Former World Bank economist and Nobel laureate, Joseph Stiglitz, is at it again. This week he made comments at a conference in Cape Town that the reserve bank should intervene in currency markets to weaken the Rand if it was to strengthen too much. Speaking in Cape Town he said
“…It is going to be very important to try and maintain competitive exchange rates and prevent currencies from appreciating as they would in absence of intervention in this very unstable world.”
“One thing South Africa can produce a lot of cheaply is rand. If people want to buy rand, then selling rand and buying dollars will have the effect of depreciating the currency. Printing presses don’t cost that much,”
A strengthening of the Rand is the only chance that the unemploye, fixed and low salary earners have of seeing an increasing standard of living in this country, as it would push food and fuel and other prices lower, and make their budgets stretch further.
If Stiglitz’ policy was to benefit the poorest people of this country, the reserve bank should allow them to own dollars or euros, and when it wants to intervene to weaken the Rand, it should buy dollars and euros directly from the poorer classes by paying them above fair value rates. This is what the reserve bank does with the banks…why the double standards?
Bear in mind the reserve bank has been following this strategy of buying forex from the banks for most of its existence. For example, since 1998 the reserve bank has increased its foreign reserve holdings by over a 1000%. [Check the data here.]
So Stiglitz isn’t proposing a change of policy, but rather a continuation of a policy that makes the poor poorer. Clearly this economic policy has not worked for the poor, has it?
Stiglitz is really just proposing more of the same policies that continue to crush the unemployed and lowest income people of South Africa. It’s a shame, really.