THE SARB the MUST peo­ple SERVE

The Re­serve Bank’s man­date of pur­su­ing in­fla­tion as a solution to eco­nomic prob­lems only ben­e­fits those with re­sources, writes Bheki Nt­shal­intshali

CityPress - - Business - Nt­shal­intshali is Cosatu’s gen­eral sec­re­tary

Work­ers’ fed­er­a­tion Cosatu has re­cently wel­comed Pub­lic Pro­tec­tor Bu­sisiwe Mkhwe­bane’s call for Par­lia­ment to con­sider chang­ing the man­date of the SA Re­serve Bank from only fo­cus­ing on price sta­bil­ity, as pur­sued through in­fla­tion tar­get­ing, to con­sid­er­ing broader eco­nomic de­vel­op­ment is­sues. This emo­tive topic has elicited a flurry of re­ac­tion from many quar­ters, con­demn­ing her for over­step­ping the mark. The ques­tion of whether or not the Pub­lic Pro­tec­tor has the power to in­struct Par­lia­ment to change the man­date of the Re­serve Bank from price sta­bil­ity to broader so­cioe­co­nomic is­sues is a valid one, but it should not be used to cen­sor the de­bate about the role and man­date of the Re­serve Bank.

Our own per­spec­tive of a South African eco­nomic growth path in­cludes is­sues of so­cial eq­uity, re­dis­tri­bu­tion and en­vi­ron­men­tal sus­tain­abil­ity, and goes beyond the nar­row def­i­ni­tion of eco­nomic growth, which is based on GDP growth rate and per capita in­come growth.

We sub­scribe to the view that no pol­icy mea­sure can be neu­tral. The re­ac­tion to the Pub­lic Pro­tec­tor’s rec­om­men­da­tion clearly shows that within the rul­ing elite there are those who are ben­e­fit­ing from the cur­rent man­date of pur­su­ing in­fla­tion as a solution to South Africa’s eco­nomic prob­lems. This pol­icy is­sue should not be treated as taboo be­cause it is not nat­u­ral law. It is our con­sid­ered view that nar­rowly tar­get­ing in­fla­tion ig­nores the long-term im­pact of colo­nial­ism and apartheid in favour of sat­is­fy­ing the nar­row in­ter­ests of those al­ready with re­sources, in­clud­ing for­eign in­vestors.

It is true that in­fla­tion erodes the buy­ing power of money and, with­out di­lut­ing the dan­gers of high in­fla­tion rates, we ar­gue that most work­ers would pre­fer jobs over low in­fla­tion. When in­ter­est rates are in­creased to re­duce in­fla­tion, peo­ple who rely on wages as a form of in­come suf­fer the most be­cause they find it dif­fi­cult to af­ford pay­ing back in­stal­ments on credit cards and house bonds, and small busi­nesses find it dif­fi­cult to ob­tain credit to build fac­to­ries.

If com­pa­nies can­not ser­vice their debts be­cause of high-in­ter­est pay­ments, they usu­ally cut down on the costs of do­ing busi­ness by cut­ting wages and lay­ing off work­ers, in the process weak­en­ing the col­lec­tive power of unions. While the pol­icy of in­fla­tion tar­get­ing looks in­no­cent and neu­tral, in prac­tice it has se­ri­ous con­se­quences for the right of work­ers to fair labour prac­tices and for their sur­vival in so­ci­ety.

As work­ers, we favour an ap­proach that in­cor­po­rates both the de­vel­op­men­tal im­per­a­tives and also pro­tects the cur­rency. These are mu­tu­ally re­in­forc­ing rather than con­tra­dic­tory. If an ex­ter­nal in­vestor were to con­sider in­vest­ing R1 bil­lion in lo­cal man­u­fac­tur­ing, they would not if they thought that in terms of the in­fla­tion pro­jec­tion that R1 bil­lion would ef­fec­tively amount to a third of its value in the fol­low­ing year.

Un­for­tu­nately in the cur­rent re­al­ity that is dom­i­nated by fi­nance cap­i­tal, a higher in­fla­tion rate sug­gests struc­tural imbalance and be­comes an impediment for in­vestors, in­clud­ing our own, who be­come hes­i­tant to in­vest if they are sure that the value of that in­vest­ment will plum­met.

