Rates no weapon against unemployment

2012-11-01 16:32

Johannesburg - Unemployment cannot be solved through monetary policy, but by correcting structural impediments in the economy, an SA Reserve Bank (Sarb) conference heard on Thursday.

"Monetary policy cannot do anything about structural unemployment," said Princeton University academic Jean-Pierre Landau.

"We now have maybe 40 or 50 years of experience. We know that there is nothing that monetary policy can do about unemployment."

He said monetary policy could try to prevent cyclical unemployment from translating into structural unemployment, which was what some advanced economies were trying to do.

"We know it’s a big mistake to try and fight unemployment with monetary policy. It creates inflation which is very bad for the poor people," he said.

"We tried in our countries in the '60s and '50s to fight unemployment through excessive monetary policy. All we got was very high inflation. We know now that it does not work."

The Congress of SA Trade Unions has on several occasions called on the government to expand the Sarb mandate to include job creation and economic growth.

Dr Azar Jammine, chief economist at Econometrix, echoed Landau’s views.

"Interest rates only have a limited capacity to influence economic growth. They do help sometimes in a very short-term, but there is always a risk."

Jammine said central banks did not exist 100 years ago and job creation depended on economic policy.

There were structural impediments to job creation in this country.

"In South Africa right now, the biggest impediment... is the fact that so many of our population are not educated and not skilled properly," Jammine said.

"This does have its origins in the apartheid system, but even since the death of apartheid, 18 years have passed [and] we have continued going backwards."

  • Christoffsmuts - 2012-11-01 16:47

    Watch Zeitgeist: Addendum, Ladies and Gentlemen Google it.

      louis.olivier.988 - 2012-11-01 17:13

      He forgot to mention the job destruction by the trade unions

  • John.Yossarian22 - 2012-11-01 16:54

    Are you listening Vavi?. Now keep your nose out of things that do not concern you.

  • adrian.snyman.16 - 2012-11-01 16:54

    I agree that education and skills are a key point to job creation. But when you read articles about SA having the lowest ranked math teachers, then where is the government really helping ? The education sector is being decimated, and who can they blame for that ?

  • andre.joubert.37 - 2012-11-01 16:56

    I would hope something more substancial came out of the conference. In the 70's it was popular to refer to the twin evils of unemployment vs inflation when discussing this, so it seems like we have not just gone backwards in the last 18 years, but have decelerated sharply to pre 70's.

  • wwrer.ww - 2012-11-01 17:06

    Just cut the business taxes to stimulate employment. It is so easy.

      Odicito - 2012-11-01 18:21

      Not that easy - you still need employable people! Just cutting taxes wont magically give you people who are capable of DOING the job!

      SarelJBotha - 2012-11-01 18:32

      No, cut personal taxes to let people start small businesses. large businesses should pay more tax for the "privileg"e to do business(plunder) the community.

  • douglas.reid.921 - 2012-11-01 17:07

    Our banks are of the most expensive and most profitable in the world. Our banks exploit the poor charging them up to 60% interest on personal loans. Go to the websites and look. FAT CATS GETTING FATTER AT THE EXPENSE OF THE POOR. I am so sick of the spin, is there any truth in this economy???

  • larry.piggott1 - 2012-11-01 17:12

    Productivity, Quality, Value, business ownership, corruption, BEE, incompetent Government, violence as a way of making demands etc. All of these points weigh heavily with anyone thinking of investing and creating jobs. South Africa must be a long way down in the scale of where an investor would consider.

  • mandla.hlatywayo - 2012-11-01 17:12

    At Egypt(apartheid),we use 2 eat n being employed but now in dis canan we suffer a lot.

      SarelJBotha - 2012-11-01 18:33

      So much for ANC style freedom, but then you asked for it.

  • Montagnes.Bleues - 2012-11-01 17:42

    These chappies have no clue about Africa and especially SA. We are doing exceptionally well in creation of jobs purely by looking at the surge in child grants and related social largesse! THESE are African jobs, no different to the full time occupation of that ever extending bowl in black gnarled claws at the highest salaries and commissions in the world. Begging is a profession in this continent! True, suffering a tad at the moment as the economies revolt in the bend over countries, but they will soon get back onto their guilt aid again. They had better, zumaville and nkandla tribal honey & suga pot needs extensions already.

  • vivian.harris.73 - 2012-11-01 18:41

    \We tried in our countries in the '60s and '50s to fight unemployment through excessive monetary policy. All we got was very high inflation. We know now that it does not work.\\r\nIt took that long to realise it wasn't working? Good grief!!!!

  • jeanpierre.pienaar.7 - 2012-11-01 19:01

    Finaly some one in DU.govermemt has seen the lighy.

  • J.Stephen.Whiteley - 2012-11-01 20:46

    We know the employment rate is not affected by monetary policy. But that doesn't mean one doesn't have a monetary policy. Lower interest rates encourage spending, higher rates favour production. The ruling party here favours low rates enabling the poor to buy on hire purchase and others to buy houses they cannot afford. We have a steeply rising domestic debt, and minimal savings. A rise in interest rates is now called for. Painful but necessary. Interest rates are related to risk. For domestic production they vary between 5% and 10%. Countries like Britain which have developed near zero interest rates have terrible domestic debt which will take decades to get out of. The annual 20% domestic debt rise here is more threatening than current unemployment. Any views?

  • martin.brink.965 - 2012-11-02 11:53

    I personally have found the labour laws to be the largest impediment to expanded job creation and skills training for the commercially unemployable of both genders. On a larger employment scale, with better paid wages, skills and salaries, unions and their insane demands would then play their role. Let's face it, being a business owner/employer is a seriously bad idea while things remain as they are in South Africa.

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