Measures need to lay the foundations of a new economy and society after the pandemic.
Reliable forecasts suggest that South Africa’s national economic output for the current year might slump by at least 5%, a situation likely to worsen as the Covid-19 depression endures. In response to this economic crisis, the country started phasing in a multifaceted macroeconomic recovery plan.
These measures appear sensible if the Covid-19 pandemic is confined to a health crisis. Hard realities, however, suggest that such a constricted view is skewed and distorted. After all, the Covid-19 pandemic is first and foremost a socio-ecological crisis, with its economic devastation set to last several months if not years beyond curbing the disease burden.
When the government decided to gradually ease anti-Covid-19 lockdown restrictions, it also launched a macroeconomic stimulus package which is roughly 10% of gross domestic product. Compared to stimulus plans amounting to 2%-3% of national output in severely depressed economies in the Global North, South Africa’s intervention looks ambitious. Details of this macroeconomic recovery package will be revealed with the passage of time according to the finance ministry.
For many developing countries, especially the resource-dependent, non-oil exporters, the ensuing food price inflation shocks pushed 100-million people into poverty. Consequently, many developing countries had to roll out fiscal and monetary policy measures of their own in order to stabilise domestic markets and cushion their economies from the consequence of exogenous shocks.
Macroeconomists disagree on the content and composition of stimulus packages. In the Great Recession, this disagreement pivoted on a fundamental question: should governments use tax payers’ money to bail out large banks and powerful corporations at the expense of the working poor? Contrarians won this dispute as evidenced in the weak economic upturn and rapid rise of corporate bankruptcy filings in the post-bailout years.
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