American foreign policy, and she argues that Iraq was invaded so that Chicago-style policies could be implemented there…. but nowhere does she mention Friedman’s actual views about the war. Friedman himself said: ‘I was opposed to going into Iraq from the beginning. I think it was a mistake, for the simple reason that I do not believe the United States of America ought to be involved in aggression.’ And this was not just one war that he happened to oppose. In 1995, he described his foreign policy position as ‘anti-interventionist.’”

Similarly, Chait accuses me of not knowing the difference between libertarians and neo-cons and chides me for never mentioning -- “not once, not anywhere” -- that Friedman “argued against the Iraq war from the beginning.” Apparently Friedman’s anti-war stance should be “morbidly embarrassing” to me.

I am not the one who should be embarrassed. Despite his later protestations, Milton Friedman openly supported the war when it was being waged. In April 2003, Friedman told the German magazine /Focus/ that “President Bush only wanted war because anything else would have threatened the freedom and the prosperity of the USA.” Asked about increased tensions between the U.S. and Europe, Friedman replied: “the end justifies the means. As soon as we’re rid of Saddam, the political differences will also disappear.” [Read the whole interview in German <http://www.focus.de/finanzen/news/wirtschaft-lasst-erhard-auferstehen_aid_196501.html> and our translation <http://www.naomiklein.org/shock-doctrine/resources/milton-friedman-war-iraq>.] Clearly this was not the voice of anti-intervention. Even in July 2006, when Friedman claimed to have opposed the war from the beginning, he remained hawkish. Now that the U.S. was in Iraq, Friedman told /The Wall Street Journal/, “it seems to me very important that we make a success of it.”

All of this has nothing to do with my book, however. In /The Shock Doctrine/, I describe the invasion and occupation of Iraq as the culmination of Friedman’s ideological crusade because he was America’s leading intellectual favoring the privatization of the state – not because he personally supported the war, which is irrelevant. For more than five years Iraq has been the vanguard of this radical privatization project. Private contractors now outnumber U.S. soldiers and corporations have taken on such core state functions as prisoner interrogation.

Furthermore, I never said Friedman was a “neo-conservative” and I discuss, at length, how difficult it is to find terms to describe the corporatist project that are acceptable to all readers. On page 17 (all page numbers refer to the Picador paperback) I write:

   “In the attempt to relate the history of the ideological crusade
   that has culminated in the radical privatization of war and
   disaster, one problem recurs: the ideology is a shape-shifter,
   forever changing its name and switching identities. Friedman called
   himself a ‘liberal,’ but his U.S. followers, who associated liberals
   with high taxes and hippies, tended to identify as ‘conservatives,’
   ‘classical economists,’ ‘free marketers’ and, later, as believers in
   ‘Reaganomics’ or ‘laissez-faire.’ In most of the world, their
   orthodoxy is known as ‘neo-liberalism,’ but it is often called ‘free
   trade’ or simply ‘globalization.’ Only since the mid-nineties has
   the intellectual movement, led by the right-wing think tanks with
   which Friedman had long associations—Heritage Foundation, Cato
   Institute and the American Enterprise Institute—called itself &l
   squo;neo-conservative,’ a world view that has harnessed the full
   force of the U.S. military machine in the service of a corporate
   agenda.”


The significance of the “neo-con” label gaining currency in the mid-nineties is that it was then that the Republicans, under the leadership of Newt Gingrich and backed by the think tanks I mentioned, swept Congress promising a “Contract With America.” At this point, the label “neo-conservatives” was not a reference primarily to hawkish foreign policy positions but to harsh economic ones. Back in the mid-nineties, many of the people most associated with the neo-con label today – David Frum and William Kristol and much of the /Weekly Standard/ crowd – were squarely focused on demanding Friedmanite cut-backs and privatizations inside the United States. Frum, for example, first made his name in the U.S. with /Dead Right/, his 1994 book exhorting the conservative movement to return to its free market economic roots. After Bill Clinton embraced much of this economic agenda, several of the key neo-con warriors narrowed th eir focus to American dominance on the world stage, a fact that has allowed their keen interests in Friedmanite economic ideas to be largely overlooked.

