A recent article in this publication stated that “the private sector is the only source of revenue for the government”. The Treasury has indicated the need for austerity, implying that departments will have to cut spending. The reason given is that the government is running out of money because tax receipts have declined, and we now face a “fiscal cliff”.
A country with its own sovereign currency cannot run out of money when spending is in that currency. It can only run out of resources to achieve its objectives. These are human, energy and material resources, as well as the abilities required to produce goods.
The story goes that we cannot “print money” because it will lead to inflation. Printing money is the phrase used for money that is over and above the tax receipts and therefore in excess of the budget. The mantra is that “too much money chasing too few goods” will result in inflation. This will happen at full employment, but we are very far from there.
Those who say “there is no such thing as public money; there is only taxpayers’ money” are simply wrong. Of course there is public money. The Reserve Bank is the government’s bank. And the Treasury can spend rand because it is the issuer of the currency.
There will, of course, come a time when spending too much without extracting sufficient value will cause inflation, but that will not happen for some time here because unemployment is so high. Unemployment of this magnitude is totally unacceptable; it is morally repugnant. We simply have to facilitate the inclusion of the 11-million-plus unemployed citizens in the money economy.
The way to do this is for the government to spend in the economy by offering everyone who is willing and able a job guarantee in the public sector, paid at the minimum wage. This will stabilise prices, avoid the worst of the downturns in the business cycle and give hope to the millions who are affected.
There is no other short-term option.
Howard Pearce
Rondebosch
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