At the time of writing, we are not sure who will be in the cabinet of the sixth administration of SA’s democratic era. Setting aside questions about individual cabinet appointments, we can reflect briefly on what has happened over the past several months and what is at stake in the coming weeks and months. We can look specifically at the future of the SA Reserve Bank and at populist attempts to nationalise the institution.
Some of this may be intuitive, but the bargaining over cabinet positions and office bearers started a few months ago. In some cases, it started in January last year. The bargaining and negotiations took place across and within a range of theatres: in the state and in corporate boardrooms, among trade unionists and political leaders, and among friends and family.
To get a sense of these talks, imagine a nest of concentric circles of power, with President Cyril Ramaphosa and a very small group at the centre. Decision-making, influence and consultations periodically draw in people from each of the expanded circles, and sends them back to the outer bands, as it were, without any new additions to the centre of power, at least not for the purposes of the final executive decisions that rest with the president.
In some ways, it does not really matter who is in the cabinet. The greatest challenges to the presidency and effective governance will be political and will come from populists. We often provide sweeping generalisations about populism, starting with definitional weaknesses. We can delve into definitional issues on another occasion.
One thing we may agree on is that the EFF represents the blunt force of populism in SA. And it is well represented by Julius Malema. His manipulation of emotions and dissatisfaction, whipping up anger and general vituperation framed by the politics of revenge is almost always horripilating. It does not take a scholar of semantics or literary theory to understand the toxicity and danger Malema represents when words like “killing” and “bloodshed” are included in the same sentences as “white people”.
In the next few weeks and months Malema will be joined, so to speak, by some of the nice-sounding types who present themselves as campaigners for “economic justice” in a quest to nationalise the Reserve Bank. There is, of course, nothing wrong with campaigning for economic justice. The differences lie in the “how”, and in ideological and other subterfuge.
There is every possibility that nationalising the Reserve Bank may be a bargaining chip between the executive and the populists, including those well-meaning ones who fight for economic justice from nine to five. This brings us to important questions. The first addresses the apparent aloofness of central banks. This can be addressed by effective communication and outreach strategies. The second is more important. Should the Bank be nationalised? Well, no, but …
The most vociferous demands for nationalisation of the Bank have been part of ideological packages that include nationalising state entities and even private banks. As with Malema’s rhetoric, referred to above, appeals for nationalisation would strategically include words and phrases like “the poor” or “poverty” or “the people”.
One of the problems the populists have with the Bank is the policy of inflation targeting. What the populists will not include in their rhetoric is that low and stable inflation is vital for economic expansion. They have also not produced any evidence on inflation thresholds that may be conducive to economic expansion (inclusive growth, production, distribution and consumption).
The stand-out danger is where populism meets central banking. SA populists have not provided any evidence of where it has resulted in economic expansion, as defined in the previous paragraph. Yet there are outstanding examples of the danger of populist control of central banks. We can point to runaway inflation in Venezuela or Zimbabwe, but a greater danger lies in populist use of central banking for criminal activity, including looting and state capture.
One example I have worked with, as part of my own global political-economic interests, is Nazi Germany. The Nazis nationalised the German Reichsbank after they came to power. Integral to Nazi policies was “revenge” and pogroms against Jews, whose personal wealth and possessions were expropriated without compensation (that is putting it very politely, I apologise) and deposited in the German central bank for safekeeping. The gold teeth and wedding rings taken from prisoners and ripped from dead bodies were melted down and stored in the Reichsbank as bullion. That is usually what populists are best at.
It is perhaps unsurprising that today’s Italian populists — especially those who would invoke the spirit of Benito Mussolini — are desperate to get their hands on Italy’s central bank and they too blame the institution for poverty and the plight of ordinary Italians.
• Lagardien, a visiting professor at the Wits University School of Governance, has worked in the office of the chief economist of the World Bank as well as the secretariat of the National Planning Commission.
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