Key IssuesMoney is at the center of our developmental challenges
The fundamental challenges confronting the South African economy are four fold: poverty, unemployment, inequality and cost of living and doing business. All these have been increasing, almost since 1994 and continue, yet we have been witnessing admirable economic growth that averaged 4% from 1994 until the crisis of 2007/8. Why should this be the case?
Since the crisis, the economy has not recovered, averaging a growth rate of about 2% (2009-2013). In fact, unlike the other BRICS nations, South Africa fared the worst. This is not an accident; it is a consequence of economic policy choices pursued by the South African authorities.
The “better life for all” as envisaged in the Reconstruction and Development Programme (RDP) and that has become an ANC slogan has turned out to be “better life for a few”. It is not surprising that we are witnessing a number of so called “service delivery strikes”.
Even with the very clear understanding by authorities that these challenges are undermining our social fabric, this has not translated into drastic policy change that can address them. It has been business as usual.
Our current macro-economic framework is inconsistent and permanently at tension with the ideals of the RDP- hence we have failed to realise these in two decades of democracy. At the centre of the framework is “money” broadly defined.
Unless we comprehensively change the existing economic policy framework, we will be unable to move the economy forward sustainably, inclusively and durably and more of the social fabric will lose its flimsy glue and finally disintegrate. We do not have to reach this point.
At the root of all these challenges is the way money is created, allocated and used or not used in the economy. As such we propose the following. Details of each one of these will be discussed later:
- Creation of usury free money by state.
- Creation of public banks right across the country/continent. These would be regional banks with no profit motive, so as to help the country and the continent move towards industrial capitalism.
- A robust fiscal regime not constrained by the current inflation targets that bear no relevance to money supply.
Each one of these will be elaborated extensively later. Watch the space as we recreate a modern macro-economic framework consistent with nations that are no longer tied to the gold standard.