Principles, strategies and tactics of decommodification in South Africa
By Patrick Bond
Patrick Bond is the author of two recent books: Unsustainable South Africa: Environment, Development and Social Protest and Fanon's Warning: A Civil Society Reader on the New Partnership for Africa's Development. Both are available from Africa World Press (http://www.africanworld.com). His 2001 book Against Global Apartheid: South Africa meets the World Bank, IMF and International Finance, will be republished by Zed Press this year, as will a new edition of Elite Transition: From Apartheid to Neoliberalism in South Africa from Pluto Press.
- Alliance for social policy
- Decommodifying municipal services
- Public goods and state services
- Should the rich pay more?
- A free lifeline
- Unsustainable development in Johannesburg
Just as corporations prepare their assault on the United Nations World Summit on Sustainable Development (WSSD), a new strategy is emerging in the host country, South Africa, from a post-apartheid upsurge of protest against worsening class and gender inequality.
The demand for a "lifeline" supply of water and electricity is being made from the townships of Soweto and other urban ghettos, to the many rural areas which have still not received piped water. The need for free access to antiretroviral medicines, for five million HIV+ South Africans, is also acute. Such demands, based upon the political principle of "decommodification", may also be the key to locking the door on services privatisation.
The verb decommodify became popular among progressives in part through studies of social policy conducted by Gosta Esping-Andersen, a Swedish academic. In his book The Three Worlds of Welfare Capitalism (Princeton University Press, 1990), he points out that during the first half of the twentieth century, the Scandinavian welfare state grew because of urban-rural, worker-farmer, "red-green" alliances that made universalist demands on the ruling elites.
Those demands typically aimed to give the working class and small farmers social protection from the vagaries of employment, especially during periodic recessions. They therefore allowed people to escape the prison of wage labour, by weaving a thick, state-supplied safety net as a fall-back position.
To decommodify their constituents' labour in this manner required, in short, that the alliance defend a level of social protection adequate to meet basic needs. Over a period of decades, this took the form of generous pensions, health care, education, and other free state services which, like child-care and elder care, disproportionately support and liberate women.
The electoral weight and grassroots political power of the red-green alliance were sufficient to win these demands, which were paid for through taxing wealthy households and large corporations at high rates. They were defended until recently, when corporate power and the ideology of competitiveness forced some cutbacks across Scandinavia.
A similar although much less far-reaching construction of welfare-state policies occurred elsewhere, in the context of a Cold War that required Western capitalism to put on a more humane face against the East Bloc and to maintain state spending, in the spirit of John Maynard Keynes, to boost economic growth.
In the postwar us, however, corporations lobbied against state entitlements such as health care and pensions, preferring to hold control over workers through company health and pension plans, which would then deter workers from going on strike. (The failure to decommodify labour helps to explain the durability of the us labour movement's pro-corporate-and often pro-imperialist-position, until it began shifting leftward in the mid-1990s.)
As the 1950s-1960s virtuous cycle of economic growth and expanding social policy came to an end, it was replaced by an era of capitalist neo-liberalism, which began during the late 1970s. This period of class war by ruling elites has been characterised by austerity-oriented economic policies, shrinkage of social programs, privatisation, trade and financial liberalisation, corporate deregulation, and what is often termed "the commodification of everything".
In a setting as unequal as South Africa's—with 45% unemployment and, alongside Brazil and Guatemala, the world's highest income disparities—the neo-liberal policies adopted during the 1990s pushed even essential state services such as water and electricity beyond most households' ability to pay. Some of these policies were adopted before political liberation from apartheid in 1994, but many were the result of influence on Nelson Mandela's African National Congress by the World Bank, US aid and other global and local neo-liberals during the late 1990s.
The Municipal Services Project, based at Johannesburg's University of the Witwatersrand and Queens University in Canada, does periodic local and national studies of water and electricity commodification (http://www.queensu.ca/msp). Of South Africa's 44 million people, approximately one quarter have had their water and their electricity disconnected in recent years. In many specific settings, the policy of full cost recovery has had devastating effects, as water cut-offs quickly caused an unprecedented cholera outbreak.
To illustrate, the centre of the ongoing cholera epidemic, with 200,000 victims, including more than 250 fatalities, was at Ngwelezane in KwaZulu-Natal, in August 2000. Two months later, the largest South African newspaper, the Sunday Times, reported:
This week, a startling picture emerged of the sequence of events that led up to the outbreak around Ngwelezane. Authorities discovered that some areas were still receiving free water in terms of a 17-year initiative of the former KwaZulu government to deal with the 1983/4 drought.
"It was eventually noticed, and it was decided to switch off the supply," said the chief executive of the Uthungulu Regional Council, B B Biyela. "The people were given sufficient warning and the supply was cut off at the beginning of August." The first cases indicating cholera were noticed in Matshana and Nqutshini in the second week of August. The first case confirmed was on August 19. At this point, health officials asked the Mhlathuze Water Board to reconnect the free water supplied by the former homeland government to the Nqutshini area.
