has a theme of macroeconomic failure, followed by difficult and ultimately successful reforms that built the foundation for a long boom, followed by decay and the return of the old challenges. the late 1980s and early 1990s was a period of macroeconomic excess and near collapse. we achieved stability and growth through reforms conducted from 1994 through to 2009. we now once again find ourselves in profound social and economic trouble. ben bernanke. “ inflation isn ’ t going to bring back the 1970s ” new york times. 14 june 2022. https : / / www. nytimes. com / 2022 / 06 / 14 / opinion / inflation - stagflation - economy. html ben bernanke. twenty - first century monetary policy. chapter 2, ‘ burns and volcker ’. w w norton & company : new york. 2022 binyamin applebaum and robert d hershey. “ paul a volcker, fed chair who waged war on inflation, is dead at 92 ” new york times. available at : https : / / www. nytimes. com / 2019 / 12 / 09 / business / paul - a - volckerdead. html unfortunately, we are struggling to achieve consensus on the proper response to our current challenges. this weakens our ability to act decisively. too many people are unfamiliar with the history of economic policy in south africa. worse, those who know their history cannot seem to agree if the reforms of the late - 90s were helpful or not. in my speech today, i hope to contribute to a better consensus, by revisiting our own macroeconomic history and highlighting its lessons. let me start with the big picture. in the nearly three decades since our transition to democracy, we have had one non - inflationary, consistently expansionary, or nice, period sandwiched between two bad ones. we can see these phases most clearly in the growth of gdp per capita, which is the total amount of economic output divided by population. this measure was negative during the dying years of apartheid, which means living standards were falling. it turned positive in 1994 and mostly stayed positive for two decades, apart from the crisis years of 1998 and 2009. from 2014 onwards it has mostly been negative again, with living standards once again in decline. 6 it is tempting to say that this just reflects trends in global growth. but even relative to the world economy, we have gone from lagging, to outperforming, to lagging once

face a situation of rising debt and excessive tax burdens. in the 2000s, we generally had revenue a little under 25 % of gdp and spending slightly over 26 % of gdp. now we raise less than 24 % of gdp in revenue, despite higher taxes, and then spend about 29 % of gdp. 16 this is an unsustainable situation, not least because the efficiency of government spending has been low. 17 much as i wish we had a strong state that could deliver high quality public goods at reasonable prices, the facts reflect otherwise. relative to the 2000s, we have a weaker state, spending a larger share of gdp. the result is an economy barely capable of growth faster than 1 %, with a shrinking tax base and a weak outlook. in these circumstances, trying to deal with social needs simply through more spending, more debt and higher tax doesn ’ t really cure the patient, but rather limits the pain while accepting continued decline. living standards cannot rise materially without growth. the problem goes deeper. if investment did rebound, and government borrowing continues at around current levels, we would then hit a binding balance - of - payments constraint. we have had an investment rate of around 14 % of gdp recently, against for 2001 to 2009, revenue averaged 24. 8 % of gdp and expenditure averaged 26. 2 % of gdp. for 2012 to 2021, revenue averaged 23. 9 % of gdp and expenditure averaged 28. 9 % of gdp. these periods correspond to the most recent ten years as well as the preceding decade. alternative samples yield comparable results. theo janse van rensburg, shaun de jager and konstantin makrelov. “ fiscal multipliers in south africa after the global financial crisis ” sarb working paper. no. 21 / 07. available at : https : / / www. resbank. co. za / en / home / publications / publication - detail - pages / working - papers / 2021 / fiscalmultipliers - in - south - africa - after - the - global - financial - cr a savings rate of 15 % of gdp. 18 a reasonable investment rate would be over 20 % of gdp, and for fast growth probably 30 %. 19 but given savings levels, this implies borrowing between 5 % and 15 % of gdp from the world – very large sums. current account deficits of those magnitudes would simply become too unsustainable, if not impossible, as in the uk currently. to achieve balanced growth, rather