The (anti) politics of central banking: Monetary policy, class conflict and the limits of sovereignty in South Africa

Abstract

During the transition to democracy in the 1990s, the departing apartheid regime granted political power to the black majority but kept the main levers of economic policy insulated from the revolution. Control over the South African Reserve Bank (SARB; hereafter also Reserve Bank) was central to this strategy. The SARB was made private and independent, its mandate limited to maintaining ‘price stability’, and the financial sector was liberalized – all in line with neoliberal principles. The SARB represents itself as ‘apolitical’, and claims that independence is necessary to build investor trust. But since 2009, left-wing movements have argued that central bank policy is in fact political; that it ultimately benefits the rich at the expense of the poor. They want to renationalize the SARB and establish democratic control over finance and monetary policy, thus completing the revolution. This paper explores the history and politics of central banking in South Africa, including the role of African National Congress (ANC) decision-makers, to determine how and why the SARB become independent during the transition, and who benefits from this arrangement. I find that the Reserve Bank’s monetary policy does indeed have uneven distributional effects, and serves the interests of some class factions (specifically, speculative finance) over others. But I argue that the vision for a more democratic financial system may be difficult to actualize. Not because it is unrealistic, but because it fails to address the external pressures that overdetermine SARB policy. Ultimately, the Reserve Bank is beholden to powers that lie beyond the borders of the domestic political economy. Integration into global financial markets, and dependence on foreign investment, has severely curtailed South Africa’s economic sovereignty.

Keywords:

• central banking
• monetary policy
• democracy
• neoliberalism
• South Africa

Disclosure statement

No potential conflict of interest was reported by the author(s).

Notes

1 This is a style of protest dance that emerged during apartheid. It is often used today to express grievances against government policies.

2 Specifically, during the Multi-Party Negotiating Forum in 1993.

3 The calculation of CPI in South Africa gives very little weight to goods that poor people consume: only three points out of 100 are assigned to bread, while much more than that is assigned to goods like medical insurance (seven points), private cars (11 points), satellite television, etc.

Additional information

Notes on contributors

Jason Hickel

Jason Hickel is an economic anthropologist. He is the author of Democracy as death: The moral order of anti-liberal politics in South Africa (University of California Press, 2015); The divide: A brief guide to global inequality and its solutions (Penguin, 2017); and Less is more: How degrowth will save the world (Penguin, 2020). He writes for The Guardian and Foreign Policy, serves on the advisory board for the Green New Deal for Europe, and sits on the Lancet Commission on Reparations and Redistributive Justice.