1 I’m very deeply concerned after reading this piece from Trudi. I had to make this post and thread and break my pledge not to be on Twitter until March. After reading this I had to share my thoughts and feelings https://www.businesslive.co.za/bd/opinion/2021-02-07-trudi-makhaya-flawed-narratives-about-sas-economy-have-real-effects/

2 “For countries that enjoy some success in elements of unconventional policy, there are steep entry requirements. Foremost, to borrow from modern monetary theory doctrine, they enjoy a high degree of economic sovereignty.”

3 “Ours is a small open economy dependent on imports, including imported intermediate inputs needed by our secondary and tertiary industries in their production processes. Thus we need foreign currency”

4. Looking at history, South Korea in the 1960s had a poverty rate of close to 60% by 1980 it had fallen to 1%. South Korea in the 60s had little monetary sovereignty, heavily dependent on imports barely a secondary or tertiary sector mainly dependent on its primary sector

5. In 1962 when Park Chung hee and his regime came into power, he was of the belief that for S.Korea to become a modern democracy it had to transform its industrial structure to build a modern stable democracy.

6. 1st 5 year plan saw the construction of an integrated Iron Mill,Diesel Engine,Textile Machine, Electric Meter,Automobile(Small and Medium-Large),Cement factories an Oil Refinery and a Quick-Freezing plant. All financed by foreign currency denominated loans passed on to SOEs

7. The 2nd 5 year plan continued on the similar path of HCI industrialization. This time aiming to build an Intergrated Steel Mill, Petrochemical and Construction plans etc financing obtained mostly through foreign denominated loans.

8. The 3rd 5 plan promoted on Shipbuilding, Electronics, Machinery etc. This done through mobilizing domestic investment($3.8 billion) and foreign loans of ($5.8 billion). Foreign loans were used to fund the Chaebol and 50% joint ventures.

9. Due to its lack of capital in the 1960s South Korea had a GDP per capita of over $100 a private savings rate of -0.97. Hence unlike most East Asian countries it borrowed in foreign denominated loans to finance its industrial transformation.

10. To put things into perspective S. Korea’s transformation is like the equivalent of Idi Amin in Uganda coming into power and by the 1990s Uganda has become like South Africa or today Sudan becoming present day Vietnam in 20 years.

11 During this period South Korea suffered from inflation 10% annually, rapidly increasing wages of 35% annually higher than productivity. The regime said as soon as the projects were done, exports would increase and imports be reduced drastically with sustainable wage growth

12 S. Korea is a case and the Economic Reconstruction and Recovery Plan is apparently a “infrastructure led” plan. Aiming to channel existing savings from financial institutions and future government financial intermediaries to stimulate various sectors in South Africa’s economy

13 IMO the plan won’t meet its own targets that it has set on unemployment and poverty let alone ‘stimulate various sectors’. However there is a case of infrastructure led development. The building of the National System of Interstate and Defense Highways(1956)

14 The funding came entirely from the US gov 90% of the $100 Billion from Federal gov and the rest from each US state. A Highway Trust Fund was set up and Congress providing funding in stages approving the Federal Reserve Bank to disperse funds to the Bureau of Public Roads.

15 In the 10 years most people claim the project contributed 30% to America’s GDP during that period. The project also helped the many sectors, especially the automobile sector. Improving the quality of life by standardizing the construction of highways and roads less dangerous

16 All this with no mobilization of private savings. But rather mobilizing government institutions and Federal Reserve to finance the project

17 The way forward lies in principled pragmatism.” “We cannot afford to indulge in contagious, harmful, self-fulfilling narratives.”

18 The Economic Reconstruction and Recovery Plan is not principled pragmatism it’s a dose of delusion and concocted by entrenched private interests. Continue to propagate that such a plan will lift SAs out of poverty and create jobs is a harmful narrative.

19 This is not about conventional or unconventional policies. It’s about realizing that you can’t have a democracy and sound state institutions with over 55% poverty and 52% unemployment and the highest inequality in the world. Let alone other terrible social pathologies in SA

20 For me based on intuition and gut-feel South Africa is in deep f*cking sh*t. Excuse my bad language it’s the only way I can express how I see the current and future conditions. It can’t deal with current and future economic conditions. If it’s not already a “failed state”

21 Disclaimer I’m a Commerce student with an interest in Finance and Business. Not an economist, for me SA is in deep or deeper trouble. But in such matters one must make up their own minds. I have no monopoly on sense making or opinions but what I perceive