The $7 connection fee imposed by Biyela, upon the instruction of higher authorities, was unaffordable for thousands of people. He cut off their water supply using a "pre-paid meter" self-disconnection strategy, thus saving a few thousand dollars—but costing the provincial KwaZulu-Natal health authorities and sick people millions of dollars.
This failure to fully calculate the social and environmental benefits of state services is typical of commodification, because when state services undergo commercialisation, the state fragments itself as water, electricity, health and other agencies adopt "arms-length" (non-integrated) relationships that reduce them to mere "profit centres". A company that takes a privatisation or outsourcing contract then has no qualms about cutting off the service to those who cannot afford to pay the full "cost-recovery" market price plus a profit mark-up.
It has no responsibility for the social and personal costs of cholera, diarrhoea, TB or other AIDS-opportunistic infections incurred by health clinics and the patients. It feels no guilt when women and children suffer most. It does not repair environmental damage when women are forced to cut down trees to heat their families' food. It pays none of the local economic costs when electricity cut-offs prevent small businesses from operating, or when workers are less productive because they have lost access even to their water and sanitation.
This ability to avoid the social implications of "public goods"—or as economists term them, "merit goods"—associated with water and electricity allows huge multinational corporations to make enormous profits by expanding infrastructure systems just to the point where low-income people live.
Usually this is a geographic decision, so that areas served by privatised services are noticeably "cherry-picked": wealthy consumers get the services, but poor people are denied access. Most of the pilot water privatisation projects in South Africa recreate the old apartheid boundaries of black townships. In one case, Stutterheim, the subsidiary of Paris-based Suez, has failed to supply the low-income areas since it won the water contract in 1993.
Resistance to the commodification of water and electricity often takes the form of a short-term inexpensive flat rate for all consumers. In Durban, community groups are mobilising for a $1 monthly fee for all municipal services, alongside an insistence that no one's supply be cut off. Even water minister Ronnie Kasrils conceded in early May that cut-offs due to inability to pay are probably unconstitutional.
For medium-range policy, a redistributive demand for decommodification is advanced by groups like the SA Municipal Workers Union, Rural Development Services Network and Soweto Electricity Crisis Committee: a specific minimal amount of water—50 litres per person per day—and electricity—1 kilowatt hour per person per day—to be supplied free. The free services should be financed not only by subsidies from central government, but also by a "rising block tariff" in which the water and electricity bills for high-volume consumers and corporations rise at a more rapid rate when their usage soars to hedonistic levels.
These demands, grounded in decades of social struggles to make basic services a human right, were originally given political credibility with the promise of "lifeline" services and rising block tariffs in the Reconstruction and Development Program (RDP) of 1994, the ANC's campaign platform in the first democratic election. They were partially incorporated in the 1996 Constitution, which guarantees that "Everyone has the right to an environment that is not harmful to their health or well-being ... everyone has the right to have access to health care services, including reproductive health care; sufficient food and water; and social security."
The World Bank immediately became the most effective opponent of this philosophical principle and political strategy, arguing that South Africa does not have sufficient resources to make good on the RDP or Constitution. Beginning by drafting infrastructure investment policy in late 1994, bank staff then played a self-described "instrumental" role in "facilitating a radical revision in South Africa's approach to bulk water management" in 1995, when the water minister, Kader Asmal, accepted advice not to supply South Africans with free water.
For Asmal, who from 1998 to 2000 served as chairperson of the World Commission on Dams, "The positions I put forward are not positions of a sell-out ... The RDP makes no reference to free water to the citizens of South Africa. The provision of such free water has financial implications for local government that I as a national minister must be extremely careful enforcing on local government."
It took a leap of logic to redefine the word "lifeline" to mean, not free, but instead the equivalent of "operating and maintenance costs"—also known as "full cost recovery". Under the influence of his own neo-liberal bureaucrats and the World Bank, Asmal's slippery semantic solution was applied with increasing ruthlessness during the late 1990s.
The main criticism of a free lifeline and rising block tariff offered by World Bank water official John Roome, the task manager of the controversial Lesotho Highlands Water Project, was that water privatisation contracts "would be much harder to establish" if poor consumers had the expectation of getting something for nothing. If consumers didn't pay, Roome continued, Asmal needed a "credible threat of cutting service".
This was part of the advice that the bank's 1999 "country assistance strategy" for South Africa termed "instrumental", and which was central to Asmal's 1998 water pricing policy. Technically, since the short-run marginal cost curve of water and electricity slopes downward—the higher the consumption, the lower it costs to supply each additional unit-the World Bank recommendation to "get the prices right" leads to the opposite slope for tariffs. In short, a private supplier objects to serving low-income people with even a small lifeline consumption amount.
Demands to reverse the government's full cost-recovery policy by labour and social movements were made during the late 1990s, and Asmal's mid-1999 replacement, Kasrils, began hinting at a policy change in February 2000, after rural water projects broke down at a dramatic rate—mainly because impoverished residents could not keep the vital service maintained by themselves without a subsidy, as Asmal had demanded.
