Mboweni’s underlying logic confuses the scope of fiscal policy

The manner in which the minister approaches fiscal policy in the long run is equally narrow. Besides passing reference to investment in public infrastructure there is no articulation of a positive vision for fiscal policy. This is shaped by three factors:

Second, the minister argues, correctly, that the economy faces structural constraints to growth. He references the Treasury’s “Economic Transformation, Inclusive Growth, and Competitiveness: Towards an Economic Strategy for SA” document, which proposes a series of micro-economic reforms to remove these constraints, leaving aside macro-economic policy. In his op-ed, Mboweni gives the release of telecommunications spectrum as an example.

Such a macro-economic framework would support micro-economic reforms and see fiscal policy as having a role in raising both aggregate demand and aggregate supply simultaneously. Such complementarity is essential because the economy cannot sustain large, additional demand without expanding supply capacity .

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