White monopoly capital: Fighting propaganda with propaganda

THE answer to claims that business is evil is not to claim, absurdly, that business is wonderful.

The unrelenting barrage of criticism against white monopoly capital is getting to someone.

If nothing else, it is creating work for consultants to fight off the other side’s consultants.

Business Leadership SA (BLSA) has belatedly risen to the challenge and has commissioned at least three pieces of research to try to demonstrate that “business”, and more specifically its own membership, is not a destructive antisocial force.

Along the way, a number of factual economic debates are being conflated with political disagreements.

Consultancy Intellidex compiled two of the BLSA reports this year.

One was meant to disprove the persistent allegation that corporations in South Africa are on an “investment strike”.

The second, which was released in November without much fanfare, was meant to dispel a number of additional “myths” about capitalism in South Africa.

These alleged myths are that business is rent-seeking, white, ineffective at job creation and investment, and prone to sending profits abroad.

The report avoids the term monopoly capital, but anyone who gives the concept the time of day would have to agree that it describes the BLSA membership, give or take the white part.

The BLSA got another consultancy, Quantec, to prepare a report last month, which was meant to show how large and important the member companies of the BLSA are for South Africa.

Somewhat embarrassingly, a lot of the economic impact the BLSA brags about when it comes to investment stems from Eskom and Transnet – both state-owned enterprises and both “suspended” from the BLSA due to mounting evidence of large-scale corruption.

The two state-owned enterprises’ contributions to capital formation in 2016 was R90bn – more than all other BLSA members combined.

Eskom’s output of R155bn was, by far, the largest of all BLSA members.

This doesn’t really mean much, other than that being big does not make you virtuous.

The problem with the BLSA reports is that they try to counter a narrative that business is somehow inherently evil with a narrative that business is somehow inherently good.

The “myth” that business is selfish is countered by pointing out that companies pay taxes, which conflates not breaking the law with being generous.

The report also points towards corporate social investment, which is estimated to have been in the region of R8.6bn last year.

It quickly passes over the fact that, in real terms, this has been languishing and, in fact, falling over time.

Intellidex admits that the “myth” about sending profit abroad is actually true – but at least getting less true over time.

Dividends being sent overseas are double the dividends flowing to South Africa from investments abroad.

In 2016, South African companies sent more than R110 billion in dividends abroad, while the country received about R60 billion from foreign investments.

This has been the case ever since the “externalisation” of the major conglomerates, such as Anglo American, in the 1990s.

The bright side is that the outflow used to be four times larger than the inflow, said Intellidex.

This is one of those ironic benefits of the falling value of the rand.

Foreign profits now simply translate into more rands than they used to. That’s great, but it does not reflect on the morality of big business – one way or the other.

As for the other “myths”, the question of investment remains seemingly impossible to resolve with facts.

Intellidex, on behalf of BLSA, said it was a “myth” that businesses did not reinvest in South Africa.

Its report points towards the gross fixed capital investment in South Africa of R853.6bn last year.

This is three times more than in 1994 in real terms.

One vociferous critic of the South African business community calls this “amazing arrogance and ignorance”.

Patrick Bond, distinguished professor of political economy at the University of the Witwatersrand, attacked the report for deliberately choosing a misleading metric that overstates private investment.

The proper measure of investment is both inflation adjusted and set against the size of the economy, said Bond in his occasional Progressive Economic Network newsletter.

By this measure, fixed capital formation in South Africa is currently what it was in the 1990s.

More importantly, Intellidex’s figure includes the public sector, he said.

Intellidex’s real argument is, however, that low investment relates to a lack of attractive investment opportunities.

If you accept that, there is not much point in quibbling about the actual level of investment as a measure of patriotism.

Nor does it make sense to try to dispel as a “myth” the fact that private companies are not investing a lot in South Africa.

The centrepiece of the BLSA report is, however, the long and defensive argument that business is not corrupt.

“There is a narrative that business is just as corrupt as those implicated in state capture.

"This is a propaganda strategy known as false equivalence, which is designed to undermine the credibility of established business when it speaks out against instances of corruption,” said Intellidex.

Anyone who has spent time on any of the Gupta-defending “news” sites can attest that at least half of this assessment is true.

There are, however, problems with the other half.

The propaganda war has largely focused on discrediting media and political opponents of the president – such as Pravin Gordhan – by associating them with big business.

That is different from saying that “established” business is being undermined.

More importantly, the report makes an extreme version of the “bad apple” defence.

Any company that is fundamentally corrupt is in fact not a real company, it seems to argue.

Without mentioning names, the report is saying that Gupta family vehicles such as Oakbay Investments are not normal companies subject to the mostly ironclad rules of accountability that govern the private sector.

It is a pity that the Steinhoff debacle happened two weeks too late to be considered in this analysis.

It is both established and, evidently, built on accounting fraud.

The term “white monopoly capital” was catapulted into the national consciousness by a propaganda campaign in defence of the Gupta family’s businesses.

Marxist economists grew hoarse trying to remind people that the term predated disgraced UK public management firm Bell Pottinger’s twitterbots.

The worst thing about the white monopoly capital propaganda campaign is that it has strangled yet another exceedingly useful set of concepts from outside the mainstream of economics by putting a tinfoil hat on it and associating it with conspiracy theories.

The two American economists who literally wrote the book on monopoly capital, Paul Baran and Paul Sweezy, had in mind a form of capitalism that makes bad and irrational decisions about where and how to invest its resources.

Examples at the time they wrote included the famous US “military-industrial complex”, as well as the US automotive industry of the time and its massive investment in oversized fuel-guzzling vehicles, effectively subsidised by state spending on superhighway networks instead of public transport.

We need these kinds of concepts to interrogate our economy and those who talk about or on behalf of it.

The important question is not whether “South Africa” gets the profits, but rather who in South Africa, or abroad, gets the profits.

Are the profits inordinate? Do they drive inequality?

Do they come at too great and unsustainable a cost to people or the environment?

A non-propagandistic application of a concept like monopoly capital has to consider the actual problems with corporate behaviour, not just the fact that companies are big.

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