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      How the US student loan debt crisis started — and how it could end

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      How the US student loan debt crisis started — and how it could end The $1.8tn debt has become a hot political issues as midterm elections approachAmerica’s students have a debt problem. A big one. More than 45 million Americans – more than the population of California – now owe a collective $1.7tn in student debt.What to do about that debt has become a hot political issues as midterm elections approach.The vast majority of the money is owed to the federal government, which has been backing or directly offering student loans for higher education since 1958. While student loans are not new in the United States, the amount of student debt has more than tripled over the last 16 years.The Biden administration has recently hinted that some form of student debt forgiveness could be announced soon – specifically, canceling at least $10,000 in student debt for Americans earning less than $125,000 a year. With that threshold, most student loan borrowers will qualify for some debt forgiveness.If the executive action is undertaken, it will be the first large debt cancellation by the federal government to address the student debt crisis. Understanding the impact of such a dramatic policy requires unpacking the student debt crisis, beginning with its origins.How the student debt crisis startedIn 1957 the Soviet Union successfully launching the first earth-orbiting satellite, Sputnik. With the cold war raging the federal government feared the US education system was failing to produce enough scientists and engineers to compete with the Soviets and, in 1958, started handing out student loans through the National Defense Education Act.Nearly a decade later, the Higher Education Act of 1965 allowed more people to take out loans as the federal government promised to pay back banks for any loans that were not repaid.“It all started from this choice, which I think was a terrible choice, to decide that as a policy matter we should support higher education … by giving [students] an opportunity to get a loan,” said Dalié Jimenez, professor of law and director of the Student Loan Law Initiative at the University of California at Irvine. “It was just a terrible mistake.”Starting in 2010, the federal government started directly lending money to student borrowers. In the wake of the Great Recession, the amount of student debt began to increase rapidly. Colleges were seeing increased enrollment as people left the workforce to go back to school. States slashed their higher education budgets, leading to higher tuition. More students were turning to for-profit colleges, which tend to be more expensive than public colleges.Over the last few years, the amount of grant aid, which does not need to be paid back, has risen. Yet despite this appearance of more financial support for students to attend college, the cost of attendance has remained the same.Two line charts comparing the gap between the listed price and what it actually costs to attend public and non-profit private institutions.The cost of attending public college has actually increased at a higher rate than the cost to attend a private college. The net cost of attendance for four-year public colleges, which takes into account any grants students receive, went from $17,500 in 2006 to $20,210 in 2016, according to data from College Board.Line chart of the costs of public and private non-profit increasing and then slightly decreasing from 2006-07 to 2020-21 school years.“That era 10 years ago was a really formative moment for producing a lot of debt that’s still out there,” said Kevin Miller, associate director for higher education at the Bipartisan Policy Center’s Economic Policy Project. “The cost of college attendance has gone up a lot while household incomes in the United States haven’t … there’s a real sense that if grant, state or institutional aid isn’t filling the gap, that just leaves debt as the only option.”What student debt looks like todayFor the 2021-2022 school year, the average cost of tuition and fees for a four-year public college is $10,740. The cost is nearly quadrupled for private institutions, at an average of $38,070. Even with grant aid, the cost of attendance is an average of $19,230 for public institutions and $32,720 at private schools.Estimates put the average debt of those in the class of 2019 who took out student loans at $28,950. The number is close to the maximum $31,000 that students who are dependents of parents or guardians can borrow from the federal government to fund undergraduate education.Area chart of student debt increasing from Q1 2006 to Q1 2022.Continuing racial wealth disparities are reflected in who has to take out loans to fund college. About half of Black college students take out student loans, compared with 40% of white students. Black Americans owe an average of $25,000 more in debt than their white counterparts and are more likely to be behind on their payments.Despite the amount of debt many students need to take on to attend college, nearly 20 million Americans still enroll in college every year. While earnings can depend on a person’s industry, those with a bachelor’s degrees earn 75% more in their lifetime than those with just a high school diploma.