Former World Bank Chief Economist and Nobel Laureate Joseph Stiglitz today issued a statement backing the South African Government’s New Growth Path.
He described the policies in the New Growth Path (NGP) as ones “that have the most promise of leading the country on the path of sustainable, equitable, and democratic development for which it has long been striving.”
“I believe that it correctly puts employment (in the vocabulary of the International Labour Organisation, “decent work”) at its centre. It seeks to build a long-term foundation for a vibrant society, in contrast to the short-termism of unregulated markets, made so evident in the recent crisis,” he said.
Professor Stiglitz has been an active observer of the South African economy and is also an advisor to Minister of Economic Development, Ebrahim Patel. His full statement is attached to this release.
In a wide-ranging commentary on the NGP, Professor Stiglitz discusses monetary policy, the role of fiscal policy and the role of the state. He says that South Africa’s New Growth Path is to be applauded.
“There are many dimensions to a successful growth strategy that are reflected in The New Growth Path. Some involve direct government actions—investing in economic infrastructure that will earn future returns and tax revenue—but many entail simply setting the rules of the game.
“Industrial and competition policies oriented to rewarding effort, innovation and entrepreneurship and ensuring effective competition are critical. It is easy for market power, once established, to perpetuate itself, stifling dynamism. In an emerging economy like South Africa, one not only has to prevent abuses of market power, but also make sure that there is access to opportunity.
“Development finance and appropriate industrial policies are part of a package for vigorous competition and a competitive economy,” Stiglitz said.
Professor Stiglitz points to the importance of exchange rate policies. The New Growth Path commits to achieve a more competitive and stable exchange rate.
“High exchange rates make it difficult for countries to export or to compete with cheap imports. Lower exchange rates help the economy to develop a diversified, productive base. It makes little sense to base an economy on a value of the currency that simply reflects the short-term view of speculators about the local bond market, or to subject producers to the vagaries of exchange rates to which the changing sentiments of speculators may give rise. That’s why most of the most successful emerging economies (such as China) have taken seriously the task of exchange rate management. Resource rich countries face a particular problem, because the sale of natural resources can lead to high exchange rates,” he said.
He addresses the relationship between markets and states, an area that has been the subject of some discussion in the New Growth Path.
“I hope that the world today has moved beyond false oppositions of states and markets to recognise that success requires a balance between and better integration of the market and the state. Such a system can work better, in the interests of all citizens, leading to markets that are more efficient and more accountable, markets that spurn short-termism and reward creativity. The South African Growth Path sets out such a vision”, Stiglitz said.
The New Growth Path is a framework adopted by the South African government recently, which sets out a target of five million new jobs by 2020 and identifies a number of means to achieve this goal. It seeks to lift the rate of economic growth and the employment performance of that growth in Africa’s largest economy.
The New Growth Path orients South African policy more strongly towards economic integration of the African continent, with its one billion consumers.
It sets priority areas where jobs can grow on the necessary scale. They are infrastructure development, the agricultural and mining value chains, niche areas in manufacturing, the green economy and tourism. Emphasis is placed on industrialising the South African economy and the contribution on knowledge-based sectors to broader economic development.
Packages of macroeconomic and microeconomic policies are identified to stimulate job-rich growth, together with a call on business and labour to contribute to the national vision.
Stiglitz noted the public discussion stimulated by the release of the New Growth Path and expressed the hope that a consensus can emerge on core policies set out in the New Growth Path.
“Inevitably, there will differences in views: both interests and perceptions of what constitutes good policy differ. Some will want to keep with the policies of the past, suggesting that if the country just sticks with them a little longer or tweaks them a little bit here or there, success is just around the corner. Others will want a still more radical departure from the past. Hopefully, out of a vigorous debate there will emerge a consensus around some of the critical policies put forward in the New Growth Path”, Stiglitz said.
Joseph E Stiglitz is University Professor at Columbia University, a Nobel Laureate in Economics (2001), a former Senior Vice President and Chief Economist of the World Bank, and a member of the Economic Advisory Panel of the South African Minister of Economic Development. His latest book is Freefall: Free Markets and the Sinking of the Global Economy.
Additional information on Joseph Stiglitz
Joseph Eugene Stiglitz, born on 9 February 1943, is one of the most frequently cited economists in the world. He has served as Chairperson President Clinton’s Council of Economic Advisers during 1995 to 1997, in which capacity he also served as a member of the US cabinet. During the recent global economic crisis, he was appointed Chair of the Commission of Experts of the President of the United Nations General Assembly on Reforms of the International Monetary and Financial System. He co-chaired a Commission set up in 2009 by President Sarkozy of France on the measurement of Economic Performance and Social Progress. He is president-elect of the International Economic Association and will take up office soon.
Enquiries:
Zubeida Jaffer
Cell: 082 698 6677
