Coke Stevenson, a legendary governor of Texas in the 1940s, was often criticised for allowing too much undisciplined discussion in the state legislature. He preferred lighting his pipe to intervening in debates - but he knew what he was doing. "As long as they're talkin'," he would drawl, "they're not makin' laws."
It is tempting to see in that kind of light the ANC's decision to review the mandate of the Reserve Bank. Ever since the balance of power shifted in the tripartite alliance, President Jacob Zuma has been careful to be seen to allow the expression of diverse opinions on economic policy, particularly from the ANC's two formal allies, trade union federation Cosatu and the SA Communist Party. After all, no harm can be done by talking about things - or can it?
When finance minister Pravin Gordhan presented his first medium-term budget policy statement in October, he was able to talk tough on spending (which the ANC's allies always want more of) because of the expected fall in tax revenues and the sharp rise in the projected budget deficit. But he seemed to compensate by saying that "alongside inflation reduction and financial stability, we must seek faster development and employment creation. I welcome public debate on this issue." Gordhan also said he had agreed with Reserve Bank governor Tito Mboweni and governor-designate Gill Marcus that "monetary policy should also support our aim of balanced and sustainable growth".
Well, of course it should. Monetary policy has never existed entirely in a vacuum - to try to implement it in isolation would be like practising medicine without patients. And the Reserve Bank itself officially "recognises, in the performance of its duties, the need to pursue balanced economic development and growth". So what exactly can it mean to say that the mandate will be reviewed? What more is wanted?
It's true that the Bank regards its primary goal as "the achievement and maintenance of price stability". It also maintains that SA "has a growing economy based on the principles of a market system, private and social initiative, effective competition and social fairness".
There's a lot there that can be assumed to be ideologically provocative to the SACP (which, not surprisingly, still believes in communism) and Cosatu (which remains committed to socialism). But what would they change? Would they say that price stability (and therefore the control of inflation) should not be the primary goal? Do they reject the role of markets?
There are many things in SA that are broken and need to be fixed, but the Reserve Bank is mercifully not one of them. Mboweni was a flamboyant and occasionally eccentric governor, but beneath the show business was a steely determination to defend the independence of the bank and, indeed, price stability - and he kept an eye on the social context.
The policy of inflation targeting tends to inflame tempers on the Left, but it has not been rigidly applied. While there are arguments for raising the target band from its present 3%-6%, to abandon the concept would send a signal that inflation is to be encouraged. Quite apart from its other destructive effects, on both the economy as a whole and on investor confidence, high inflation would be a terribly punitive tax on the poor and the aged. That is the last thing we need in a country where so many are unemployed and so many survive on meagre social grants and old-age pensions.
Yet Cosatu and the SACP do not want play-play discussions and they will not enjoy being thrown sops. The "review" of the Bank's mandate should be seen for what it is: an attempt to change economic policy through the back door.
But no changes are necessary. The Bank's stated mission, which has served the country so well, remains appropriate and adequate. What is required is steady and independent management of the Bank, the sort of management Mboweni provided and Marcus is eminently qualified to maintain. She is the right person for the job and should be left to get on with it.
Ranking the Analysts 2009
