Pali Lehohla
JOHANNESBURG - The former chairperson of the Federal Reserve, Alan Greenspan, has had a colourful career.

In 1987, after getting into office, he faced a storm - the 1987 stock market crash.

Monday, October 1987, went down in history as Black Monday as stocks crashed from east to west.

Greenspan slashed interest rates and asked banks to fill the markets with liquidity. His career of 21 years ended on a high note with the ethos unquestionable of trust in markets.

Yet two years later that trust in markets was dashed as another bigger financial crisis paralysed the US economy and revealed mega scandals that saw the closure of Lehman Brothers among those too-big-to-fail institutions. Later, in a congressional hearing, Greenspan admitted he made a mistake in presuming that financial firms could regulate themselves.

In an International Monetary Fund session on statistics in 2014, Greenspan provided a keynote address reflecting on that godforsaken period of 2008. Following the collapse of the markets, former US president Barack Obama in 2009 hosted a discussion on the crisis at the G20.

Bean counters had to see whether statistical systems could be improved to take into account the trends as they emerge and provide early warning signs.

South Africa felt the pain in the middle of 2009, where the country suffered negative gross domestic product growth. The construction-and-build programme for 2010 kept South Africa afloat and the mood was all positive, despite the financial crisis and the bleeding economies of the world.

Programmes of the state are said to stand a chance of success when the following holds true: First the programme on technical merits must be sound. Second, financially they must be viable and, finally, politically they must be persuasive.

The year 2010 met all these conditions and South Africa survived, albeit not for long as we know today, looking back over the decade, economic performance has been dismal and unemployment is at its highest since 2000.

The financialisation and repackaging of the bad and the good financial programmes are blamed for the 2008 financial crisis. Sub-prime mortgages were packaged with ones that were performing and the average of the two was possibly expected to be a convincing financial prospect.

Greenspan held the conviction that such would not happen as markets would not tolerate underperforming financial products. These he argued would die a natural death. But where to be Ponzi is cool, the good are easily cajoled into the lowest common denominator and join Ponzi.

What is the meaning of all these for South Africa politically?

Political parties are working tirelessly to attract votes from the electorate under promises that we so badly need as a nation.

In the basket of these our leaders are those declared to have violated their oath of office. There are those alleged to have committed crimes that would, if proven, disqualify them from the high office. In a way we are faced with a political mixture of prime and sub-prime personalities.

The Zondo Commission is to run for a longer period beyond the election and thus the prospect of a crisis sparked by the mixed bag of the good and the bad in our body polity is an imminent reality.

Perhaps political markets are capable of self-regulation and they will weed the bad from the good and we shall enjoy a perfect political system.

Democracy is served when people out of free will select those they hold dearly to lead a democracy.

Greenspan learnt the hard way that financial markets do not behave that way. From our recent history we know self-correction in politics is impossible. Thus with under six months to go, a sub-prime political crisis is very possible and the competition to the sub-prime is poised to lead to the tragedy of the commons - whereby everyone loses.

Dr Pali Lehohla is the former Statistician-General of South Africa and a former head of Statistics South Africa.

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