The whole of East Asia and the global markets, of which the Johannesburg Stock Exchange is one small component, suffered the reverberations of this week’s seismic shock in Japan when the second-largest economy in the world sank into its first recession for nearly a quarter of a century.
The situation was rescued by United States President Bill Clinton’s decision to boost the ailing yen at the expense of the dollar. This sent stock markets soaring, but is unlikely to put an end to the volatility in the global economic system or set the Japanese economy to rights.
According to the Economic Planning Agency in Tokyo, the economy contracted by 1,3% in the three months to March following a reduction of 0,4% the previous quarter. Two successive quarterly falls are normally classified as a recession. It is difficult to believe that barely seven years ago the Japanese economy looked impregnable, while the US was losing confidence in its ability to stay at the forefront of technology-led growth.
US magazines were full of articles bemoaning the country’s misfortunes and how Japan had stolen a lead in key areas. This diagnosis appeared to be confirmed by economic statistics. In the seven years to 1991, Japan’s economy grew by an average of 4,5% a year, while the US recorded average growth of 2,4%.
Then something happened. The US economy was suddenly carried aloft by the information technology revolution which, somewhat to its own surprise, it now completely dominates. But while the USexploited sunrise industries, Japan turned into the land of the sinking sun. The huge inflation of share and property prices predictably went into reverse, dragging down with it the banking system and exposing endemic inefficiencies in the non- manufacturing areas of the economy.
Japan’s leading manufacturers are still very efficient and highly competitive thanks to the falling yen, but the collapse of markets in the rest of Asia has hit them badly (exports were down 3,8% in the last quarter). The great fear now is that if the yen, which has dropped in value by over 40% against the dollar since its 1995 high, carries on falling then it will trigger a fresh round of beggar-my-neighbour devaluations among other countries in the region including, most worryingly, China.
Consumers in Japan are so unused to the spectre of growing unemployment, bankruptcies and recession that they are deeply reluctant to spend more of their huge savings. There is no guarantee that the fruits of the next reflationary package (worth $116-billion in theory) won’t simply be added to savings as happened to previous ones. Since interest rates are so low as to be almost non-existent there is hardly any role for conventional monetary policy unless it be the unorthodox recipe recommended by the American professors Milton Freedman and Paul Krugman – a sustained dose of rising inflation.
If that doesn’t work then maybe the emperor should be called in to urge everyone to spend, spend, spend in the national – and the international – interest. For, make no mistake, if Japan gets sucked into a deflationary spiral it will affect not just Asia but the rest of the world as well. South Africa and the rest of the developing world are even more vulnerable than the developed economies. That’s what the globalised economy is all about.
Unpublic broadcaster
In among the flying accusations and public angst about the South African Broadcasting Corporation’s new CEO, there is one structure that has escaped unscathed.
And that is the board responsible for the mess in the first place. This newspaper holds no particular brief for Govin Reddy or against Hawu Mbatha. But we do worry that that the board has failed to instil public confidence in one of the most important tasks it has to perform. Its choice of a leader for an organisation like the SABC must be flawless, scrupulous and considered. Trying to find out how it arrived at its decision is impossible.
All we have to go on is the word of its chair, Professor Paulus Zulu, who has pulled a veil over the entire process. Only he can comment on the selection. In fact, only he can comment on anything the board thinks and does. The board is meant to be a bouquet of different talents and a blend of political and economic opinion – a microcosm of the South African public.
They represent that public and are paid by the public purse. But they behave like a law unto themselves. They hold no briefings and they have no profile, unlike the previous board where the former chair Ivy Matsepe- Casaburri delegated authority to those with the relevant skills and helped fight the battles of the public broadcaster.
Instead this board has been silent on its choice of chief executive, on the forthcoming privatisation of the SABC, on the broadcasting White Paper – and silent in the face of the growing commercialisation of the public broadcaster. Where is the guiding hand, the knowledge and the check on management which a board should provide?
The SABC doesn’t need a rubber stamp – it needs a vibrant board which will fight the corner of the public broadcaster. It needs a governing authority which is not afraid to take on government and lobby hard for independence or for further funding to secure programming that is independent of business and commercial interests.
The SABC needs a new board or at least a message to the existing one that it must shape up or ship out.