“The message is you have to get a college degree. It’s not just a rhetorical message, it’s an actual truth that if you don’t have a college degree, particularly if you are Black or brown … you will not be able to get a job that is better than your parents’,” Jimenez said.Those with graduate and professional degrees earn even more, but the price for an advanced degree is even higher. A good chunk of student debt – about 40% – is held by those who took out loans to pay for graduate school.What the government has done to address student debtThe most substantial policy addressing student debt was first implemented by the Trump administration, which paused student loan payments and interest accrual at the beginning of the Covid-19 pandemic. Both Trump and Biden extended the pause over the last two years, and it is now set to expire on 31 August.Since the beginning of this year, Biden has announced a slate of additional policies alongside the pause extension. Those who have defaulted or are delinquent on their federal student loans will be returned to good standing. Biden forgave $415m in student debt for borrowers who attended predatory for-profit schools.His administration also announced changes to the Public Service Loan Forgiveness Program, which forgives the student loans of borrowers who are non-profit and government employees after 10 years of debt or after 120 payments are made. Over 113,000 borrowers with a cumulative $6.8bn in debt are now eligible for forgiveness. Over the years, the program has been under much criticism, as relief through the program was rare and borrowers were often deemed not qualified for logistical reasons.The debate over debt forgivenessEven as it seems Biden is prepared to cancel some debt, the idea has gotten some criticism over the last few months.Republicans have been using student debt as a talking point against Biden as the midterm elections start rolling.Senator Mitt Romney suggested that Democrats canceling student loans is a way of bribing voters. “Other bribe suggestions: Forgive auto loans? Forgive credit card debt? Forgive mortgages?” he wrote on Twitter. JD Vance (who went to Yale Law School) told the Washington Post that “Biden essentially wants blue-collar workers like truck drivers – who didn’t have the luxury of going to college to get drunk for four years – to bail out a bunch of upper-middle-class kids.”The reality is that the student loans of those in the highest income quartile – people making more than $97,000 – do make up a third of all outstanding student debt. But many low-income Americans also have student debt, though the amount of debt they have is smaller. Those making below $27,000 a year make up 17% of all borrowers, but their loans comprise 12% of all the outstanding debt.An income threshold could be a way for the government to target forgiveness to those who need it most. But some have pointed out that an income ceiling does not take into consideration a person’s wealth.“You’re looking at a snapshot of what your income was this year or last year, that tells you very little,” Jimenez said. “If your family has no wealth, you’re very differently situated from someone who has family wealth or personal wealth from previous careers.”Those who have been advocating for student debt cancellation say that $10,000 in forgiveness will not be enough to address the breadth of the crisis. Democratic lawmakers, including Senate majority leader Chuck Schumer, Senator Elizabeth Warren and Representative Alexandria Ocasio-Cortez, have called on Biden to cancel up to $50,000.“I don’t believe in a cutoff, especially for so many of the frontline workers who are drowning in debt and would likely be excluded from relief,” Ocasio-Cortez told the Washington Post. “Canceling $50,000 in debt is where you really make a dent in inequality and the racial gap. $10,000 isn’t.”Ending the student debt crisis for goodEven if Biden forgives some student debt, future college students will continue to take out loans – and at higher interest rates. Tackling the price tag of college will come with its own complications, but advocates say it will be necessary to ensure student debt does not get worse.While Biden’s plan for free community college was killed along with the rest of the social and climate spending bill that was making its way through Congress, some efforts for better college funding are happening at the local level.In March, the governor of New Mexico signed a bill that would use $75m in state funds to cover tuition and fees for undergraduate students at two- and four-year colleges. Drives for similar government support have been seen in Pennsylvania, California and Maine.“The cost of college is too high for a lot of students to manage without debt. Making it so that students can go without debt or take less debt in the first place is the thing that we really need to be focusing on,” Miller said. “What about the next generation or the one after that?”
      This article was amended on 26 May 2022. An earlier version stated that student debt had doubled over 16 years. In fact, it has more than tripled.
      TopicsUS student debtUS personal financeEconomicsBiden administrationUS politicsexplainersReuse this content More

