Jane Duncan, Patrick Bond and Salim Vally
“We warned you!” Business journalist Rob Rose made this claim recently about the media’s reporting on the collapse of African Bank Investment Limited (Abil). He argued that the business press locally and globally had been “calling it right for ages” when it came to the financial crisis that has swept the world from 2008.
Rose also took issue with economist Trudi Makhaya’s recent warning that South Africa lacked meaningful economics journalism. He disagreed with her argument that the media were missing in action when it came to important debates, including failing to warn the public about the credit bubble that led to the 2008 crisis.
Academics still need to undertake the content analyses that either confirm or refute Rose’s claims about the Abil reporting. Rose is a highly experienced, award-winning economics journalist: one of the few who has been willing to take on the corporate sector with as much vigour as the government.
And let’s not forget that the South African corporate sector is the world’s gold medal winner in this year’s PricewaterhouseCoopers competition (the Global Economic Crime Survey). But shockingly, Rose’s colleague, former Business Day editor Peter Bruce, repeatedly endorsed dodgy dealings, such as the construction company price cartel and South African High Commissioner to London Obed Mlaba – in spite of his R3 billion tender hijack attempt while he was Durban mayor.
What should also set off alarm bells in readers’ minds is that Rose cites the University of Maryland’s American Journalism Review (AJR) analysis in support of his argument that the business media warned the public before the 2008 crisis that a bubble was developing.
Dean Starkman conducted a much more extensive content analysis of the agenda-setting financial media for the Columbia Journalism Review, and found the AJR’s analysis wanting. Its more comprehensive analysis showed there was a general system failure in the reporting on factors that led up to the financial crisis.
Starkman found that there were hard-hitting articles warning about a possible sub-prime crisis in the early 2000s. But in the crucial years leading up to 2008, the business media shifted their focus to consumer and investor-orientated stories that missed the bigger picture. When the media woke up to the enormity of the problem, it was too late.
“With all due respect to our cousins in Maryland, I find AJR’s approach − in effect, sticking a thumb into several years of coverage and pulling out some plums − inadequate … [Missing are] investigative stories that confront directly powerful institutions about basic business practices while those institutions were still powerful. This is not a detail. This is the watchdog that didn’t bark,” wrote Starkman.
This salutary lesson in the dangers of journalistic self-judgement should warn us against taking Rose’s argument at face value. The failure of the media before the 2008 recession is a symptom of a far more serious myopia in reporting on the economy. Perhaps the most serious problem is the reduction of economics journalism to business journalism.
This myopia was on full display in Rose’s own publication recently − the Sunday Times’ Business Times − which devoted a page to analysing the fact that South Africa’s economy was so fragile that it had only just averted a recession. The lead article blamed rising consumer costs and unemployment, as well as the strikes, as key contributors to the economy’s weakness, as these factors apparently led to contractions in both production and consumption.
The newspaper also profiled the views of three economists from Stanlib, Cannon Asset Managers and Econometrix, and described them as “three of the country’s leading economic thinkers”. One recommendation made was that South Africa needed to make it easier for companies to do business, and another was to improve the quality of education to heighten people’s employability and productivity, which would result in higher wages and fewer adversarial labour relations. The second recommendation echoed a much-favoured view in analyst circles − that education must be linked more directly to the economy to ensure the economy has access to the kinds of skills it needs if it is to grow.
The reduction of economics journalism to business journalism is problematic as it fails to understand the economy as a system of social relations and the abuse of power, including but not limited to crony capitalism. Business and labour journalism are pursued in silos, with the business silo being the much bigger and more well-resourced of the two. This silo-isation has led to economics journalism becoming skewed towards the business case.
In addition, the way for-profit activities impinge upon communities, women, youth, the elderly, disabled people, debtors and the environment are all subject to social resistance. Many of South Africa’s protests arise from the pursuit of profit, but these warning signs are also typically ignored, except when local disruptions occur. But journalists often shy away from investigating these as structural and systemic problems.
Economic actors who are outside the business realm, but who have knowledge that may problematise or even contradict the business case, can easily be branded as “non-expert” and therefore incapable of making meaningful judgements on the overall state of the economy. Furthermore, specialist knowledge about the labour movement and its contribution to society and the economy has been lost from many newsrooms.
Mainstream economists tend to focus on the circulation of money as their main unit of analysis, without considering the social conditions in which commodities are produced and exchanged. The narrowness of their focus allows them to ignore the fundamentally exploitative nature of the system, seen in the fact that the price of commodities does not represent the labour that went into them. There can be little doubt that labour in South Africa is grossly undervalued.
The assumption that strikes are driving South Africa towards a recession is problematic, yet it is parroted by the “experts” favoured by the business media. In making these arguments, they blame the victim. Workers cannot subsist on starvation wages. The rising cost of living is creating a layer of workers who are, quite simply, too poor to work. Their organic experiential knowledge tells them that the system is unworkable: to that extent, they too could be considered “experts”, albeit of a different type.
