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Trade war or capitalist crisis, again?

Jul 22 2018 11:41
Chris Maxon

In recent weeks, we have been silent spectators of the three-sided spat led by US President Donald Trump with tweets against China and European countries on what is termed a “trade war”. This could plunge the world’s economy into another deep slump.

Many have seen this as a declaration of war – a trade war – through Twitter by Trump. The tweets represent an extremely serious and dangerous trend for the world’s economy, especially for developing economies such as those in Africa. This row could very easily escalate and send the capitalist world into a deep depression, as happened in the 1930s. Investors and governments are rattled, to say the least.

What worries me the most is the silence of our leaders in Africa every time the elephants decide to have a go at each other. Writing in The Guardian (March 7 2018), Afua Hirsch suggests: “What Africa needs is an African Trump: an ‘Africa first’ leader who is not afraid of rubbing the rest of the world up the wrong way, someone willing to rip up traditional alliances, forgo historic links, forge a united and common purpose among Africa’s diverse nations, and then make their own needs – unambiguously – the priority.”

Africans can take matters into their own hands.

Lanre Akinola, editor of African Business, told Hirsch: “It’s not up to Brussels – we know the playing field is not level.”

Countries like Brazil show how dramatically a food importer can turn itself into a major exporter through policy, research and investment in the sector.

In March, referring to the increasing possibility of a trade war between the US and China, Trade and Industry Minister Rob Davies said he was sure that South Africa wasn’t in any country’s sights in such a war. Nevertheless, we could suffer considerable collateral damage.

The most direct harm to South Africa could come from Trump’s new import tariffs on steel and aluminium. Last year, South Africa exported about $375 million (R4.7 billion) worth of aluminium and $950 million worth of steel to the US. The new tariffs would override the duty and quota-free access that South Africa has to the US market under the African Growth and Opportunity Act. The likely loss of those sales because of the steep new import tariffs would seriously damage a few companies and cost thousands of jobs, Davies said.

However, the question that remains is, what are we truly dealing with?

Trump is not concerned about the effects elsewhere in the world – he is only concerned about US interests. His motto is “America first” and to hell with the rest of the world. As he said: “Trade wars are good.”

The International Monetary Fund recently rushed out a statement urging calm.

Its spokesperson, Gerry Rice, said: “The import restrictions announced by the US president are likely to cause damage not only outside the US, but also to the US economy itself, including to its manufacturing and construction sectors, which are major users of aluminium and steel.”

Brad McMillan, chief investment officer for the Commonwealth Financial Network, said: “This really could be a big deal. The net effect of the tariffs ... will be economic damage, higher inflation and greater geopolitical uncertainty.”

The proposition of these crises derives from the capitalist system being subject to periodic crises of overproduction, where the limited purchasing power of smaller markets (developing markets, in particular) collides with ever increasing expansion of the productive forces.

The capitalists overcome this contradiction by investing profits from the unpaid labour of the working class, which serves to expand the market. However, the increased investment simply results in greater productive capacity and the increased release of commodities for sale. As capitalism is motivated by the maximisation of profits, falling sales will result in falling profits, leading to a slump.

As it is, some of the strategists of capital are aware that another crisis is looming. But they have no way out because whatever they do will be wrong. Raising interest rates (as a potential way out) will make the debt burden intolerable. Those businesses reliant on cheap credit will go under. This itself could precipitate a new slump.

“Hope springs eternal in the human breast,” stated 18th-century English poet Alexander Pope. Truth be told, the capitalists are clinging to false hopes as if there is no way of avoiding the contradictions of the capitalist system. However, these are more like the ever present ghost of Lord Banquo in Macbeth that haunts them.

The current trade spat led by Trump reflects the impasse of the capitalist system. The private ownership of the means of production, together with the nation state, has become a massive barrier to economic development.

The most recent global financial crisis, which began in 2008, represented a fundamental turning point. It ushered in an epoch of crisis, turbulence and upheaval. It introduced austerity and massive attacks against the working class. This is the meaning of a capitalist crisis. The system can no longer afford the reforms of the past. Counter-reforms are now the order of the day.

If the “trade war” – actually, a capitalist crisis – occurs, it will have more savage and devastating effects than before.

Furthermore, millions will become politicised as they look for a way out of the crisis. There will be growing anger and bitterness in society, not only against the US or China, but also aimed at the rich and members of the establishment. This will be driven by the massive class polarisation within society.

Trump is a protectionist, but his actions only reflect greater historical forces at play. He is both a result of the end of the post-war trade consensus and another nail in its coffin.

In reality, his liberal opponents have no alternative to his policies. In fact, they seem inclined to cheer him on half the time. In the end, they only reflect the impasse of an economic system that should have been overthrown a long time ago.

Trump’s threats epitomise the crisis of the system. If he continues along this trajectory, all bets are off. As in the 1930s, the capitalist system will descend into a catastrophic downward spiral and will precipitate another wave of uprisings similar to the Arab Spring in 2011 in countries such as ours.

Africa cannot afford to remain silent and adopt a spectator role. We may not need an “African Trump”, but we definitely need our own Thomas Sankara, who pointed out: “We are not against progress [read: protectionism], but we do not want progress that is anarchic and criminally neglects the rights of others.”

While appreciating the progressive African Continental Free Trade Area, which will hopefully strengthen the continent’s appeal as a global trading partner, one must stop and categorically warn against the free trade agreement being the gateway for the dumping of cheap products across the continent. Our immediate task is to develop our productive capacity so that we truly become a “global trading partner” with our own offerings and products.

I believe we have the capacity, the key is to unleash it. It’s time for African leaders to adopt their own protectionist posture to protect the continent from parasitic greed that will lead to job losses and serious economic crises.

* Chris Maxon is deputy manager: advocacy, communication and social mobilisation at the KwaZulu-Natal department of health. He writes in his personal capacity.

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