The consequences of the just energy transition (JET) experimentation could be vast for South Africa and its future. However, nothing is surprising about the broken test tube economic experiment. Two most significant events are relevant in explaining and contextualising the darkness that covers South Africa like a sheet of clouds, i.e., the Morgenthau Plan and the structural reform programmes (SAPs) of the Bretton Woods institutions in the 1980s.
In the aftermath of WWII, there was a plan by the victors under the leadership of the United States to de-industrialise German and Japan by turning them into agrarian societies. The American Morgenthau Plan of 1944 was first introduced in 1944 but only accepted in 1947. Therefore, it is necessary to understand the intricacies of this destruction plan, which was quickly replaced with the Marshall Plan in 1948.
From the word go, the formation of a united Germany in 1871 was received with suspicion. This cold treatment would define its relations with its European neighbours in Czarist Russia, France and the United Kingdom. However, the new state succeeded greatly by recording high economic growth, rapid industrialisation, and increased military power. This phenomenal rise pointed to one thing by 1900: Germany would surpass its neighbours in terms of industrial production.
Unfortunately, Germany was involved in the event that helped its competitors to get even the First World War. Its defeat provided an opportunity to annihilate the industrial power. It was blamed for starting the war and later made to pay reparations to the Allied Powers. The Treaty of Versailles (signed in 1919) and the 1921 London Schedule of Payments required Germany to pay 132 billion gold marks for causing the war and to cover civilian damage. UK’s principal representative to the Conference, John Maynard Keynes, resigned in June 1919 in protest at the size of reparations.
Germany’s World War I debt was so destructive that it took ninety-two years to pay off. With too much back and forth, which included the economic collapse, the Weimar Republic could not afford the instalments. Then Adolf Hitler rose to power and immediately cancelled all payments in 1933. Historian Felix Schulz states, “Hitler was committed to not just not paying, but to overturning the whole treaty.” Nevertheless, the German economy stabilised under Hitler and experienced an upward trajectory matching the previous levels.
The Second World War was a German response to the poor treatment of 1919 and drew the likes of the US, which participated in the pretext of enforcing the treaty, restoration of peace and saving the Jews. The truth, however, is that America not only knew about the gregarious abuses but was also complicit to them. Thus, the goal of US entry into the war was envy and to destroy Germany once and for all.
Fast forward, the war ended, and Germany was defeated again. With the Americans emerging as the new stars in the global scene, they took it upon themselves to mete out punishment on the Germans, and that is how the Morgenthau Plan was born in 1944. Under Henry Morgenthau Jr, the US Treasury Department developed the plan. Its author was Harry Dexter White. White envisioned “the creation of a new world order based on the alliance between the USA and the USSR”. He also foresaw the elimination of Germany altogether.
Interestingly, though, the US Treasury Department was also the brains behind the Bretton Woods Conference in 1944 to shape the post-war monetary order. Economist Antony Mueller suggests that “the Morgenthau Plan and the design of the international financial system as agreed upon at the Bretton Woods conference must be seen together.” Franklin Delano Roosevelt had very serious hegemonic aspirations, including eliminating Japan and Germany as rivals and Britain’s role as a colonial maritime power.
Morgenthau’s plan had been kept secret but later became known to the public through the publication of his book “Germany is our Problem” in 1945. He dreamt of Germany’s transformation “into a country that is mainly characterised by agriculture “. Therefore, there was a need to decimate Germany’s heavy industry and especially the relevant factories to undermine its industrial potential by halving the production level of 1938. Morgenthau believed that “the Germans’ road to the peace leads to the farm.”
The plan to destroy Germany entailed seven points, i.e., demilitarisation, division of the country, internationalisation of the Ruhr area, compensation and reparations payments, de-industrialisation of the German economy, educational reform and re-education, and redesign of the political system. The plan was discussed at the second Quebec Conference in 1944, where British PM Winston Churchill partly approved it because he preferred a united Europe that would include Germany.