*Ignore the Reporting, Attack the Author*

Both Chait’s essay and the Cato paper are marked by a stubborn refusal to wrestle with the evidence quoted in my book. For instance, Chait dismisses out of hand my suggestion that there were economic interests behind the 1999 NATO intervention in Kosovo (though he grudingly admits I never claim that economics was the sole motivator). I do write that there were other factors motivating the war besides Slobodan Milosevic’s egregious human rights violations. I base this claim on the post-war analysis provided by Strobe Talbott, Deputy Secretary of State under U.S. President Bill Clinton and the lead U.S. negotiator during the Kosovo war. In a 2005 essay (quoted on page 415), Talbott wrote:

   “As nations throughout the region sought to reform their economies,
   mitigate ethnic tensions, and broaden civil society, Belgrade seemed
   to delight in continually moving in the opposite direction. It is
   small wonder NATO and Yugoslavia ended up on a collision course. It
   was Yugoslavia’s resistance to the broader trends of political and
   economic reform—not the plight of the Kosovar Albanians—that best
   explains NATO’s war.”

Instead of explaining how the words of a top-level U.S. official could so clearly coincide with my argument, Chait chooses to completely ignore the Talbott quote. Again and again, readers of The New Republic are left with the distinct impression that /The Shock Doctrine/ is a work of opinion journalism, rather than a thesis based on research and reporting.

When Chait and the Cato Institute do acknowledge my reliance on facts, they accuse me of manipulating them to fit my thesis. Interestingly, the first time Chait quotes my work, he does just that. To explain to his readers what kind of an extremist he is dealing with, he quotes my first book, /No Logo/. In it, I allegedly described the world as a “fascist state where we all salute the logo and have little opportunity for criticism because our newspapers, television stations, Internet servers, streets and retail spaces are all controlled by multinational corporate interests.” If he had let the quote continue for one more sentence, his readers would have known that I went on to dismiss this worldview as overly caricatured. The next sentences read: “there is good reason for alarm. But a word of caution: we may be able to see a not-so-brave new world on the horizon, but that doesn't mean we are already living in Huxley's nightmare... Instead of an airtight formula, is a steady trend... but riddled with exceptions.”

This is just the first of countless instances in which Chait twists my words to fit his thesis. When manipulation fails, he simply takes my points and passes them off as his own, without attribution. (I am well aware, for instance, that both Marxists and Keynesians have exploited crisis and disaster, which is why I explore left-wing disaster opportunism on pages 21-25, 65-70, 283, 316-317.)

*Grasping at Straws*

The Cato paper does, at times, acknowledge that there are facts in my book, but faults me for failing to provide sources for my statistics. This is a bold charge to make against a book with 74 pages of endnotes. The one example mentioned is the statistic “that between 25 and 60 percent of the population is discarded or becomes a permanent underclass in countries that liberalize their economies.” I did not provide a source for this stat because it is an amalgamation of stats I had already cited and for which I had already provided multiple sources. This is standard practice: once a statistic has been sourced, it can repeated (for the sake of brevity) without repeating the source. So here are those stats on which the 25-60 per cent amalgamation is based, with their sources, straight out of The Shock Doctrine endnotes:

   * *Unemployment in Bolivia was between 25% and 30% in 1987* (page
     186. Source: Mike Reid, “Sitting Out the Bolivian Miracle,”
     /Guardian/ (London), May 9, 1987.)
   * *25% of Russians lived in desperate poverty in 1996* (page 300.
     Source: Russian Economic Trends 5, no. 1 (1996): 56–57 cited in
     Bertram Silverman and Murray Yanowitch, /New Rich, New Poor, New
     Russia: Winners and Losers on the Russian Road to Capitalism/
     (Armonk, NY: M.E. Sharpe, 2000), 47.)
   * *Unemployment for black South Africans more than doubled from 23%
     in 1991 to 48% in 2002* (page 272. Sources: “South Africa: The
     Statistics,” /Le Monde Diplomatique/, September 2006; Michael
     Wines and Sharon LaFraniere, “Decade of Democracy Fills Gaps in
     South Africa,” /New York Times/, April 26, 2004.)
   * *Unemployment in Poland was at 25% in some areas in 1993* (page
     241. Source: Mark Kramer, “Polish Workers and the Post-Communist
     Transition, 1989–93,” /Europe-Asia Studies/, June 1995)
   * *40% of young workers were unemployed in Poland in 2006* (page
     241. Source: Andrew Curry, “The Case Against Poland’s New
     President,” /New Republic/, November 17, 2005)
   * *59% of Poles had fallen below the poverty line in 2003* (pages
     241-242. Source: Przemyslaw Wielgosz, “25 Years of Solidarity,”
     August 2005.)


