Let's Think

For once Pravin Gordhan got it wrong

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Over the past number of months Minister of Finance Pravin Gordhan has been doing a sterling job, under trying circumstances, of safeguarding South Africa’s economy, but last week he got it sadly wrong. (Read more)

Mr Gordhan mostly reacted in a cool-headed way during the turmoil after President Jacob Zuma in December 2015 appointed the then unknown Des van Rooyen, just to replace him within four days by Mr Gordhan. Likewise, he remained calm during a harassment campaign against him around the special investigative unit at the Treasury.

He did an admirable job to restore international trust in the country’s fiscal and monetary policies, and although the danger is not over, he has warded off a credit downgrade to junk status by international grading agencies.

He made all the right noises and only last week assured business leaders that the government understood the need to create greater certainty over its policies, after both investors and ratings agencies expressed concern about government’s commitment to a prudent fiscal path.

Then the slip

But then, on the same day, he told delegates at the National Treasury’s Public Economics Winter School in Pretoria, that it is up to a new generation of economists to achieve equality and inclusive economic growth.

Suddenly the man who has, deservedly so, got the image of a top class technocrat, sounded like a common variety politician on the campaign trail when he encouraged them to “build on the foundation laid by Mandela and Sisulu” to achieve social justice, not only for South Africa but the entire African continent.

“There is a great deal of hopelessness and lack of sense of direction among the poor,” he said.

“Where is this new generation and energy going to come from to evade this wave seeking to sink an equitable economy and the social justice system?” he asked, as he challenged the public economists to “use their research to create social and economic transformation”.

It is not their job, function or responsibility, neither are they trained to “create” or “achieve” any economic or social targets. All they can and should do is deliver quality research and analysis to enable them to give the best possible advice to those with the responsibly to formulate and execute the most prudent and productive policies – firstly government, and then the captains of commerce and industry.

What is an economist?

The Business Dictionary tells us that the discipline with which economists are concerned,” is economics, which consists of the theories, principles and models that deal with how the market process works. It attempts to explain how wealth is created and distributed in communities, how people allocate resources that are scarce and have many alternative uses, and other such matters that arise in dealing with human wants and their satisfaction”.

There are basically five speciality fields for economists, according to Vocabulary.com. An econometrician or econometrist, uses statistical and mathematical methods; a macroeconomist specialises in macroeconomics; a micro-economist, specialises in microeconomics; a monetarist, is an advocate of the theory that economic fluctuations are caused by increases or decreases in the supply of money; and lastly a bimetallist advocates more than one yardstick for a fixed relative value as the monetary standard.

Looking at the core function of the economist, Investopedia tells us he/she is “an expert who studies the relationship between a society’s resources and its production or output. The societies studied may range from the smallest of local communities to an entire nation or even the global economy.

“The expert opinions and research findings of an economist are used to help shape a wide variety of policies, including interest rates, tax laws, employment programs, international trade agreements and corporate strategies.”

In short, it is the job of economist to research, analyse the field of economic activity and then to advise. The responsibility to do and create rests with government and business leaders.

We think

We think Minister Gordhan’s first job and responsibility is to persuade his colleagues in government to take proper note of the best possible economist advice available when they formulate policies and then make sure these are properly executed.

And, if it were ever needed that proper economic advice should be sought and followed, it is now while, as we report elsewhere, human society and its economic construct are in the midst of their most profound transition in 500 years.

 Also read: Globally, society is undergoing a profound and disruptive transition  

by Piet Coetzer

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