Poverty can't be blamed on fiscal policy - Mboweni

from Business Report

By LENNOX DIVER

Grahamstown - The problem of poverty in a booming economy lay with government policy implementation and not monetary policy, Reserve Bank governor Tito Mboweni told Rhodes University yesterday afternoon.

Addressing a debate on the Washington consensus - policy ideas drawn up by US economist John Williams that have informed the actions of the International Monetary Fund and the World Bank - Mboweni said: "Bridging the inequality gap is important, but [poverty] cannot be blamed on fiscal and monetary policy. You have to look at implementation of other policies such as social services, and in the workplace. Laws must be implemented."

He warned that any incoming government leader needed to implement potentially unpopular but necessary policies in his or her first year of office, as it would be difficult in the coming years when elections loomed large.

Some comments of the top state banker, delivered in a relaxed, humorous style, did not go down well with some senior Rhodes academics, especially those concerned with social injustices. One said afterwards that Mboweni had come across as "a bit flippant".

Mboweni expressed scepticism about claims made against himself and finance minister Trevor Manuel.

He warned against people becoming dependent on the state and provided a number of examples, including:

n People littering, especially in the townships, then complaining because the local authority did not pick it up; A state-built school in the Eastern Cape that was razed to the ground by thieves who stole it "brick by brick"; and

n Communities that did nothing while state-provided resources, such as their school or clinic, were vandalised.

When a student asked about the criticisms of poverty in boom times from Cosatu and the SA Communist Party, Mboweni said it was "not difficult" to strike a balance between property and other economic rights, and transformation.

There were clear policies in place, such as in the case of land restitution for victims of forced removal, but the problem lay with delayed implementation.

When left-leaning parties came to power, such as the ANC in South Africa, there was a fear that social expenditure would soar. It was prudent for such governments to adopt conservative fiscal and economic policies, he said.

"You can call that the Tito Mboweni Dictum!" he joked.

Key to his model was to establish the independence of the central bank. In South Africa, the independence of the Reserve Bank was protected by the constitution and the law, but he knew of no bank in the world that was free of state intervention. The trick was to "get the balance right" between a market-driven society and state control.