Elsewhere, the Cato paper claims that, “Klein never provides the reader with any data over a longer period. She… never once admits that Chile is the social and economic success story of Latin America and has virtually abolished extreme poverty.” In fact my economic analysis of Chile covers a 34-year span and I provide facts and data that directly challenge the claim that the country is a free market success story. Here is a relevant passage (pages 104-105):

   “The only thing that protected Chile from complete economic collapse
   in the early eighties was that Pinochet had never privatized
   Codelco, the state copper mine company nationalized by Allende. That
   one company generated 85 percent of Chile’s export revenues, which
   meant that when the financial bubble burst, the state still had a
   steady source of funds…. By 1988, when the economy had stabilized
   and was growing rapidly, 45 percent of the population had fallen
   below the poverty line. The richest 10 percent of Chileans, however,
   had seen their incomes increase by 83 percent. Even in 2007, Chile
   remained one of the most unequal societies in the world—out of 123
   countries in which the United Nations tracks inequality, Chile
   ranked 116th, making it the eighth most unequal country on the list.”


*A Massacre of Straw Men*

Most of the attacks on /The Shock Doctrine/ involve manufacturing claims, falsely attributing them to me, then handily tearing them down. For example, Jonathan Chait telescopes my point about Donald Rumsfeld’s holdings in the Disaster Capitalism Complex like this: “Donald Rumsfeld maintained his stock in Gilead Sciences, which holds the patent for Tamiflu, even while serving as defense secretary. Get it? Rumsfeld would stand to profit from a flu pandemic. But surely you don’t have to be an admirer of Rumsfeld to doubt that he would engineer an outbreak of a deadly virus in order to fatten his stock portfolio.”

Actually, that is the plot of the movie /V for Vendetta/; it has absolutely nothing do with my book. What I do write about is how the Pentagon, under Rumsfeld’s leadership, stockpiled Tamiflu and Rumsfeld stood to profit as the value of the stock increased by 807 per cent. On pages 394-395 I write:

   “For the six years that he held office, Rumsfeld had to leave the
   room whenever talk turned to the possibility of avian flu treatment
   and the purchase of drugs for it. According to the letter outlining
   the arrangement that allowed him to hold on to his stocks, he had to
   stay out of decisions that ‘may directly and predictably affect
   Gilead.’ His colleagues, however, took good care of his interests.
   In July 2005, the Pentagon purchased $58 million worth of Tamiflu,
   and the Department of Health and Human Services announced that it
   would order up to $1 billion worth of the drug a few months later.”

There are many more straw men propped up in the Cato Institute paper. Most involve vastly inflating the role I attribute to Milton Friedman. And no little wonder. Other than the University of Chicago economics department, Cato is the institution most intimately aligned and associated with Milton Friedman’s radical theories. Among other tributes, every two years, Cato hands out the Milton Friedman Prize for Advancing Liberty, worth half a million dollars. (This year it went to a 23-year-old Venezuelan student activist to further his opposition to the government of Hugo Chavez). Since Friedman continues to serve as Cato’s patron saint, it has much to lose from a diminishing of Friedman’s reputation, as well as a direct interest in exonerating him of all crimes, real or imagined.

Here are a few more examples. The Cato paper claims that I put the entire blame for Pinochet’s economic policies on the shoulders of Milton Friedman – then “proves” that his direct involvement was minimal. Once again, I make no such claim. I do devote considerable space – roughly 60 pages -- to describing the impact of a U.S. State Department program that brought more than one hundred Chilean students to the University of Chicago as part of a deliberate effort to export free-market economic ideas to Chile. This is the program that gave birth to the infamous “Chicago Boys” of Chile, several of whom were actively involved in planning the Chilean dictatorship’s economic program before the 1973 coup even took place. Amazingly, the Cato paper makes absolutely no mention of this academic program in its effort to exonerate Friedman personally. The writer either missed 60 pages of my book, or deliberately chose to ignore them.

