BUD­GET 2017

IT’S BUSI­NESS AS USUAL

CityPress - - Business And Tenders - Terry Bell busi­ness@city­press.co.za

In this bud­get week, some trade union­ists will con­tinue to be an­gry with the mea­sures an­nounced by Fi­nance Min­is­ter Pravin Gord­han. Oth­ers will per­haps reg­is­ter faint praise, es­pe­cially be­cause there will be no in­crease in VAT. But noth­ing, re­ally, has changed. South Africa still faces a fright­en­ingly high na­tional debt, as well as gross and grow­ing in­equal­ity in a coun­try where the cost of ser­vices to cit­i­zens has con­sis­tently out­stripped of­fi­cial in­fla­tion.

Far-reach­ing and in­no­va­tive steps are clearly needed.

But for all the talk about rad­i­cal eco­nomic trans­for­ma­tion, against a back­ground of cur­rency deal­ers in ma­jor banks fid­dling ex­change rates, it will still be busi­ness as usual.

And part of that busi­ness is to gam­ble with money as a com­mod­ity.

This is the re­al­ity that Gord­han and other fi­nance min­is­ters around the world have to deal with – they have to try to sta­bilise an in­her­ently un­sta­ble sys­tem.

So they tweak and ma­nip­u­late, and in­crease or de­crease the level of one or other tax – and hope for the best.

Once upon a time, and not too long ago, the words “I prom­ise to pay the bearer on de­mand the sum of...” were printed on all pa­per money.

In other words, the piece of pa­per, which had no worth it­self, was a prom­is­sory note based on a store of wealth held by a govern­ment, usu­ally as gold.

And many ex­change rates – how many dol­lars to the pound or what­ever – were fixed.

This was an at­tempt to pro­vide eco­nomic sta­bil­ity, a pol­icy stick­ing plas­ter that could not hold be­cause gov­ern­ments and banks sim­ply cre­ated ever more money – much of it an il­lu­sion.

For ex­am­ple, a bank does not wait un­til savers de­posit R1 mil­lion be­fore lend­ing R1 mil­lion.

This debt merely be­comes an as­set in the books of the bank and a debt to the bor­rower.

This, in sim­ple terms, is what hap­pened with the sub­prime mort­gage is­sue in the late 2000s that trig­gered the global fi­nan­cial cri­sis.

Banks lent money that did not ex­ist to bor­row­ers who could not re­pay the loans. They then of­ten sold these sup­posed as­sets to other banks at a dis­count.

Even­tu­ally, the whole rot­ten ed­i­fice col­lapsed.

Much the same ap­plies to the for­eign ex­change deal­ers in banks that now face fines.

But col­lu­sion was the only sin per­pe­trated by the deal­ers – they are not sup­posed to gang up to bet­ter pil­lage hap­less trea­suries and the cit­i­zens who rely on them.

Some deal­ers are also sup­posed to, from time to time, lose in this in­sane and un­pro­duc­tive game where the liveli­hoods of mil­lions of peo­ple, who have no agency, are the luck­less vic­tims.

It is a to­tally fixed game, but one where the reme­dies pro­posed merely tweak the rules.

And that is what has hap­pened and con­tin­ues to hap­pen with bud­get af­ter bud­get in South Africa.

To give most unions their due, in­fla­tion tar­get­ing is a mea­sure they have con­sis­tently op­posed be­cause of the ad­verse ef­fect this has on eco­nomic growth and jobs.

And they suc­cess­fully op­posed VAT in­creases.

But is it not time that or­gan­ised labour, and all of us, re­alised that we can­not solve our prob­lems with the same think­ing, meth­ods and in­sti­tu­tions that cre­ated these prob­lems in the first place?

PHOTO: AP

A build­ing at a camp that has been home to peo­ple demon­strat­ing against the pro­posed Dakota Ac­cess oil pipe­line in Can­non Ball, North Dakota, is set alight by protesters early on Wednes­day morn­ing. Most of the pipe­line op­po­nents aban­doned their protest camp on Wednes­day ahead of a govern­ment dead­line to get off the fed­eral land, and au­thor­i­ties moved to ar­rest some who de­fied the or­der in a fi­nal show of dis­sent. Some of the last rem­nants of the camp went up in flames when oc­cu­pants set fire to makeshift wooden hous­ing as part of a leav­ing cer­e­mony

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