The plan was dropped in 1947 for several reasons, e.g., opposition in the US, imminent geopolitical rivalry between the US and the Soviet Union and threat to Europe’s prosperity. There were fears that “it was only a matter of time before Western Europe would fall under Soviet dominance after Eastern Europe”. The truth is that Morgenthau didn’t care much about Japan, but the advent of the so-called Cold War meant that the Rising Sun would be spared. The West was not going to be able to compete on an equal footing with the Soviet Union, with underdeveloped Japan in tow.
Therefore, Germany and Japan were given a chance to develop through the Marshall Plan for political reasons – there was a need to showcase Western capitalism as a better alternative to communism. The Marshall Plan was extended to other countries in SE Asia to compete directly with Soviet outposts in the People’s Republic of China, Vietnam, and North Korea. But for the Marshall Plan to succeed, the newly industrialising nations would require cheap resources; that is how particularly Africa was drawn in. Africa and the rest of the Third World were given a Morgenthau Plan and forbidden to industrialise.
Besides the proxy wars fought in the continent, the de-industrialisation process of African countries, also called “Africanisation”, picked up pace when the Bretton Woods institutions, i.e., the World Bank and International Monetary Fund (IMF), introduced structural reform programmes (SAPs) in the 1970s to the 1980s. Erik S. Reinert of the Norwegian-based The Other Canon Foundation claims that “Morgenthau Plans, after years of neglect, were resurrected by the Washington Consensus starting in the 1980s and, even more strongly, after the end of the Cold War in 1991”. Suddenly, economics was heavily weaponised and became part of the Cold War propaganda based on the theory that the market produces automatic harmony.
Leading economists championed the cause of neoclassical economics. Economic liberalisation became the mainstay of their arguments for government policies that promote free trade, deregulation, elimination of subsidies, price controls and rationing systems, and, often, the downsizing or privatisation of public services. Among others, they made a case for open trade by saying that if a rich country signs a free trade deal with a poor country, the productivity of the impoverished country will increase quickly.
Their arguments, especially the work of US economist Paul Samuelson, formed the basis for the economic policies of the Washington Consensus – the basis for the economic policies imposed by The World Bank and the IMF on developing countries. African scholars like Thandika Mkandawire and Samir Amin wrote extensively about Africa’s de-industrialisation and how it created its current socio-economic problems. In short, Africa was turned into a pastoral society through the Morgenthau Plan (SAPs) and was seen as good enough to fuel the world with resources and nothing more. On the other hand, Japan and the Asian Tigers benefited from the Marshall Plan, which accelerated their development and industrialisation.
Interestingly, the third version of Morgenthau’s plan is currently being implemented in developing countries using climate change and its superfluous agenda that has the hallmarks of destruction and destabilisation. What started as lame concerns for the earth and its resources turned out to be an economic plot to sink the developing countries. The long road from Rio de Janeiro to Kyoto and, eventually, Paris delivers a new economic agenda that could have serious ramifications for South Africa, its people and its economy. Not to sound unreasonable, but Gwede Mantashe is not dreaming and is also not a “coal fundamentalist”. Morgenthau Plan III is in motion.
At the COP27 held in Sharm El-Sheikh, Egypt, South Africa unveiled its Just Energy Transition Investment Plan (JETP) valued at R1.5 trillion. The JETP outlines a roadmap to decommission coal-fired power stations and launches new renewable energy generation capacity. France’s Emmanuel Macron dubbed the plan a “benchmark”, and his EU counterpart Ursula von der Leyen remarked that it was an excellent initiative for accelerating a just energy transition in other countries. US Secretary Treasury Janet Yellen equally sang praises for the plan. Unfortunately, the South African population blinks in the dark.
The so-called world community hyped the ’new’ South Africa as the best thing ever to happen to humankind. A safe passage was secured for the perpetrators of grievous harm under apartheid. Their property and wealth were properly ring-fenced as a mockery to the newly found liberation of the previously oppressed native majority. Billions of dollars left the country with the corporations that were complicit in green investments’ exploiting the country, people and resources. The massive capital outflows in the 2000s and the hoarding of wealth dampened the ‘miracle’ as poverty levels grew. South African exceptionalism was cut short, and millions live in despair.