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      US inflation rate slows but remains close to 40-year high

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      US inflation rate slows but remains close to 40-year highConsumer price index reveals costs rising by a monthly rate of 0.3% in April, down from 1.2% in March, the first fall since August 2021 Price rises slowed in the US in April but the annual inflation rate remained close to a 40-year high, leaving many Americans struggling to afford necessities including food, shelter and fuel.The latest consumer price index (CPI) figures – which measure a broad range of goods and services – showed prices rising by a monthly rate of 0.3% in April, down from 1.2% in March, the first fall since August 2021.But it is still too early to say whether inflation has peaked. At 8.3% the annual rate of inflation in April was down from 8.5% in March but remains at a level unseen since the 1980s. Over the year the CPI’s food index increased 9.4%, the largest 12-month increase since April 1981. The so-called core-price index – which excludes the volatile categories of food and energy – increased 0.6% on the month, up from March’s 0.3% gain.The figures come as the Federal Reserve is moving to sharply increase interest rates in an attempt to bring prices back under control. The pace of rate rises, and fears that they may trigger a recession, have spooked investors and sent stock markets reeling.Soaring demand and a lack of supply thanks to the pandemic have led to price rises across a broad swath of goods and services. Air fares are up 40% over the last three months. A booming house market has made housing unaffordable for many Americans, especially people of color, and 49% of people recently told Pew Research that affordable housing is a large problem in their community.Randall Kroszner, an economics professor at the University of Chicago and former Fed governor, said the sharp rise in core inflation would worry the Fed. “That is where you look for evidence that inflation is becoming entrenched,” he said.Kroszner said global issues including the war in Ukraine and China’s Covid woes had combined with rising rates to deliver a “one-two punch” to the US economy. He believes the chances of the US entering a recession have risen and that the housing and jobs markets may be the next to suffer.“I’m generally an optimist but this is challenging,” he said.The rising cost of living has become a leading political issue as the US prepares for November’s midterm elections. Rising prices have battered Joe Biden’s approval ratings. This week an Investors Business Daily/TIPP poll found that Biden’s approval had fallen to 39%, approaching his previous record low of 38% set in February, and confidence in the US economy was close to an eight-year low.On Tuesday, Biden said his administration was doing all it could to tackle inflation. “I want every American to know that I’m taking inflation very seriously,” he said in remarks from the White House. “It’s my top domestic priority.The Biden administration has made attempts to bring down prices. In March the White House announced plans to release up to 1m barrels of oil a day from the strategic reserve, in an attempt to dampen high gasoline prices exacerbated by the war in Ukraine. But gas prices remain elevated at a national average of $4.37 a gallon compared with $2.96 a year ago, according to AAA.Republicans have blamed Biden’s stimulus programs for rising prices, a claim he disputes. ​​ The president said his policies had “helped not hurt” the nation’s economic outlook.MIT economics professor Kristin Forbes said the US recovery had shown the US economy lacked skilled workers in industries where demand for jobs was high, pushing up wages – a problem that also afflicted the UK in the wake of the pandemic.The former Bank of England policymaker told a committee of MPs in the UK parliament that she expected inflation in the US to fall, especially once increases in borrowing costs feed through into more expensive mortgages and loans.However, she said the UK faced an acute inflationary spiral that would continue into the autumn because Britain was the only country affected by all six drivers of global inflation. Inflation is running at 7% in the UK, but is forecast by the Bankto exceed 10% later this year. She highlighted the impact on the UK of higher energy prices, a falling exchange rate, trade restrictions that pushed up goods prices, a decade of modest inflation going into the pandemic, expectations among businesses and consumers of much higher inflation in a year’s time and a tight labour market, forcing wages higher.“The UK is the only country to tick every box with inflation pressures coming from all six areas,” she said.TopicsUS economyInflationEconomicsUS politicsBiden administrationnewsReuse this content More

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      ‘What am I going to do?’: soaring prices fuel calls for US government to step in

