A de­bate on con­sti­tu­tional man­date

Asks: why is the con­sti­tu­tion im­por­tant and is it off lim­its to be be­ing amended, if peo­ple’s in­ter­ests are placed first? In the light of the con­tro­versy sparked by the pub­lic pro­tec­tor on the man­date of the SA Re­serve Bank, it is im­por­tant to un­der­stand

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LAST YEAR South Africa cel­e­brated 20 years of the sign­ing of the con­sti­tu­tion of the Repub­lic by Pres­i­dent Man­dela. Tak­ing our cue from the com­mon law, our con­sti­tu­tion, like many con­sti­tu­tions the world-over, serves as a form of so­cial con­tract. This so­cial con­tract orig­i­nally em­anated from the agree­ment reached be­tween the king and no­bil­ity and which was later ex­tended to the peo­ple.

Those of us who study the for­ma­tions of con­sti­tu­tions would also know that con­sti­tu­tions not only serve as a so­cial con­tract be­tween the gov­erned and the gov­ern­ing but also as a dec­la­ra­tion that unites peo­ples. One of the ear­li­est ex­am­ples of the unit­ing pur­pose of a con­sti­tu­tion was the Con­sti­tu­tion of Me­d­ina.

This char­ter, drafted by the Is­lamic prophet Muham­mad, served as a bind­ing doc­u­ment be­tween Muham­mad and the tribes and fam­i­lies of what was later known as Me­d­ina. The doc­u­ment made sure to end all in­ter-tribal fight­ing be­tween fam­i­lies and clans, thus in­sti­tut­ing a num­ber of rights and re­spon­si­bil­i­ties for each com­mu­nity, be they Chris­tian, Jewish, pa­gan or Mus­lim.

While the so­cial con­tract and the unit­ing dec­la­ra­tion serves the South African con­text well, for our pur­poses the con­sti­tu­tional ob­jec­tive of the Greek philoso­pher Aris­to­tle is most use­ful. Pre-dat­ing the Con­sti­tu­tion of Me­d­ina by ap­prox­i­mately 1 000 years, Aris­to­tle be­lieved a con­sti­tu­tion was to be a doc­u­ment out­lin­ing “the ar­range­ment of the of­fices in a state”. In other words, he pro­posed the prin­ci­ple, fol­lowed by nearly all mod­ern con­sti­tu­tions, of ar­tic­u­lat­ing the role and func­tion of each of­fice and how they re­late to each other in the state.

At the same time, it is im­por­tant to un­der­stand, as most schol­ars have done through the ages, that con­sti­tu­tions are not static doc­u­ments. They are alive and evolv­ing; adapt­ing to the ma­te­rial con­di­tions of the so­ci­eties they wish to serve. It is for this rea­son that, in the last 200 years, the US con­sti­tu­tion has been amended 17 times. In the last 20 years, the South African con­sti­tu­tion was also amended 17 times.

Note, though, that the con­sti­tu­tional frame­works of th­ese two con­sti­tu­tions are dif­fer­ent. In prin­ci­ple, it is im­por­tant to note that the con­sti­tu­tions have changed and that of­ten the most life-giv­ing ap­pli­ca­tions of th­ese so­cial con­tracts were the court judg­ments in­ter­pret­ing the con­sti­tu­tional law. Again, it is im­por­tant to note that if at any stage the gov­erned or the gov­ern­ing feel that this so­cial con­tract is no longer rel­e­vant to the re­la­tion­ship be­tween them and their ma­te­rial con­di­tions, the con­sti­tu­tion it­self must make pro­vi­sion for it to be amended to re­main le­git­i­mate.

Re­cently, much con­tro­versy erupted sur­round­ing the re­me­dial ac­tion pro­posed by the pub­lic pro­tec­tor in re­spect of the South African Re­serve Bank. We do not wish to go into the de­tails but again suf­fice to say that no part of the con­sti­tu­tion re­mains un­touch­able in be­ing amended, if the amend­ment can wield a two-thirds ma­jor­ity in Par­lia­ment.

What the pub­lic pro­tec­tor has done, what­ever her ac­tions may be in the fu­ture, is to open the de­bate on the man­date of the SA Re­serve Bank (Sarb). Given South Africa’s eco­nomic co­nun­drum, it should be a de­bate that is wel­comed. In fact, in light of the 2008 global eco­nomic cri­sis and that even South Africa’s eco­nomic co­nun­drum is some­what a re­sult of that cri­sis, the de­bate sur­round­ing cen­tral banks and their man­dates is hap­pen­ing at a global level.

