THE BLOG

Basic Knowledge Of Economics Should Be A Prerequisite To Political Leadership Positions

A president without a basic understanding of economics is like a judge without a law degree.

01/03/2017 06:58 SAST | Updated 01/03/2017 06:58 SAST
Stephane De Sakutin/ AFP/ Getty Images
South African President Jacob Zuma (C) flanked by Gill Marcus (R), Governor of the South African Reserve Bank and Pravin Gordhan (L), South African Finance Minister

A few centuries ago, people who could read and write were rare. But now, not only in the capitalist democracies, but also in every state in the world practically every adult is literate. In the absence of widespread literacy, it is hard to imagine how modern societies could function at all. This does not necessarily mean that the literacy problems are solved. There are other forms of illiteracy, though, that are harder to correct e.g. economic illiteracy.

Most South Africans always turn a blind eye to this subject without realising that it affects their daily lives. More than half of South African adults that I have interacted with do not understand what it means to say that the gross domestic product (GDP) has increased. Nearly two-thirds do not know that in times of inflation, money loses value, let alone what broad based black economic empowerment (BBBEE) is. Even our leaders seem to suffer from this kind of illiteracy.

Collen Maine the leader of the ANC Youth League once suggested that we collapse the Rand and build a new currency as a solution to get rid of white monopoly capital (WMC as they put it). We want the rand to fall, we need those economic turntables, the rand will fall but when it rises we will be in charge of the economy, he said. This whole statement represents ignorance and economic illiteracy. I do not think he understands the impact of this. If only he had the basic understanding of economics, we would not be having this conversation.

Whilst we were still digesting Collen's ignorant utterances, then came Mzwandile Masina, a former ANC Youth League national convenor and the current mayor of Ekurhuleni, with another ill-informed rant about the Reserve Bank. In an Instagram post, Mzwandile said a guy called Michael Duerr owns 57.5 percent of the South African Reserve bank and has refused to give away the majority shareholding to the state. In the same statement he said this German man decides on how much money South Africans take home.

It turns out that Duerr and his family only own 4.5 percent of the issued shares of the Reserve bank. By law the Reserve bank is required to pay 90 percent of its profit to the government. Now you know that for every complex problem, there is an answer that is clear, simple and wrong.

If these leaders aspire to be our presidents someday, then we are in for a long bumpy ride. A president without a basic understanding of economics is like a judge without a law degree. On Wednesday the finance Minister Pravin Gordhan upon finishing the budget speech, thanked his leader President Jacob Zuma for the guidance when compiling the budget.

EFF's Mbuyiseni Ndlozi quickly rose and disputed that Zuma provides any guidance. I wouldn't put this past Zuma, judging from the things he says in his personal capacity. I cannot imagine him advising anyone on things like tax raises versus spending cuts, the size of the fiscal multiplier on the economy, the relative importance of fiscal versus monetary policy and lots more besides.

It is our political system that has broken down, not the economy. The problem is not so much the polarisation of policy views. Recapturing the lost art of political compromise is essential to realising our economic potential.