With so many people living in poverty, they should be pursuing economic policies that raise incomes, not raise exports and ‘investor confidence’ at all costs. Job creation and raising incomes – through investment in agriculture and infrastructure, protecting manufacturing, and guaranteeing a minimum wage.

The way to do that is to treat the extractive industries as the special economic sector that it is, and which should be heavily taxed if it is in private hands and if not, nationalized outright.

Many of the successful Asian economies have most of their economy run by parastatals, so it can be done (although I am not even suggesting going that far, for South Africa). The difference in development is because they never allowed their economies to be run by the IMF and World Bank.

So I say – heavliy tax the mines or nationalize them, and use money from that sector to invest in infrastructure, agriculture and manufacturing.

The problem is that a massive expansion in labour-intensive public works, along the lines of the CCC in the New Deal, would be extremely expensive. It could probably be organised by raising taxes, but that would entail changing the whole government model — they’d have to reintroduce exchange controls to prevent capital flight. That might easily lead to a withdrawal of foreign investment, which could cause huge problems for the current acount deficit which is funded by foreign investment.

We’re in something of a cleft stick, I fear, unless we take really dramatic measures which I’m sure Zuma is unprepared to take.

The Eastern growth was based ENTIRELY on cheap labour, something which South Africa can not stomach. Note: the oversupply of unemployed people willing to provide labour for what little money they could get in an unregulated labour market led to low production costs and the potential to milk export markets, which in turn grew the economy and provided the cheap labourers with better opportunities.

In other words, with South Africa’s labour laws we will never be in a position to produce significantly cheaper products than elsewhere, so we will have limited export opportunities. Currency fluctuations only help in the very short term, since forex valuation of a currency will be reflected shortly in the domestic valuation – ie inflation and higher production costs.

Secondly, an export economy requires buyers. China had the benefit of a robust US market, with americans spending far beyond their means. In the current global economy, everyone is being very careful with their money, and will continue to do so for several years still. It would not surprise me to see global economic stagnation for the next four to five years.

Devaluing the currency is equivalent to putting lipstick on a corpse – it may look nice for a while, but it’s just as dead and will start stinking in short order.

Do you know what the trouble is with you… (and me!)

The problem is, you (and I) keep saying “déjà vu” and “I’ve seen it before” and “remember Mozambique/Argentina/Zimbabwe (delete those not applicable)” .

We suffer from an ailment called by many names like reactionary, or conservative, or old fashioned. The real dilemma is when things do not work, we ask why and then try to remember the lesson.

South Africans don’t want to hear criticism, regardless of how misguided their ideas may be. It’s much more fun being creative and to hell with the outcome.

to piggyback from what jon said — you’re not entirely right or wrong. as the original poster mentioned, cosatu are actually right about a few things, but they’re right for the wrong reasons. they’re right about the effects of higher interest rates on the workers, but real problem with the high interest rates is that it stifles entrepreneurship [i know about this bit, personally] and makes large-scale employers more indebted — many of the world cup stadia cost overruns are *directly* related to interest rate hikes.

[the government should have issued guaranteed bonds to pay for the stadia to be protected against this rather than pay for them out of their general budget. it would have saved a ton of money.]

yaj: peak oil is less of an issue regarding south african inflation than the wto — imports and domestically produced goods must be competitively priced. this includes food, and that’s where south africans [hell, almost all africans] are being soaked. if zimbabwe worked and angola and mozambique weren’t riddled with land mines, south africa would actually be able to stop importing as much food as it does from “overseas”. food prices would fall like a stone as a result. however, the reality being what it is, south africans get to suffer.

it’s far easier to blame oil prices when the case is really something less tangible.

and, for dave harris/phillipa lipinsky — it’s 15 years since “democracy” and you are saying that there is no qualified black person for finance minister?

[and to be honest, someone should *really* point this out to those raking zille over the coals. zille would do right to point this out herself; it's a shame that the da are collectively too polite to go for the jugular in the way that the anc's lackeys are.]

reaganomics didn’t entirely work, actually. it wiped out union protections — american workers, it must be said get zero guaranteed leave in a calendar year — and in most service jobs, it’s not even offered in the first year. this is bad, from a quality of life point of view. a domestic worker in south africa gets more leave than nearly 40 percent of americans in the work force. lolwut?

most union protections are good — but it’s the bad ones which get all the press. union protections are why europeans work less hours but are “more/almost as productive” than americans.