The (anti) politics of central banking: Monetary policy, class conflict and the limits of sovereignty in South Africa

Abstract

During the transition to democracy in the 1990s, the departing apartheid regime granted political power to the black majority but kept the main levers of economic policy insulated from the revolution. Control over the South African Reserve Bank (SARB; hereafter also Reserve Bank) was central to this strategy. The SARB was made private and independent, its mandate limited to maintaining ‘price stability’, and the financial sector was liberalized – all in line with neoliberal principles. The SARB represents itself as ‘apolitical’, and claims that independence is necessary to build investor trust. But since 2009, left-wing movements have argued that central bank policy is in fact political; that it ultimately benefits the rich at the expense of the poor. They want to renationalize the SARB and establish democratic control over finance and monetary policy, thus completing the revolution. This paper explores the history and politics of central banking in South Africa, including the role of African National Congress (ANC) decision-makers, to determine how and why the SARB become independent during the transition, and who benefits from this arrangement. I find that the Reserve Bank’s monetary policy does indeed have uneven distributional effects, and serves the interests of some class factions (specifically, speculative finance) over others. But I argue that the vision for a more democratic financial system may be difficult to actualize. Not because it is unrealistic, but because it fails to address the external pressures that overdetermine SARB policy. Ultimately, the Reserve Bank is beholden to powers that lie beyond the borders of the domestic political economy. Integration into global financial markets, and dependence on foreign investment, has severely curtailed South Africa’s economic sovereignty.