Before the financial crisis the negative effect of globalisation wasn’t realised. The financial crisis has affected many of the surrounding countries such as America and Europe, but there has not been a direct impact on South Africa’s economy, until recently. The downgrade of Moody’s can possibly be the first incident to have a huge affect on our economy since it can lead to a increase of debt for South Africa, which causes an increase in economic tension and at the end major problems for the economy.
For the South African economy globalisation is crucial for emerging markets, yet economist should start realising that we need to govern globalisation in such a manner that markets can expand while simultaneously globalisation still has to work for people, and not only profits. Through globalisation many business opportunities is created, therefore benefitting from interdependence which helps to mitigate risks, especially systematic risk. The big question we have to ask ourselves when globalisation is concerned is whether we are able to govern globalisation and if the balance can be restores back to where it used to be.
To govern globalisation necessary regulations need to be put in place, but there is no use of regulations if it isn’t monitored on a regular basis. A few questions have been raised: do we need more regulations to better the situation? Do we require new tailor made regulations? And the most important question is whether we need to replace the World Bank or IMF? One fact is certain; we drastically need to find the correct regulation as a starting point to tackle the problems that are arising from the financial crisis.
Arno van Niekerk pointed out that when a new regulation is considered it is important to remember that time is a necessity. The moment there is a problem in the economy a new regulation needs to be drawn up as fast as possible, since it is likely that if it takes too long the problem will be too big to handle. Going back to the question about whether tailor made regulations is an alternative to the problem. Each country has different problems, so the main benefit of tailor made regulations are that the situation can be dealt with to suit the countries individual circumstances. National policies can be implemented so that each country has the opportunity to make the best of each advantage and disadvantage that globalisation carry to mitigate the risks.
The disengagement between decision makers (global bodies) & government (national level) adds to the global risk. There is a definite gap between decisions that are made and what the people need, which causes that the nation to trust the government less. Globalisation forces government to expand markets across borders, which forces markets (the government) to collaborate, which has a few disadvantages, but also advantages. Policies are better aligned between the governments which increases the accountability and trust in the government even though It causes the government to be more dependent when making decisions.
In the blog post “Growth policy for dummies”, Johan Fourie highlighted how governments can help the economy to grow which will increase the living standard of citizens. He emphasised on the fact that government needs to start investing time and money in education and innovation (to name a few) for the economy to start growing. He also pointed that productivity needs to improve before long-run growth can take place on the supply-side.
South Africa’s main problem currently is leadership. People need to be able to create a better environment for others and not only themselves, therefore more enabling capacity needs to be created i.e. more system need to be created where others can benefit. The lack of leadership is putting development in danger. Looking back at the financial crisis it can be seen that markets cannot control all the activities in the market that government needs to take part in order for the economy to grow.