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      ‘What am I going to do?’: soaring prices fuel calls for US government to step inLarge corporations are passing on higher-than-needed price increases to customers under the cover of inflation, war and supply chain squeezes, experts say Outside a Dollar Tree in Detroit, Latasha Holmes lamented the rising cost of toilet paper, beverages, food and other items she had just purchased. The price increases, she said, were forcing her to choose among necessities for her and four kids.“What am I going to do? Prices are up everywhere, all over town,” she said. “I can’t afford everything.”But while Holmes struggles, Dollar Tree thrives. The retailer increased its prices by 25% as profits jumped 269% between 2019 and 2021, and its profit margins widened. Shareholders won too. The company also announced a stock buyback program worth $1bn that will deliver cash from those price increases to its investors.Dollar Tree and other large corporations are juicing profits by passing on higher-than-needed price increases to customers like Holmes under the cover of inflation, war and supply chain squeezes, consumer advocates and economists say. They are calling for the federal government to take bold steps to rein in the companies.Revealed: top US corporations raising prices on Americans even as profits surgeRead moreAmong proposed prescriptions are price controls, improved price fixing rules, commodity market intervention, stock buyback regulation and antitrust enforcement. Ranged against those proposals are a powerful business lobby and a divided Congress that seems unable to pass major legislation.“There are reasons to have a profit incentive, but there are also reasons to have an overall regulatory body that can say, ‘This is actually profiteering … while everyone is hurting,’” said Krista Brown, a policy analyst with the American Economic Liberties Project.A Guardian analysis of 100 top corporations’ Securities Exchange Commission filings found a median increase of 49% in profits between the most recent quarter and the same quarter two years ago, pre-pandemic. It shows companies have largely shielded themselves from inflationary pain by passing most or all of their increased costs on to customers via price hikes.So far, the federal government’s most visible attempt to address inflation has been to increase interest rates, rates look set to rise again this week. But the Guardian’s data suggests such a measure may miss an important mark. Raising rates effectively takes money out of consumers’ pockets to cool the economy.If corporate profits are contributing in a meaningful way, then raising rates would only reduce the amount of money people have to spend on products and services for which prices are still going up.“That would mean you’re exacerbating this dynamic instead of doing anything to help it,” said Isabella Weber, University of Massachusetts Amherst economist.Instead, limited and targeted price controls could work for essentials like bread, she said, but stressed those would have to be coupled with a bailout plan for negatively affected companies.“Increased prices for basic items like bread can exert enormous pressure on wages” and send inflationary ripples throughout the economy, Weber added. Though price controls are controversial and generally regarded as a leftist idea, the last president to enact them was Richard Nixon, who imposed a 90-day freeze on wages and prices to address inflation in 1970. Price controls were also enacted during and following the second world war, when, again, supply chain issues and pent up demand led to soaring prices.Table of 100 US companies’ profit growthBut price rises are not the only issue critics would like to see the Biden administration address. Others, like Groundwork Collective’s executive director, Lindsay Owens, have called for a ban or new restrictions on stock buyback programs. Joe Biden’s 2023 budget proposes prohibiting executives from selling their stock three to five years after enacting a buyback program.“The other big winner besides the shareholders in excess cash that’s going to buybacks are the executives,” Owens said. “They announce the buybacks, their stock prices soar, then they sell their shares and there are a number of ways to make this work better.”The Guardian’s analysis found companies’ buyback programs over the last 15 months totaled $544bn. That cash could have been reinvested to keep prices down, or increase workers’ wages, consumer advocates say.Others levelled accusations of price fixing and gouging. The American Economic Liberties Project is helping draft legislation that would make it easier for businesses to sue companies for price fixing by making private corporate communications more accessible. As of now, only 3% of price fixing cases make it to trial, Brown said.“Reinvigorating price fixing laws and going after price gouging in moments like this, where a war or Covid are used as excuses for companies to raise rates just because they can, could help a lot,” she added.Fixing is especially a problem in highly consolidated industries, consumer advocates say. Companies have benefited from “decades long under-enforcement of consolidation laws”, added Martin Schmalz, an Oxford University economist.Just four companies control most of the US beef industry, four airlines control about 80% of domestic passenger traffic, Walmart accounts for the majority of grocery sales in the majority of US states, the list goes on and on.And it’s not just the companies that have outsized control. Large investors also a role to play.Schmalz pointed to the Investment Company Act, which limits investment funds to holding no more than 10% of a corporation’s securities. Vanguard on average holds 10% of all S&P 500 companies, Schmalz research has found, but it is not violating the law because companies within its fund family own the shares, not Vanguard itself. But Vanguard still executes the voting rights of more than 10% of shareholders.