The greatest challenge in responding to the Cato paper is the scope if its dishonesty. Consider this one passage:

   “Klein also blames Friedman and Chicago economics for the actions of
   the International Monetary Fund during the Asian financial crisis
   and the Sri Lankan government’s confiscation of the land of fishing
   families to build luxury hotels after the tsunami. Yet the fact is
   that Friedman thought that the IMF shouldn’t be involved in Asia,
   and he held that governments should be forbidden from expropriating
   property to give it to private developers. Of course, Klein could
   argue that Friedman was in some sense a source of inspiration for
   those policies, even though he was opposed to them. But she doesn’t
   do that. She pretends that he agreed with them, and that that is
   what he and other Chicago economists wanted all along.”


Absolutely everything in this passage is wrong. I never say Friedman favored the IMF bailout in Asia, quite the opposite. On pages 335-336, I report that, “Milton Friedman himself, now in his mid-eighties, made a rare appearance on CNN to tell the news anchor Lou Dobbs that he opposed any kind of bailout and that the market should be left to correct itself.” In what way could this constitute “pretending” that Friedman supported the bailout?

I also freely acknowledge the fact that Friedman opposed the IMF on principle. However, as with Pinochet’s government in the seventies, I also document that the IMF, at the time of the bailout, was packed with ideological Chicago Boys – a very different point than claiming the IMF was taking orders from Friedman. On page 202, I directly address this apparent contradiction:

   “Philosophically, Milton Friedman did not believe in the IMF or the
   World Bank: they were classic examples of big government interfering
   with the delicate signals of the free market. So it was ironic that
   there was a virtual conveyor belt delivering Chicago Boys to the two
   institutions’ hulking headquarters on Nineteenth Street in
   Washington, D.C., where they took up many of the top positions.”

/The Shock Doctrine/ has room for this kind of complexity because it is not – despite what Cato claims – a book about the actions of one man. It is about a multifaceted ideological trend that has successfully served the most powerful corporate interests in society for half a century.

Furthermore, I never wrote, as Cato claims in that same passage, that Friedman had anything to do with “the Sri Lankan government’s confiscation of the land of fishing families to build luxury hotels after the tsunami.” His name does not appear once in my 25-page chapter on the tsunami. Once again, to write that I “pretend” that Friedman is advocating these policies is pure fabrication. Furthermore, all of these inventions and misrepresentations appear in a single paragraph. The Cato background paper is 20 pages long and is comprised of dozens and dozens of equally dishonest paragraphs. Subjecting them all to this kind of rebuttal is simply too time consuming; my full rebuttal is the book itself.

*Go to the Source*

Thanks to a fantastic team of researchers, especially my incredible research assistant Debra Levy, /The Shock Doctrine/ has withstood a year’s worth of intense media scrutiny in dozens of countries. It is not unscathed, but it has emerged in better shape than I dared hope. When errors are discovered, we immediately correct them in future editions and post a correction <http://www.naomiklein.org/shock-doctrine/resources/corrections-clarifications> and an explanation on the book’s website. So far there has been only one significant error discovered, related to the profits earned from Dick Cheney’s Halliburton stocks. It was immediately corrected. Readers of /The Shock Doctrine/ know that this is but one of many examples that make the same point about conflicts of interest in the Bush Administration; indeed I devote an entire chapter to the topic. And this is the benefit of a methodology that is grounded not in anecdotes but in thousands of sourced facts and figures: the thesis does not rise or fall on any single example.

As to my critics’ charge that I am selective in my use of quotations, that’s a danger for any writer. It is also why Debra and I launched the “resources” section <http://www.naomiklein.org/shock-doctrine/resources/chapter-resources> of the book’s website. On this page, readers can access dozens of original reports, letters and studies that make up some of the key source material for the book. If you are concerned that I am exaggerating Friedman’s support for the brutal regime of Augusto Pinochet, read a letter Friedman wrote to Pinochet <http://wwww.naomiklein.org/files/resources/pdfs/friedman-pinochet-letters.pdf>. If you are suspicious that I am making disaster capitalism seem more conspiratorial than it is, read the minutes <http://www.naomiklein.org/shock-doctrine/resources/part7/cha%0D%0A%20pter20/pro-market-ideas-katrina> from a meeting that took place at the Heritage Foundation just two weeks after the levees broke in New Orleans. It lays out 32 “free market solutions” for Hurricane Katrina and high gas prices, many of which have been championed by the Bush Administration.

The thesis of /The Shock Doctrine/ was not born of whimsy but of four years of research. Debra and I put these documents online because we want educators, students and general readers to move beyond an admittedly subjective version of history – as all histories are -- and go straight to the source. We invite you to explore these documents, send us ones we missed, and come to your own conclusions.

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