We ac­knowl­edge that price sta­bil­ity is im­por­tant even from a rad­i­cal so­cioe­co­nomic trans­for­ma­tion point of view – as long as we depend on cap­i­tal­ists for job cre­ation and growth.

The man­date of the US and other global north coun­tries in­cludes em­ploy­ment cre­ation. The New Growth Path that has been vir­tu­ally re­placed by the ne­olib­eral Na­tional De­vel­op­ment Plan has called for a loose mone­tary pol­icy but a tighter fis­cal pol­icy in or­der to cre­ate 5 mil­lion jobs.

We need a cen­tral bank that will pur­sue an in­clu­sive mone­tary pol­icy and that will reg­u­late the fi­nance sec­tor with a view to en­sur­ing that there is re­dis­tri­bu­tion of in­come and wealth to all South Africans as man­dated by the Free­dom Char­ter.

As ar­gued by Joseph Stiglitz in his book The Price of Inequal­ity, fo­cus­ing on in­fla­tion is wrong when a large part of the cause of in­fla­tion is im­ported in the form of oil prices and food prices and when the only ben­e­fi­cia­ries of this pol­icy are bond­hold­ers. The cur­rent pol­icy of low in­fla­tion has en­trenched the apartheid-era eco­nomic pol­icy of sep­a­rate de­vel­op­ment, in­come and as­set inequal­i­ties. An or­di­nary per­son with­out a job would pre­fer a job over in­fla­tion. Bet­ter a job whose pay has de­clined in real terms by a few per­cent than no job. Low in­fla­tion has re­sulted in fi­nan­cial in­sta­bil­ity, re­ces­sion, lay­offs and loss of job se­cu­rity.

In ad­di­tion to tar­get­ing em­ploy­ment the Re­serve Bank should align its pol­icy with in­dus­trial de­vel­op­ment, in­tro­duce for­eign ex­change con­trols, and im­pose quan­ti­ta­tive con­trols on com­mer­cial banks to en­sure that a quar­ter of their loans go to pri­or­ity sec­tors that drive the growth path and cre­ate jobs on a larger scale.

It is also not lost on us that our Re­serve Bank is cur­rently only no­tion­ally in­de­pen­dent as it gen­er­ally sub­scribes to the dom­i­nant and conventional but fail­ing poli­cies re­ceived from fi­nance cap­i­tal – even at the ex­pense of real pro­duc­ers of wealth in min­ing and man­u­fac­tur­ing.

The Re­serve Bank is too be­holden to the in­ter­ests of fi­nance cap­i­tal to have an im­pact on the broader econ­omy, which is why the big­gest noise in de­fence of the sta­tus quo comes from fi­nance cap­i­tal. The in­de­pen­dence of the Re­serve Bank in a mul­ti­party bour­geois sys­tem is in­dis­pens­able, but we want the bank to be in­de­pen­dent from both pri­vate in­ter­ests and a reck­less or cap­tured gov­ern­ment. Oth­er­wise the value of the rand can eas­ily plum­met if it’s up to pop­ulist politi­cians when there is an eco­nomic cri­sis, as we have seen in Zim­babwe.

The poli­cies of the Re­serve Bank cur­rently re­flect the ne­olib­eral pos­ture of Treasury, mean­ing that a cap­tured gov­ern­ment can­not be en­trusted with the Re­serve Bank. Cosatu pro­poses a fully pub­licly owned Re­serve Bank that will ac­count to the pub­lic through their rep­re­sen­ta­tives in Par­lia­ment on the im­ple­men­ta­tion of this broad man­date we are call­ing for. This also means that the ap­point­ments to the bank must be sub­ject to the same par­lia­men­tary pro­cesses.

The Re­serve Bank should be taken from the banks and re­stored to the peo­ple to whom it be­longs.

PHOTO: REUTERS

RICE IS LIFE A farmer plows a field be­fore plant­ing rice saplings dur­ing the Na­tional Paddy Day, also called the Asar Pan­dra fes­ti­val, which marks the com­mence­ment of rice crop plant­ing in Bhak­ta­pur, Nepal

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