economic policy fiscal policy political economy

Beware of predators imitating critics of economic policy

My most recent column, headlined Medium-term budget policy statement bucks boring trend, was published on the day the National Prosecuting Authority issued summons to the finance minister to appear in court in November. By mid-morning, it was clear the column had been overtaken by events.

There is doubt that this week’s medium-term budget policy statement will be no ordinary one, but not for the reasons espoused in the column. There I was, going on about the likely content of the policy statement, when the real action was in the criminal justice system. I expected, as always, that when the statement was delivered, we would witness a well-calibrated, stage-managed process rather than fireworks. I also argued for the limits of fiscal policy in the absence of a clear economic vision from the highest levels of government (that is, beginning with the president) and a capable state.

As the case against Finance Minister Pravin Gordhan unfolds, it is worth reflecting on the broader “case” against the Treasury. It is a series of deeply held critiques, mostly from the labour movement and left-leaning academics. Lately, the case has attracted new complainants.

A key allegation is that the Treasury is an aloof neoliberal institution. It stands accused of being a purveyor of inappropriate economic policy such as the Growth, Employment and Redistribution policy. Other critics argue the Public Finance Management Act is rigid and does not take into account the limited capacity of a middle-income country with a difficult history that has bequeathed us a skills deficit.

There is also the question of whether the Treasury has created an enabling environment for local and black-owned businesses to thrive through supportive government procurement.

These, and other similar arguments, have been made mostly in the public interest, driven by the belief that a different policy direction or mode of conducting government business would deliver a more just economy and human development.

Some of it has been dogmatic, some of it even patronising rhetoric by old-school Marxists, but it has not been propelled by narrow self-interest. Now, however, it has become ammunition in the hands of those whose main ideology is rapid capital accumulation at all costs.

The predators and their sympathisers have chosen to free-ride on leftist critiques of macroeconomic policies supported by the Treasury to attack it.

Many arguments can be made, from all sides, about why SA has failed to deliver a sustained high economic growth rate. Much debate can also be had about why the limited growth that has been realised has maintained, or arguably deepened, inequality.

In this context, it cannot be that government policy has been flawless. Mistakes have been made. I recall a roundtable I attended in which a senior Treasury official expressed regret over the demise of industrial zones in the former homelands.

However, the case against the Treasury often fails to interrogate how the rest of government has functioned since 1994. It rarely asks whether more could have been achieved within the corners of postapartheid macroeconomic policy, imperfect as it has been. The case also ignores that this supposedly neoliberal approach has spawned an extensive welfare state.

As for the more recently vocal critics — those who shout Rupert or third force at every opportunity — the aim of their onslaughts is not to get the department to change its thinking or practices to the benefit of all, but rather to undermine its effectiveness.

As the case against Gordhan and the offensive against the Treasury continues, it becomes important to begin to sift genuine criticism from opportunistic rhetoric.

Makhaya is CEO of Makhaya Advisory

This piece was first published in Business Day

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