“The law is written at the fund level so technically speaking they don’t violate the law, but they are violating the spirit of the law,” Schmalz said.Economists and attorneys working on US antitrust law have proposed prosecuting mutual funds like BlackRock or Vanguard that own large stakes in multiple companies in the same sector. Such shareholders can exert an outsize influence on companies’ pricing decisions, Schmalz said, and he noted Investment Company Act language that specifically targets this scenario: “The national public interest … is adversely affected … when investment companies [have] great size [and] excessive influence on the national economy.”Schmalz said there’s little discussion among policymakers to address that specific issue.Biden’s budget includes over $220m for antitrust enforcement, and bills that would break up large tech companies have bipartisan Senate and House support.The Guardian’s analysis highlighted the commodity market boom as companies trading in grain, steel, mining, wood, rubber, meat, oil, homes and other materials generally recorded higher profit increases than companies across the rest of the economy.However, many commodity companies operate in what analysts characterize as “feast and famine” cycles in which they’re unprofitable for years before cashing in. The pendulum has swung for many commodity companies in the day’s economic climate.“When there’s a chance to raise prices when markets are tight, companies are going to do so,” said Skanda Amarnath, executive director of the Employ America thinktank. “It’s some part opportunistic, some part greed, some part rationality, some part a response to uncertainty.”The oil industry highlights the dynamic. After seven years of low returns, it’s restricting supply to boost profits regardless of how that hits Americans at the pump. Earnings calls transcripts reveal executives eagerly “putting shareholders first” and an investor who described industry-wide supply suppression “one of the delights of this earnings season”.Bar chart of the monthly change in US wages since January 2019Bringing volatile commodity prices under control would require curtailing uncertainty and building supply chain resiliency, analysts who spoke with the Guardian say. That could involve some degree of government intervention to cut down on risk by establishing a floor on commodity prices. The government could do that by effectively becoming the “buyer of last resort” when material prices dip below a certain level.But the government should also set a ceiling above which it collects profits, said commodities analyst Alex Turnbull. He suggested the federal government set up what’s effectively a state reserve board.Turnbull pointed to lithium, which, amid increased demand for EV batteries and supply chain squeezes, jumped from $5,000 a ton to $45,000 a ton last year. Higher prices impact the pace of the clean energy transition, and the government could hypothetically set a $10,000 a ton floor price and $25,000 a ton ceiling that would limit the volatility, Turnbull said.The federal government could also increase stockpile reserves of products like grain or oil that are released when prices spike.“That sends the message ‘You should plant more wheat because if it goes really bad, you might have a lean year or two, but we will buy your wheat. But on the other hand don’t expect to buy a Lamborghini if you’re a farmer in Iowa because when prices get too high we’ll be out there selling the shit out of our stockpiles,’” Turnbull said.Stabilization may also spur investment in raw material production that’s risky, which would further bolster markets against future supply shortages. Few companies have built steel plants in recent years because the prices have been so low, Turnbull noted, and now the world is short on steel.Though price caps are “not politically palatable” Bespoke Investment analyst George Pearkes said, the government could take a number of measures to steer futures curves and markets for raw commodities like oil and wheat.“Something in between where there are strategic efforts to smooth volatility, and provide the private sector with enough certainty that they can make decisions is a lot more compelling,” he said.Spikes in investment for some commodities, like nickel, that are essential to the clean energy transition, can be a positive development, Turnbull said. Mining companies limped through the several years leading up to the pandemic, but reaped windfalls over the last year.“People say ‘Nickel producers are making too much money’, well, they didn’t make money for a decade,” Turnbull said. “At some point, somebody has to put money down to dig holes because people aren’t going to drive to the middle of fucking nowhere with a truck and work for free.”Another force in some commodity price spikes: Wall Street speculation. Commodity markets were once heavily regulated because they deal in raw materials that underpin the economy. An influx of investment capital followed the commodity markets’ deregulation about 20 years ago, and some are now treated like speculative assets similar to bitcoin, said Rupert Russell, who authored a book on the topic.The consequences of economy-addling commodity price spikes are real, he adds, pointing to the 2010 grain prices that helped trigger the Arab spring uprising in Tunisia.Supply chain back ups, inflation and war have generated “radical uncertainty” in which no one knows how much commodities are worth, because the prices are no longer anchored, Russell told the Guardian. He echoed others’ calls for stronger government intervention to tamp down the casino-like mentality.“Once there’s not just radical uncertainty but markets dominated by speculators, algorithmically driven speculation that is just kind of responding to headlines, then you’re going to get that kind of Bitcoin-esque volatility,” he said.But experts say there are few viable short-term solutions, and long-term measures don’t help Holmes. That’s forcing her to think about getting another job to survive as she feels the pressure of an economic system stacked against her.“I don’t want to. I’ve got four kids to take care of, but what am I supposed to do?” she asked.TopicsUS economyInflationEconomicsUS politicsUS income inequalityInequalityfeaturesReuse this content More

