I have been following and intermittently engaging in a discussion on quantitative easing (QE), and the general populist drive to nationalise everything, starting with the SA Reserve Bank.
One of the astounding parts of the discussion has been the ready-made slogans and trade of poorly concealed insults. Any critical questions asked about QE and nationalisation of the Bank are met with puerile name-calling and othering — that pesky habit of denigration accompanied by de rigueur self-absolution and association with all things good and great.
There are two immediate concerns about the state of discussions. One is the intellectual occlusion, and the other is that it is elites who tend to benefit from QE. Just to be clear, we know who the SA elite are and who brought the country to the brink of collapse. We should, of course, not be seduced by collapsology and catastrophism.
Notwithstanding the grandstanding of my friends on the left, it seems difficult for them to accept that neither one of the two policies are the exclusive preserve of right- or left-wing ideologues. For instance, the EFF, the Black First Land First (BLF) movement and the Institute for Economic Justice (IEJ) share a desire to control the central bank with Italy’s far-rightist Brothers of Italy, the nativist League and the Five Star Movement.
What brings them together is a romantic populism, coupled, in the case of SA, with a failure to adequately explain what happens the day after the revolution, and torturing evidence to support crude romanticism. Everyone wants liberators riding into town on thoroughbreds waving red flags, but nobody wants to discuss what happens afterwards.
In SA the IEJ, in particular, is aided and abetted by distinguished professors who have one or more axes to grind, and who have a very 19th-century understanding of political economy (situated in the English Midlands). Together they have presented themselves as the custodians of a body of knowledge on the economy. Anyone who disagrees with them is either “right of centre”, a shill for neoliberalism and capitalism, or a copper-bottomed economist — with everything that is wrong with all of that. They encourage “debate” but would insist on the logical certainty of their own ideas.
I recall Paul Krugman saying, in 1997, that people had no right to moral outrage over his position on cheap labour. If they thought long and hard enough, Krugman said, the morally outraged would agree with him.
It’s like saying you can debate and think as much and for as long as you wish, but you will, eventually, agree with my view. As if Krugman’s view is the natural outcome of all reasoning.
It may have been Thomas Hobbes who wrote that people are perfectly happy to accept that others can be smart or intelligent, but that their own intelligence is necessarily superior. Forgetting, of course, they are closest to their own knowledge.
While the Twittersphere is as good a place as any for banter, a more composed and considered response is necessary. In SA, elite posturing on QE is a cause for concern. Evidence from the US and Europe, gathered in the wake of the 2007/2008 crisis, shows that QE benefited the elite.
In Britain, the Bank of England found that the wealthiest 5% gained the most from QE. In the US, QE became a bailout for the wealthy, did little to reduce inequality and slashed the savings of retirees. In Britain, it was found that creating money willy-nilly can push up share prices and profits, with little impact on working-class income.
When QE became fashionable after the global crisis, Eric Rosengren of the Boston Fed, Mario Draghi of the European Central Bank, and Mervyn King of the Bank of England admitted that QE had failed to produce growth. The point here is, actually, not whether QE can be applied to serve the poor; it is whether we can trust the elite (ANC/SACP/Cosatu) that brought us to this point, especially those who have now transformed into soi-disant ethical revolutionaries wearing crests embroidered with terms such as “economic justice”.
One argument that has been put forward is that we should not focus on state capture. One cannot be sure why. Maybe it is to deflect attention from complicity in state capture, corruption and fraud that so define the past 10-15 years. Silence is also complicity.
This, then, is the horror show behind QE, and the nationalisation of the Bank, for that matter. Ultimately it is not whether these things matter in the long run. Can one trust the looters with access to vast amounts of money? And we have yet to discuss the partial truths they would apply in place of neoclassical economics.
• 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.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.