The new Minister of Finance, Pravin Gordhan, has said that macroeconomic 
policy is up for debate. He has also said that economic policy is not changing. I interpret him to mean that he takes his new office with an existing policy in place but that he is prepared to debate macro-
economic policy.

The fact that he has said that there is room for debate indicates that there is a possibility that macroeconomic policy will change in the future. His position is markedly different from that of his predecessor, who said in 1996 that macroeconomic policy was not for debate.

Gordhan was immediately criticised in the media for daring to say that macroeconomic 
policy is up for debate. One commentator gave the financial-market populist view when he warned the new Minister that talk is not cheap. This view is that government currently 
has business-friendly macroeconomic policies.

They warn that financial markets run on sentiment and that the Minister risks 
upsetting the few hundred people operating in financial markets if he even dares mention that he will debate economic policy. They do not care that South Africa is a democracy.

The financial populist argument is an antidemocratic trap riddled with misunderstanding of economics and finance. It incorrectly gives financial markets godlike status. Financial populists promote the view that financial markets are omnipotent punishers and enforcers. They spread the fear among policymakers that even talking about policies that upset these greedy, jealous gods will lead to ruin. These populists cling to the 
belief – and expect others to believe – that 
financial markets are infallible.

However, the state of the global economy today shows us that inadequate regulation of financial markets and financial populism can create space for a few hundred people motivated by greed and fear to inflict huge suffering on society. Policymakers should not fear financial markets. They should ensure that they are adequately regulated and controlled. Financial markets should not allow a few people to destabilise economies. The major task of our new economics Ministers is to develop a plan to harness the power of finance to promote an economic development project that tackles poverty, unemployment and inequality in South Africa.

An important lesson from the economic 
history of development over the last two centuries is that successful industrialisation 
requires tight regulation of the financial sector. The allocation of capital away from con-
spicuous consumption and asset market speculation towards long-term productive investment should be a key goal of policy. Further, policy has to ensure that cross-border flows of capital do not destabilise an economy by promoting asset market booms and busts. 


Another important lesson from the economic history of development is that the correct macroeconomic policy is really 
important for development. Many policymakers ignore macroeconomic policies and focus on attempts to successfully implement microeconomic policies, such as industrial 
policy, small business development and 
entrepreneurship support, and provision of services and infrastructure. These are really 
important areas of economic policy that have to be well implemented. However, most 
developing countries do not have adequate capacity to correctly implement the myriad of microeconomic actions and coordination required. Often this capacity has to be built within the public and private sectors during the implementation process.

Economic development is a process of searching and learning – there is no blueprint. Therefore, accommodative macroeconomic policies are important. There has to be fiscal space for the searching and learning process. Monetary policy should not be so tight that it stops the searching and learning process and stifles entrepreneurship. The lesson from economic history is that a flexible approach to macroeconomic policy provides societies with the space to develop. People working within the public sector and entrepreneurs require this space.


The macroeconomic space I am talking about may not be in the interest of giant trans-
national corporations and global financiers looking for short-term returns in emerging markets. They will continue to warn us that financial markets will punish markets that implement these policies. However, we have to stand strong and explain to them that the economic policies they want are not business-friendly policies in our country.