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      Lebanon Takes a Step Forward but Risks Still Remain

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      The Fair Observer website uses digital cookies so it can collect statistics on how many visitors come to the site, what content is viewed and for how long, and the general location of the computer network of the visitor. These statistics are collected and processed using the Google Analytics service. Fair Observer uses these aggregate statistics from website visits to help improve the content of the website and to provide regular reports to our current and future donors and funding organizations. The type of digital cookie information collected during your visit and any derived data cannot be used or combined with other information to personally identify you. Fair Observer does not use personal data collected from its website for advertising purposes or to market to you.As a convenience to you, Fair Observer provides buttons that link to popular social media sites, called social sharing buttons, to help you share Fair Observer content and your comments and opinions about it on these social media sites. These social sharing buttons are provided by and are part of these social media sites. They may collect and use personal data as described in their respective policies. Fair Observer does not receive personal data from your use of these social sharing buttons. It is not necessary that you use these buttons to read Fair Observer content or to share on social media. More

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      Democrats announce plans to ‘go after’ big oil in effort to bring down prices

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      Democrats announce plans to ‘go after’ big oil in effort to bring down pricesNancy Pelosi says oil companies ‘hoarding the windfall while keeping prices high at the pump’ amid concerns over US inflation The Biden administration is to propose legislation that would allow US federal and state agencies to “go after” oil companies on wholesale and retail sales practices, lambasting the industry over price gouging and profiteering.As American voters express increasing concerns about the high prices of a wide range of consumer goods, including energy and food, Senate majority leader Chuck Schumer said passing legislation to bring down retail gasoline prices “is at the very top of our list”.‘We’re not attacking Russia,’ Biden says as he asks for $33bn in Ukraine aid – liveRead moreNeither Schumer nor House speaker Nancy Pelosi would say when such legislation will be voted upon, or how much money it could end up saving consumers if enacted into law.“Big oil has profiteered and exploited the marketplace,” Pelosi told reporters, noting companies’ strong corporate profits over the past year. “They are hoarding the windfall while keeping prices high at the pump,” she added.The move comes as gas prices have surged in the wake of Russia’s invasion of Ukraine. Despite recent falls, the average price of a gallon of gas is now over $4 in the US, up from $2.88 a year ago, according to the American Automobile Association.Oil companies have enjoyed record profits as prices have soared. Exxon, the largest US oil company, is expected to report record earnings on Friday and rival Chevron recently reported “the best two quarters the company has ever seen”.Pelosi said the White House had discussed a “holiday” for Federal gas taxes but said that there was no evidence that oil companies would pass those savings on to consumers.Oil companies are not alone in reporting huge surges in profits even as consumers face higher bills thanks to soaring inflation. An analysis of 100 leading US companies found their net profits had risen by a median of 49%, and in one case by as much as 111,000%. The increases came even as prices rose and average wage increases were eroded by rising inflation.Reuters contributed to this storyTopicsOil and gas companiesUS politicsBiden administrationInflationEconomicsEnergy industrynewsReuse this content More