Like in the rest of Africa, the democratic government is to blame for ‘taking the country to the dogs’. At first, South Africa believed it was unique and embraced human rights propaganda. It was more than convinced it could be a critical stabilising actor in a broken and fragile geopolitical system that had just emerged from debilitating US-USSR rivalry. But the truth is, many people’s views in Western policy circles never saw things the same: South Africa was junior in the relationship and was a place to be exploited. The dominant Western force was interested in accessing the market and creating trade barriers.
The Western propaganda machine comprising governments, academics and civil society circled South Africa and leveraged its position. Besides drawing South Africa to the high table in platforms like the UN, G20 and sporting bodies, now climate change policy is focused on convincing South Africa that climate change is real and that its use of coal is irresponsible. The claim is that South Africa is one of the world’s biggest greenhouse gas emitters since more than 70% of its electricity is generated by coal. The focus on getting South Africa to adopt more stringent CO2 reduction commitments is based on the view that the country does not understand the long-term costs of its energy mix to itself and the world at large.
The climate talk is now new economic speak championed by the Western governments, UN, WEF and the Bretton Woods. It is about convincing South Africa to shift away “from coal toward low- carbon energy sources (mainly renewables), already the least costly option for South Africa due to its ageing and unreliable coal power plants”. The narrative is that when the country invests in renewables, it will increase the electricity supply and eliminate costly loadshedding. Much like the
SAPs, the renewables logic is currently being exposed as a farce. No country can survive without a stable baseload.
Even when the fragilities of renewables were exposed after the natural gas supply from Russia became real, the Western powers and their institutions ramped up their misinformation drive through the bogus JET philosophy. As per the JET perspective, the country’s competitiveness in global markets would improve by reducing the carbon intensity of its exports. This is notwithstanding the fact that industries are operating below capacity due to gripping loadshedding and other supply-side challenges. The signs are written all over that the South African economy is being strangulated. There is no inward investment amid loadshedding, and everyone talks about ‘green investments’, the phraseology that sounds like economics.
Western countries have introduced a carbon tax at the border to pressure countries like South Africa, which could impact their exports that already rely on one-sided trade preference programmes such as the African Growth and Opportunity Act (US) and GSP+ (EU). The push for dumping coal is laced with crocodile tears: it is said that South Africa’s benefit would be lower air and water pollution, which would reduce the risks of early deaths and improve workers’ health and productivity. Yet, the energy crunch in Europe resulted in massive coal exports to places such as Germany and The Netherlands surged by 582.7% in September 2022.
The World Bank’s Country Climate and Development Report released in October 2022 estimated that the JET programme in South Africa could create as many as one million jobs from 2023 to 2050. The jobs bloodbath currently taking place due to energy supply challenges is seen as temporary. Jacques Morisset and Mariano Salto of the US-based think-tank Brookings Institution propose that “South Africa will need to implement both adequate safety nets and active labour programs to mitigate negative impacts on dismissed workers and local communities”. Hence, the World Bank and the IMF overload South Africa with loans. This is in addition to the massive loan announced at COP26 to close the financing gap for just transition.
With all said, we could be in more serious trouble than we think.
Nobody knew their destructive intent when the World Bank and IMF rolled out (SAPs) in the 1980s. Only after the storm had passed and people were picking whatever remained from the debris they realised the impact of the SAPs. Countries were left barren since economies had been destroyed, poverty and inequalities had escalated, and living standards had substantially deteriorated. African, Latin American/ Caribbean and some Asian countries were adversely affected, and many continue to struggle until this day.
The JET phenomenon has all the markings of the SAPs and Morgenthau’s plan. Guess what? In a few years, South Africa will be recorded as an experiment that went horribly wrong.
Siya yi banga le economy!