When cholera broke out in August 2000, less than four months before nationwide municipal elections, the ANC government reacted by promising a free services lifeline. It was progress, although for poor households the promise was half the amount needed, and for electricity was undefined but in practice amounted to only a tenth of essential needs.
Roome and his colleagues saw Kasrils and the ANC's free-services promise as potentially dangerous. In March 2000, the bank's Orwellian "Sourcebook on Community Driven Development in the Africa Region" laid out the policy on pricing water:
Work is still needed with political leaders in some national governments to move away from the concept of free water for all ... Promote increased capital cost recovery from users. An upfront cash contribution based on their willingness-to-pay is required from users to demonstrate demand and develop community capacity to administer funds and tariffs. Ensure 100% recovery of operation and maintenance costs.
Social disasters from such rigid neo-liberal policy were strewn across Africa, especially when low-income people simply could not afford any state services, or cut back on girls' schooling or health care when cost recovery became burdensome. In October 2000, the World Bank was instructed by the US Congress never to impose these user-fee provisions on education and health care, and in 2002 a campaign by progressive NGOs in the US expanded to decommodify water as well.
In South Africa, since free water came into effect in July 2001 as official policy—notwithstanding widespread sabotage by municipal and national bureaucrats responsible for administering the policy—there have been no new water privatisations, in large part due to the fear that cherry-picking and supply cuts will be deemed unconstitutional.
Moreover, some of the major pilot cases have resulted in disaster. Saur had to renegotiate its Dolphin Coast contract in mid-2001 due to a lack of profits, with research showing that it regularly denies services to poor people. For similar reasons, Saur also pulled out of its Maputo, Mozambique, contract in late 2001. In the impoverished Nkonkobe area of the Eastern Cape, the mayor fired the Suez subsidiary late last year for failing to deliver affordable services, and the company is responding with a lawsuit for millions of dollars in damages.
The Johannesburg Water Company, also managed by Suez, is controversially introducing pit latrines in spite of porous soil and the spread of the E. coli bacteria, so as to avoid poor people flushing their toilets. Public health problems, including mass outbreaks of diarrhoea and even cholera last year, continue to embarrass officials in the WSSD host city.
Electricity privatisation also remains an acute source of conflict. The Soweto Electricity Crisis Committee continues to hold protests against politicians who insist that the imminent privatisation of the state electricity utility requires cut-offs of power to those who can't pay. One demonstration at the Johannesburg mayor's house in March led to the bodyguard shooting eight live rounds of ammunition into a crowd of non-violent protesters, eighty-seven of whom were then locked up. Fifty were denied bail for ten days, before being released in an incident now considered the first political imprisonment of neo-liberalism. The bodyguard remains at large, uncharged, while the Soweto protesters were to face the prosecutor in mid-August, just before the WSSD kicks off.
The other acute embarrassment for the South African government remains its fear of alienating international pharmaceutical companies. Hence President Thabo Mbeki maintains an "AIDS-denialist" posture, claiming that antiretroviral medicines are either too toxic or that they don't work.
The same spirit of decommodification has emerged from the Treatment Action Campaign and its international allies like ACT UP. But like water and electricity, it too has hit the barrier of transnational (and local) corporate power. When financier George Soros was asked about treating HIV+ South Africans in an April interview with the SA Broadcasting Corporation, he replied, "I think to provide treatment to the bulk of the people is just not feasible. I think to provide treatment for instance to qualified workers actually saves money, actually saves money for companies."
The interviewer responded, "Aren't you uncomfortable to talk in a way that is a kind of death sentence to those who we can't afford to treat?"
Replied Soros, "I think the cost of providing actual treatment to everyone at the present—I don't think it's realistic. It's not achievable."
Corporate capital and its policy managers at the World Bank have, it seems, decided that a large number of people are disposable. As Lawrence Summers once put it, "I think that the economic logic of dumping a load of toxics in the lowest-wage country is impeccable and we should face up to that".
The same spirit has apparently been imported into the WSSD, where privatisation of basic services is moving ahead at great speed. The WSSD chapter on Africa, which is known as the New Partnership for Africa's Development, was drafted by a team under Mbeki's direction, and also calls for a massive dose of foreign investment in privatised infrastructure.
Still, what the South African experience these last few years shows is that full cost recovery doesn't work and will be resisted, especially if combined with cut-offs of services. Those services create additional social welfare in the form of public goods, but only if they are not privatised, because only the state has a built-in incentive to use public services like water and electricity to promote public health, gender equity, environmental protection and economic spin-offs.
Not only do privatisers ignore public goods; they are also inevitably opposed to free lifeline supplies and redistributive pricing. Hence, as so many South Africans have learned these last few years, the fight against privatisation is also a fight to decommodify the basic services we all need, simply to stay alive. And by winning that fight, there is a chance that the state can be won over to its logical role: serving the democratically determined needs and aspirations of that huge majority for whom the power of capital has become a profound threat to social and environmental well-being.