By Redge Nkosi
There is a profoundly important bill before parliament. Introduced by the Economic Freedom Fighters (EFF), it lapsed, revived and now silently dying. It is the South African Reserve Bank Amendment Bill. It is a bill with the potential to change democracy, disrupt policy and regulatory capture, as well as arrest South Africa’s economic decline.
The bill seeks to change the current private ownership of the South African Reserve Bank (SARB) to democratic ownership under government custodianship (nationalisation).
There is widespread opposition to nationalisation among the local elite, their foreign allies, beneficiaries of pro-rich monetary policies and their representative institutions. Their objections are understandable, given their interests.
Paradoxically, even Treasury and the SARB, supposedly serving national interests object. For these two, it is extraordinarily odd, but absolutely consistent with their well-known ideological posture.
However, the bill’s death should not be read primarily as a struggle over ideological interests only. Class struggles and subterranean racial bias are linked to “property” ownership features.
So, national interests are better served by the undemocratic ownership of the SARB, so implies their ideas. But that ideas follow the interests that can pay for them is what explains the recurrence of so many spurious and indefensible ideas in economic thought.
Their ideas, clothed in economic parlance yet indefensible in economic thought, say that nationalisation will discourage foreign investors, the SARB will lose credibility, fear of potential state capture and the negative signal of future monetary policy with mandate change.
A mandate change for the SARB to include curbing “unemployment” is a threat to their interests, not that reserve banks can’t pursue this mandate. What a compelling testament to their intellectual sadism.
For most citizens, isn’t the year on year falling buying power of the Rand, the ravages of foreign footloose capital, high interest rates, shocking unemployment, poverty and inequality, etc. the outcomes of a macroeconomic policy and institutional setting that benefits those who have, through policy and regulatory, already captured macroeconomic institutions of state or is it just a case of gross macroeconomic incompetence? Either way, where is credibility?
Further, nearly 99 percent of foreign investors are from nations whose reserve banks are nationalised. Unless on racist grounds or foreign economic control of South Africa (SA) basis, why should they oppose SA’s nationalisation as causing uncertainty when such an act brought and brings immense economic benefits and stability for their economies?
As Korean Cambridge scholar Joon Chang reminds us: Japan, Korea, Taiwan, etc. banned foreign direct investment (FDI) during their development phase, largely because their reserve banks and other state banks were at the core of their infrastructural investment, industrial development, and ensuring their economic indigenisation.
Evidence supporting Chang’s remarks is plentiful, including that of former governor of the Indian Reserve Bank, Professor Raghuram Rajan, who empirically found that “nations that grew faster, relied less, not more on foreign money”.
Beyond the above, there’re key peculiarities of money that support full democratic ownership of a reserve bank.
Firstly, a bank is there for money, the creation or production and allocation of money. Money enables the wheel of national industrial production and commerce to grind. Any inequitable or divergent access to money, as we see in the South African banking system, produces inequality, poor production and thus unemployment and other ills.
As the enabler of production and commerce, money is the ultimate purpose of production. Differently put, there can be no production, at any industrial or commercial scale, without money. Here, production begins and ends with money, so theory states.
Indeed, it is precisely in the context of this monetary theory of production that Keynes, in his magnum opus, called for the nationalisation of central bank if employment, equity, industrialisation, development and full capacity level economic operations were to be achieved.
Keynes recognised that as the most powerful and critical institution in the capitalist world, money – thus the Reserve Bank, must be in the public hands if directional, distributional and durational effects of monetary policy are to equitably benefit the whole nation, not a select few.
Sectarian interests, hiding behind technocratic exceptionalism, want to constrain democratic influence over monetary policy, hence blocking the Bank from full democratic ownership and control. Yet the Bank’s decisions have profound effects on democracy, the economy and citizens’ livelihoods.
Rampant corruption, fraying national fabric and other ills threatening to collapse democracy today are the manifestation of the highly undemocratic influence on the Bank and, therefore, money.
Here’s yet another uncontroversial reality. Money, as we commonly know and understand it, is a creature of the state. As a creature of the state, the state chooses the money of account (the Rand), and only the state issues the currency.
There can, therefore, be no doubt that money is a public monopoly, as is the issuer of such money, the Reserve Bank. Separating the democratic state and its fiscus from its money is purely ideological. And so is the private ownership of the Bank.
Being a public monopoly, the Reserve Bank, influenced by democracy only, is supposed to leverage its monopoly power of creation, modulation and allocation of money and credit to constitutionally give effect to the Bill of Rights, not undermine it through biased directional and distributional effects of monetary policy.
Given the historical precedent of dispossession using money (Reserve Bank and commercial) and the current endless commercial banks' racial profiling, money, thus the Reserve Bank, is too profoundly important to be owned by private firms and individuals irrespective of their assumed innocence on policy influence.
Finally, another critical reason for nationalising the reserve bank: Democracy. It is common cause that democracy, as per the West’s interpretation of it, following their Roman law, is that governments exist so as to manage relations of “property”.
Classical Adam Smith (1776) interprets that, the “civil government so far as it is instituted for the security of property, is in reality instituted for the defence of the rich against the poor, or of those who have some property against those who have none at all”. But what’s property and who has property in SA?
In Smith’s time and perhaps today, property was first and foremost the ownership of land. The acquisition of land was either through inheritance, monarchal gift or forced transfer by the state as in land dispossession in South Africa.
Advancing Smith’s view, Karl Marx offered a more modern interpretation. He observed that in modern industrial nations, it is “capital” that is the “property” to be defended by the government.
Therefore, Treasury’s parliamentary presentation rejecting nationalisation was in defence of capital (the rich), betraying the poor majority. By their deliberate ideological fiscal and monetary policies, Treasury and Reserve Bank have caused unparalleled inequality, unemployment and poverty for the majority.
Saving democracy in South Africa hinges on the nationalisation of the means of property/capital accumulation, the monopoly supplier of money/credit (the SARB), and deliberately engineering its distributional, directional and durational effects toward the majority, who have no property (capital and land).
With democratic ownership of the SARB, Parliament will be saving democracy, uprooting corruption inherent in policy and regulatory capture, and growing and stabilising the economy.
Redge Nkosi: Executive Director of Firstsource Money and founding executive Board Member of the London-based Monetary Reform International.