The debate about the Reserve Bank's mandate should not be the preserve of the so called experts

5 July 2017

The Congress of South African Trade unions has taken note of an open letter by a group of academics and economists calling for a debate about the Reserve Bank’s mandate to be conducted by experts in the open. While we have no objections with the suggestion for an open debate about the mandate of the Reserve Bank, we do not agree that the debate should only be the preserve of the so called experts or academics.

The federation argues that some of the most disastrous policies in this country that have left millions of poor people unemployed and mired in poverty were brought to us by the so called experts. The problem with “experts” is that they are hired by other people and are not autonomously financed. This means that they cannot be regarded as neutral because sometimes they are used as authoritative voices to push certain narrow agendas on behalf of those that pay them.

The question of whether or not the PP was empowered to make a call to 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.

We subscribe to the view that no policy measure can be neutral. The reaction to the PP’s recommendation clearly shows that within the ruling elite there are those who are happy with the status quo , where millions are isolated from the mainstream economy. This policy issue should not be treated as taboo because it is not natural law.

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 a billion in SA manufacturing; they would not if they thought that in terms of the inflation projection, that 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, higher inflation rate suggest structural imbalance and it becomes an impediment for investors, including our own companies as they become hesitant to invest if they are sure that the value of that investment is going to plummet.

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

The mandate of the American and other global-north countries includes employment creation. The NGP that has been virtually replaced by the Neoliberal NDP 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. The current policy of low inflation has entrenched apartheid economic policy of separate development, income and asset inequalities. An ordinary person without a job would prefer a job over inflation. Better some job whose pay has declined in real terms by a few percent than no job.

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 also independent from reckless or captured government.

COSATU will continue to push for 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 also 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.

Issued by Sizwe Pamla, National Spokesperson, COSATU, 5 July 2017