FRIDAY, 11.30AM
A CAMBRIDGE University academic, in a wide-ranging report on industrial policy, has criticised the Reserve Bank’s restrictive monetary policy as “uninformed’ and serving the interests of the financial sector to the detrimient of industry.
In a working paper prepared for the policy think-tank Trade and Industrial Policy Secretariat, Ha-Joon Chang said industrial policy-makers should put pressure on the Reserve Bank to reconsider its tight monetary stance, adding that there is no proven negative relationship between economic growth and inflation rates of under 40%.
Chang also noted that SA’s industrial policy framework emphasises the role of small business in economic empowerment and improvements in productivity, but had negletced issues relating to large conglomerates. He said a clampdown on conglomertaes through competition policy will neither inject dynamism into large forms, nor encourage them to invest in SA. He urged government to “strike direct deals with conglomerates regarding investment” in strategic industries, adding that “formally or informally controlling their outward investments in accordance with the overall industrial strategy may also be critical”.
Meanwhile, Reserve Bank governor Dr Chris Stals came under fire on Thursday for managing monetary policy in an “undemocratic manner”.
BoE Natwest strategic economist Nick Barnardt recommended that government copy Britain’s Labour government, where the government of the day sets inflation tagets while interest rate decisions are taken by a central bank committee.
Barnardt said the Bank’s “rigid emphasis on money supply and bank credit is dangerously antiquated”, and the drive to reduce inflation from 10% to 6% is “unsuited to SA’s circumstances and needs as an emerging economy”.