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n New Agenda: South African Journal of Social and Economic Policy - 'Both directions at once' : fiscal policy in South Africa - economic crisis

Volume 2019 Number 75
  • ISSN : 1607-2820

Abstract

John Coltrane once described his approach to the improvised solo as “start in the middle and move both directions at once”.1 This is an inspired approach to artistic creation but not a good basis for fiscal policy. yet government is doing just this, attempting to move backwards and forwards at the same time. The consequences are pulling apart the public sector.

South Africa’s public finances are in a deep and increasingly intractable crisis. If left to fester there will be fundamental consequences for government’s ability to guide national development in the decades ahead. Two alternative responses have been suggested. The first is a sudden and decisive fiscal contraction. The second is sudden and decisive fiscal expansion. In my view both are likely to fail. Instead of resorting to a macroeconomic policy fix, South Africa needs to address underlying political constraints. The only path forward is to negotiate through these constraints by recognising the need for real sacrifices and agreeing on how they should be distributed. In the meantime, we should accept that fiscal policy is neither the core problem nor the primary solution.

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/content/journal/10520/EJC-1aa47acc28
2019-12-31
2020-10-27

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