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      DC Deconstructed: The View from the Carriage House

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      The Fair Observer website uses digital cookies so it can collect statistics on how many visitors come to the site, what content is viewed and for how long, and the general location of the computer network of the visitor. These statistics are collected and processed using the Google Analytics service. Fair Observer uses these aggregate statistics from website visits to help improve the content of the website and to provide regular reports to our current and future donors and funding organizations. The type of digital cookie information collected during your visit and any derived data cannot be used or combined with other information to personally identify you. Fair Observer does not use personal data collected from its website for advertising purposes or to market to you.As a convenience to you, Fair Observer provides buttons that link to popular social media sites, called social sharing buttons, to help you share Fair Observer content and your comments and opinions about it on these social media sites. These social sharing buttons are provided by and are part of these social media sites. They may collect and use personal data as described in their respective policies. Fair Observer does not receive personal data from your use of these social sharing buttons. It is not necessary that you use these buttons to read Fair Observer content or to share on social media. More

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      The Unholy Alliance Between the US Security Apparatus and Big Tech

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      The Fair Observer website uses digital cookies so it can collect statistics on how many visitors come to the site, what content is viewed and for how long, and the general location of the computer network of the visitor. These statistics are collected and processed using the Google Analytics service. Fair Observer uses these aggregate statistics from website visits to help improve the content of the website and to provide regular reports to our current and future donors and funding organizations. The type of digital cookie information collected during your visit and any derived data cannot be used or combined with other information to personally identify you. Fair Observer does not use personal data collected from its website for advertising purposes or to market to you.As a convenience to you, Fair Observer provides buttons that link to popular social media sites, called social sharing buttons, to help you share Fair Observer content and your comments and opinions about it on these social media sites. These social sharing buttons are provided by and are part of these social media sites. They may collect and use personal data as described in their respective policies. Fair Observer does not receive personal data from your use of these social sharing buttons. It is not necessary that you use these buttons to read Fair Observer content or to share on social media. More

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      Jacob Zuma Threatens to Bring South Africa to its Knees If He Is Jailed

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      The former President of South Africa, Jacob Zuma, is the glowering figure who looms large over the country’s future. The 80-year-old is determined that never again will he suffer the ignominy of being jailed — despite being charged with hundreds of counts of corruption in a case that has dragged on for nearly 17 years. Zuma has pleaded not guilty to corruption, money laundering and racketeering in a 1990s $2 billion arms deal that he promoted.

      To head off any chance of being imprisoned, he has deployed the so-called “Stalingrad defense.” This is a term for a legal strategy of stalling proceedings based on technicalities. Zuma’s lawyers are fighting every attempt to put him before a judge on the basis of arcane technicalities. Finally, this strategy is wearing thin and Zuma’s supporters are now resorting to alternative tactics.

      Past Precedent

      This is not the first time that Zuma faces time in prison. Last year, the Constitutional Court of South Africa found Zuma guilty of contempt of court and sentenced him to jail for 15 months. Zuma’s supporters took to the streets in KwaZulu-Natal and Gauteng. They blocked roads, assaulted people, and looted and burned supermarkets.

      Embed from Getty Images

      When Zuma’s legal team were in court on April 11,  they reminded the court of what had happened. They warned the judge that the riots that ensued after his jail sentence last year resulted in the deaths of more than 350 people. Zuma’s lawyers claimed that the riots “were partly motivated or sparked, to whatever extent, by a sense of public outrage at perceived injustice and special treatment of Mr Zuma.” They were making an obvious threat.