There are also economic arguments often ignored by superficial business journalists and the big banks’ and rating agencies’ economists. For example, they have generally failed to connect the dots between low “effective demand” that Keynesian economists cite for sluggish growth and low wages. In addition, they fail to assess the relationship between low wages, rising costs of living and consumerist aspirations that bombard the brains of each of us via advertising – to sky-high consumer indebtedness.
Yet over-indebtedness, compounded by extremely high interest rates, caused so many defaults that Abil just went out of business. How many articles did we see that assess this crisis from the standpoint of the desperate working class debtor and her or his family?
The business media are also awash with arguments that the costs of South Africa’s labour force are too high, which makes the country’s economy uncompetitive and unattractive to investors. These arguments ignore the massive contributions of women to the economy, through the unwaged work they perform in the home to bring up the next generation of labourers, and care for the elderly. When workers are underpaid, women are forced to increase their unpaid labour to compensate as the family is less able to afford basic services. But the business case for a more competitive workforce, and a deregulated labour market, is gender blind.
One reason is that economists measure gross domestic product (GDP) without any reference at all to women’s unpaid labour, to community work or other social activities. This kind of studied ignorance should be penalised; economists should be delegitimised until they correct these kinds of foundational errors.
The same is true for their treatment of nature – for example, our mineral resources – within orthodox GDP accounting. When our minerals are stripped from the soil, economists count this as only a GDP credit, not a debit to our historic pool of nonrenewable natural resources. A proper accounting of the wealth stripped from South Africa’s soil easily demonstrates that the net economic effect of our mining industry is negative. (Even World Bank economists were forced to recognise this point in their 2011 book The Changing Wealth of Nations.)
If workers were paid fairly, domestic demand would increase; but recently many business analysts have portrayed them as being unpatriotic hotheads intent on damaging the economy. This message is dangerous as it plays into the hands of more securocratically minded government officials who use the portrayal of strikers as destabilising actors to clamp down on strikes and protests and protect the “national interest”.
Granted, the business media have often criticised the financial sector harshly for this misdemeanour or that, but there has been scant focus on the systemic factors that give the banks and financiers so much power in South Africa and beyond. Economic financialisation per se is rarely criticised, even though economists like Seeraj Mohamed from Wits University, Ben Fine from the University of London and Samantha Ashman from the University of Johannesburg have demonstrated how much financialisation has degraded our economy.
The external orientation of South Africa’s economy is hardly criticised either: factors that created a toxic mix of massive capital flight combined with speculative inflows of “hot money”, leading us to a foreign debt-to-GDP ratio that is now nearly as high as it was in the debt-crisis year of 1985. As a result, the conditions that allow bank managers to sneer “fuck the poor” when their house of cards collapses remain unchallenged.
The property media have talked up housing as an investment prospect and a source of speculation rather than simply being a place to live. In the process they have contributed to a housing bubble in South Africa that has yet to blow. South Africa’s housing price rise between 1997 and 2008 was 389%, for example – twice as high as Ireland’s and four times higher than the United States. Few voices of sanity have prevailed in property journalism, with journalist-turned-media academic Reg Rumney being one of them.
Another ‘given’ that shines through in so much of what passes for economics journalism is that growth is assumed, unproblematically, to lead to redistribution. In reality, though, growth rarely trickles down to the extent that is needed; so rising tides do not necessarily lift all boats.
It is remarkable that as a result of this ideology prevailing in South Africa since the early 1990s, we have had a durable rise in the Gini coefficient. To say inequality was worse under apartheid than it is today is quite extraordinary – it should be a national scandal – but it is taken by economists and business journalists as just an unfortunate side effect of liberalisation and globalisation.
But as even the centrist Brazilian government has shown, much more generous public policy can change this lamentable outcome. Instead, the South African government uses a tiny fraction of its budget on social spending, leaving us fourth-worst of the 40 largest economies, according to the Organisation for Economic Co-operation and Development. That data you would never get from our conventional economists and journalists.
Even though our currency has crashed by 15% over a short period (a record seven times since 1994, with only Zimbabwe’s record being worse), somehow the business media consider the economic fundamentals to be sound. These fundamentals stand above ideology, while criticisms of these fundamentals by those who stand outside of this finance house-business journalism nexus are considered to be merely ideological. Neoliberal, financialised capitalism is taken to be the only game in town.
A legion of commentators, largely employed by financial institutions, tediously feed South Africans a daily diet of education-related market fundamentalism through the media. Their mantra is usually a permutation of the following clichés: “The labour market is too rigid and inflexible”; “We must be competitive and entrepreneurial”; “We need more skills”; “Education fails to provide young people with skills for employment”; “We need more investment and economic growth”; and “Labour unrest scares away investors”. These clichés are uncritically recycled by business journalists.