Re­cently, lead­ing economists at the Lon­don School of Eco­nom­ics re­leased an ar­ti­cle called: Is the era of cen­tral bank in­de­pen­dence draw­ing to a close? The au­thors of the blog in­clude Wouter Den Haan, pro­fes­sor of eco­nom­ics and direc­tor of the cen­tre of macro­eco­nomics at LSE; Ethan Ilzet­zki, as­so­ciate pro­fes­sor of eco­nom­ics at LSE and an ex­pert in in­ter­na­tional fi­nance, fis­cal pol­icy and macro­eco­nomics; Martin El­li­son, pro­fes­sor of eco­nom­ics at Ox­ford and a former con­sul­tant to the Bank of Eng­land; Michael McMahon, as­so­ciate pro­fes­sor at War­wick and an in­ter­na­tional con­sul­tant econ­o­mist for the In­ter­na­tional Mon­e­tary Fund; and Ri­cardo Reis, pro­fes­sor at LSE and an aca­demic con­sul­tant of the Fed­eral Re­serve Board of New York and Rich­mond.

Th­ese aca­demics ac­knowl­edge that, at one stage, the in­de­pen­dence of cen­tral banks was in vogue.

It would not be wrong of us to sug­gest that this oc­curred es­pe­cially dur­ing the nineties when the Bank of Eng­land was made in­de­pen­dent by the Blair ad­min­is­tra­tion in the UK and South Africa’s con­sti­tu­tion, guar­an­tee­ing the in­de­pen­dence of our Re­serve Bank, was writ­ten and pro­mul­gated.

Cou­pled with this move to de­clare cen­tral banks in­de­pen­dent, sug­gest th­ese aca­demics, were poli­cies which aimed at in­fla­tion tar­get­ing and pro­tec­tion of the na­tional cur­rency.

How­ever, in the wake of the eco­nomic global cri­sis, the cen­tral banks and their “un­con­ven­tional in­stru­ments” as well as their abil­ity to act “with a great deal of dis­cre­tion” have come un­der scru­tiny, es­pe­cially by demo­cratic gov­ern­ments and par­lia­ments.

Of­ten part of th­ese crit­i­cisms, the aca­demics con­tinue, is that cen­tral banks have over­stepped their man­date.

They go on to point out, based on a Euro­barom­e­ter sur­vey, that only 30% of Ger­mans trust the Euro­pean Cen­tral Bank. In the UK, lead­ing fig­ures in both the Con­ser­va­tive and Labour par­ties have crit­i­cised the in­de­pen­dence of the Bank of Eng­land.

While it might not be “po­lit­i­cally cor­rect” to quote US Pres­i­dent Trump, even he ques­tioned the role of the US Fed­eral Re­serve Bank dur­ing the 2016 US pres­i­den­tial elec­tion cam­paign. He was not far off, when even the Bank’s vice-chair, Stan­ley Fis­cher, ques­tioned the “many cur­rent chal­lenges to cen­tral bank in­de­pen­dence”.

Th­ese aca­demics then re­port on a sur­vey they are con­duct­ing with lead­ing economists across Europe, in the main OCED coun­tries, the ma­jor­ity of whom, two-thirds in fact, sug­gested that in­de­pen­dence of cen­tral banks will change in the next two years. Even more so, the sur­vey showed that a lead­ing ar­gu­ment for the in­de­pen­dence of cen­tral banks – lower in­fla­tion – was no longer con­vinc­ing to th­ese lead­ing eco­nomic ex­perts.

Yet what does all of this mean for South Africa? First, we must recog­nise that the dis­cus­sion on Sarb and its man­date is not out of line with in­ter­na­tional trends. Economists glob­ally, as we have just seen, are dis­cussing this mat­ter and so should we. Sec­ond, the dis­cus­sion must fo­cus on what kind of bank we would like to see. It is ab­surd that an in­de­pen­dent bank, pri­mar­ily ac­count­able to share­hold­ers who are some­times for­eign, is dic­tat­ing mon­e­tary pol­icy that di­rectly af­fects the lives of or­di­nary South Africans.

Twenty-three years into democ­racy we must en­sure the peo­ple gov­ern and that if the bank is go­ing to be ac­count­able, it should at least be ac­count­able to the demo­crat­i­cally elected rep­re­sen­ta­tives of the peo­ple. In­deed, a bal­ance could be found whereby the bank re­mains in­de­pen­dent but ac­count­able to Par­lia­ment. Cur­rently, as per the con­sti­tu­tion, it only needs to con­sult with the Min­is­ter of Fi­nance.

As the ANC is in elec­tion mode, it is sad to see the ex­pe­di­ency of some par­ties and or­gan­i­sa­tions. In par­tic­u­lar, it is sad to see the ANC’s al­liance part­ners, Cosatu and the SACP, not com­ing out in sup­port of the re-ex­am­in­ing of Sarb’s man­date. In­stead of en­liven­ing de­bates and seek­ing ways to im­prove the lives of South Africans, we see crass fac­tion­al­ism at play through this po­lit­i­cal ex­pe­di­ency. Wes­ley Seale teaches pol­i­tics at Rhodes Univer­sity

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