      It is important to put Zuma’s July 2021 riots in context. The country’s most notorious mass killing remains the Sharpeville massacre of March 1960. This occurred during the era of apartheid. The massacre cost 69 lives as the police fired into a crowd. The Zuma riots cost many more lives than the Sharpeville massacre.

      To contain these riots, South African President Cyril Ramaphosa had to deploy 25,000 troops. He admitted that he had no prior warning from his intelligence services of the scale of the unrest. This is unsurprising. Zuma was an intelligence agent for the African National Congress (ANC) and has strong links with South Africa’s security services. As the South African media have reported: “Former senior security agency and ANC members aligned with Jacob Zuma have allegedly instigated the unrest in Gauteng and KwaZulu-Natal. Citing sources in the intelligence community…these former agency members used intelligence networks to spark the riots.”

      The government made promises to bring those who instigated the Zuma riots to justice.  Duduzile Zuma-Sambundla, Zuma’s daughter, was one of those accused of stoking the riots. She and none of the major figures allegedly behind the Zuma riots have been held accountable. Of the 3,000 suspects arrested, all of them have been small-fry.  

      Constitutional Challenge And Risk of Becoming a Failed State

      Like a latter-day Samson, the former president is threatening to bring down the South African constitutional order around him. Those close to Zuma have threatened both the judges and the constitutional order itself. The South African constitution, shaped under Nelson Mandela is today questioned by factions of the ANC who want to make the judiciary and the constitution subservient to the political establishment.

      Many ANC leaders, keen to stave off allegations of wrongdoing, have muttered darkly about the constitution for years. KwaZulu-Natal Premier Sihle Zikalala recently criticized the courts, saying “It is time we should debate whether the country does not need parliamentary democracy where laws enacted by Parliament should be above all and not reviewed by another organ…” Ironically, Zikalala is calling for a return to parliamentary supremacy — the hallmark of the apartheid years.

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      There is a real cost to such maneuvers by ANC politicians. In its December conference,the party will elect a new leadership. If some ANC members have their way, they could even remove Ramaphosa, although this seems unlikely as of now. Nevertheless, the ANC’s branches and its provincial structures are experiencing a bitter battle between the pro- and anti-Zuma factions. These factions are fighting for the support of the ANC’s 1.5 million members in meetings across the country, some of which are turning violent.

      While the ANC is locked in internal battles, there are warnings that South Africa might be turning into a failed state. The government has failed to provide many essential public services already. The railways have been vandalized and looted so severely that no trains have run in the Eastern Cape since January 7. Critical coal and iron ore exports are grinding to a halt because of cable theft  that has gone unchecked for years because of South Africa’s systemic corruption.  As per Bloomberg, “more than $2 billion in potential coal, iron ore and chrome exports were lost” in 2021.

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      The failure of the electricity supply system is so chronic that it is hardly remarked upon. In the Cape, the opposition Democratic Alliance has plans to dump the state electricity provider — Eskom — and establish its own power supply.

      In a September 2020 report, Eunomix warned that “bar a meaningful change of trajectory, South Africa will be a failed state by 2030.” The remarks were echoed in March this year by the treasury director general Dondo Mogajane. He took the view that, if South Africa continued on its present path, it could indeed become a ‘failed state’ with “no confidence in the government, anarchy and absolutely no control in society.”

      In April, Ramaphosa was forced torespond to Mogajane. The president adamantly declared that South Africa was “not a failed state yet and we will not get there.” Ramaphosa claimed that his government was taking steps to rebuild South Africa’s capacity and fight corruption. This claim remains an admirable but unfulfilled ambition.

      Zuma has not been brought to court and his associates are locked in battle with Ramaphosa’s supporters for control of the ANC and the country. Meanwhile, growth rates slide, unemployment rockets and poverty remains endemic. Even as South Africa is on the slide, the world’s attention is elsewhere. This is a tragedy. Africa could lose one of its few genuine democracies and see the collapse of its largest economy.

      The views expressed in this article are the author’s own and do not necessarily reflect Fair Observer’s editorial policy. More