Monetary Policy Must Be Debated across the Political Spectrum

Cape Times (South Africa), July 13, 2017 | Go to article overview

Monetary Policy Must Be Debated across the Political Spectrum


Debates on monetary policy in South Africa over the past couple of decades seem to have come from a madhouse. In the 1990s the country had old discredited Washington consensus policies rammed down its throat, with scant regard for alternative progressive ideas and little or no democratic debate or public participation.

Recently the Public Protector Busisiwe Mkhwebane released a report that made sweeping populist recommendations about the South African Reserve Bank (Sarb). The report favoured revising the constitution and a binding recommendation for a monetary policy regime that excludes any reference to price stability. A mandate like this doesn't exist in any comparable country with a well-developed private banking system.

To put the report in context, we want to focus on basic monetary policy principles that have been debated for centuries by serious thinkers and scholars. We also explore how South Africa can move the debate forward.

Broadly, thinkers on monetary policy range from "sound money" advocates to those concerned that money and banking must serve the productive economy - let's call them "serve-society" advocates.

We locate ourselves on the "serve-society" side of the debate. We agree with William Lowndes who served in the British Treasury in 1695, and said that money supply must serve society.

Thomas Attwood in the 19th century, John Maynard Keynes, the trade union leader Ernest Bevin and Hyman P Minsky in the 20th century, concurred.

Unlike Mkhwebane's report, these economists, particularly Keynes and Minsky, understood that currency and money markets under capitalism have a nasty tendency to be unstable. That's why the regulatory and lender of last resort function of the Reserve Bank is so vital. (When the operations of the inter-banking lending market cease to operate, the lender of last resort is the entity - usually a central bank - that has sufficient liquidity to lend to banks.)

The Sarb has performed these roles for almost a century. There hasn't been a systemic banking crisis since the formation of the Reserve Bank in 1921. Experts in the field, Calomiris and Haber, 2004, find that South Africa is among the most stable top 13 banking systems in the world. The Reserve Bank should take credit for much of that.

That doesn't mean that it's beyond criticism, which is why a serious debate is needed. The debate doesn't need to rely on the ideas of fringe adventurers and crackpots. There is a wealth of intellectual talent on monetary and central banking policy inside and outside its universities. The public intellectuals in the unions and in civil society organisations have excellent ideas. Ordinary citizens should be drawn in too.

Things cannot remain as they are; so much is changing in the world of central banking and in economic life.

Sound money thinkers tend to view banking as another business, best left to the free market. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Monetary Policy Must Be Debated across the Political Spectrum
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.