Some comfort to be had in global turmoil
THE past few years have been marked by significant political upheaval. In Greece, Alexis Tsipras’s Syriza party returned to power in response to mounting anger over imposed austerity, and to manage a looming Grexit (Greek exit from the EU).
The Grexit story is by no means over. Last year, there was a coup attempt in Turkey followed by a referendum, the result of which has enabled President Recep Erdogan to extend his powers.
In Brazil, Dilma Rousseff was impeached amid corruption scandals, as was her South Korean counterpart, Park Geun-hye. Starving protesters in Venezuela riot daily as footage of President Nicolas Maduro dancing on stage is beamed across the country.
In each case, except South Korea, the political turmoil comes against a backdrop of crippling economic contraction, soaring inflation and rising joblessness.
Globally, the rise of populism was brought sharply into focus when the UK voted to leave the EU. Prime Minister Theresa May has since called for a snap election to cement her term, as the Scots again debate independence from Britain.
Fortunately, the politics of hope and openness is not dying, as pragmatic political parties prevailed in Austria, the Netherlands and France. But the looming Italian election could prove the fly in the EU ointment.
In the US, Donald Trump’s election caught markets and commentators off-guard, just as they had been with Brexit.
Just last week, after what can politely be described as a tumultuous start to his presidency, it emerged that the “leader of the free world” had not only divulged topsecret intelligence to the Russians, but also pressured FBI head James Comey to drop an investigation into Trump’s former national security adviser.
Turns out Trump also wanted journalists critical of his decisions locked up. Comey was fired for not toeing the line, and a Trump impeachment is a growing possibility as the dollar wilts.
It may be time to start thinking about the consequences of a post-Trump era, which so far has been supportive of emergingmarket risk assets and commodity prices, and has protected the rand in the face of a cabinet reshuffle and sovereign credit-rating downgrades.
It is traumatic to see these events unfold globally, but it is also perversely reassuring in that it provides perspective on our own political and economic condition.
Domestically, we have had four finance ministers in 18 months, swirling allegations of state capture and a looming vote of no confidence. As in the US, our judiciary has been approached to rule on matters deeply political, inviting accusations of overreach.
No economy fares well in political uncertainty, and turbulence in the US could
Political consequences for bad economics
well derail (or at least defer) what looks like a promising economic comeback.
At home, we face a technical recession. Whether we enter recession in the first quarter is largely academic. The reality is that our economy is not growing fast enough to create jobs, inspire confidence and reduce inequality.
What can we deduce from all this political uncertainty around the globe?
First, we are not unique, as we like to think. Second, there are many lessons we can learn from Brazil, the US and Venezuela.
Ultimately, there are economic consequences for bad politics, but conversely and reassuringly, there are political consequences for bad economics.
Nxedlana is FNB chief economist