The general orientation of this discourse and the daily drone-like assertions of business journalism is the crude formulation that education and training on the supply side leads to skills, skills lead to employment, and employment leads to economic growth and hence jobs.
This lazy analysis is based on a raft of unjustified claims about the outcomes of education and skills in capitalist societies; that education and training is not simply a handmaiden for resolving the problems of low economic output; and that a wide range of factors and social relations circumscribe the potential value of education and training.
All too often, the relationship between education and the economy is understood through simplistic formulations and dogmatic assertions. In this view, the main proposition is that there is a great shortage of skills in South African society, which is accentuated in particular “critical areas of shortage” to make any possibilities for economic advancement unimaginable.
Another proposition is that the education and training system is hopelessly out of sync with the demands of the local and global economy. Still another is that the lack of skills is one of the greatest obstacles to achieving higher levels of economic growth, and that it simultaneously is the primary cause for low levels of productivity and a lack of international competitiveness, resulting in South Africa falling further behind relative to the economies of other countries.
These assumptions are imprisoned by the conceptual conservatism of a perspective that regards education and training simply as instruments of the labour market requirements of business. These assumptions are made despite the strong and seemingly instructive constitutional injunctions about the broader humanising and citizenship-related role of education and training systems.
The lineage of this instrumentalist perspective lays in an unproblematic approach to human capital theory and its successive incarnations in neoclassical economic thought whose premises, having had considerable purchase on policy and social analysis over a long period, are now de rigueur.
The value of education should be defined in socioeconomic, cultural and political terms, and not reduced solely to the needs of economic growth. Knowledge, skills and the competencies derived from education and training are of course critically important for all societies and the wellbeing of nations. But the reduction of their value to the needs of employers in a market-dominated economic system, to the exclusion of their wider societal purposes, is a serious limitation on their social role.
The relationship between education and the economy cannot be separated from a range of other social, economic, political and cultural conditions in society. The idea that there is a direct and positively causal connection between education and the economy obfuscates the reality that education is not synonymous with employability – that is, the possession of “knowledge”, “skills”, “competencies”, “attributes” and “understanding” that might be gained through education, and is not a guarantee of employment and participation in the labour market.
However, the political landscape is changing. The emergence of the Economic Freedom Fighters (EFF), the five-month strike of the Association of Mineworkers and Construction Union (Amcu), and the National Union of Metalworkers of South Africa (Numsa) movement for socialism, as well as community protests for cheaper and more accessible state services, offer the beginnings of an ideological contest in South Africa. But there is a mismatch between the ideas that circulate in society and the ideas that circulate in the media, and nowhere is this more evident than in economics journalism.
Economics journalism needs to wake up and smell the coffee. As things stand, the profession and its (usually economically comfortable) practitioners are apparently ill-equipped to relate to these recent developments, just as were professional economists when the crash of 2008 stunned the discipline.
It is not enough to sneer at the leftwing organisations and to accuse them of attempting to destroy the economy. For too many South Africans, the economy is already destroyed, including for those who – via Coronation with its massive pensioner account holders – inadvertently put their trust in Abil as the supposed bank for the unbanked.
Unless the media recognise the need for a genuine contest of ideas and diversity of opinions and start to speak to the economic experiences of the majority of South Africans, the media’s future could be bleak indeed. After all, relevance is the most important guarantor of sustainability – not closeness to where the wealth lies in society right now.
Salim Vally is the director of the Centre for Education Rights and Transformation, an associate professor at the Faculty of Education, University of Johannesburg and a visiting professor at the Nelson Mandela Metropolitan University. He holds degrees from the universities of the Witwatersrand and UKZN and has been a visiting lecturer at the Universities of Columbia, Virginia, York and Fort Hare. He continues to publish extensively while agreeing with Howard Zinn that “most academics publish while others perish” and therefore continues with his abiding interest in linking academic scholarship with societal concerns, community participation and global solidarity. He spends an inordinate amount of time attempting to convince his peers and community activists to collaborate on socially engaged research. His academic interests include education and social policy as these relate to social class, transformation, social justice, human rights and democracy, critical and liberatory pedagogies and extensive involvement in participatory action research and trans-disciplinary and comparative approaches to critically examining education policy and practice. Vally has recently co-edited a book titled, ‘Education, Economy and Society’ with Enver Motala (Unisa Press, 2014).
Patrick Bond is senior professor of development studies and directs the University of KwaZulu-Natal Centre for Civil Society, and recently authored Politics of Climate Justice (UKZN Press, 2012) and edited Durban’s Climate Gamble (Unisa Press, 2011). Other books include Elite Transition, Unsustainable South Africa, Looting Africa, Against Global Apartheid, Zimbabwe’s Plunge and Talk Left Walk Right.
This article is a longer version of a piece that appeared first on the South African Civil Society Information Service website (sacsis.org.za)