YOU wouldn’t know it last week from the sombre mood in Parliament that this year began as an election year. Where radical rhetoric animated campaign speeches, we now have cautious utterances about the expenditure ceiling, the debt burden and the fiscal deficit.

Finance Minister Nhlanhla Nene not only kept to the fiscal path traced out by his predecessor, but he lowered the expenditure ceiling. Sceptics who saw in him a new minister who could be swayed into fiscal dovishness have been silenced for now.

The medium-term budget policy statement also came with a condition about how the burden of fiscal consolidation is to be distributed. The moderation of public expenditure, we are assured, will not take place at the expense of the poor. In a policy environment where ideas stall due to anxiety about the distribution of costs and benefits, this is an important but unenforceable "rule" that Nene has set for the fiscus.

Many of us will remember the fallout from the structural adjustment policies that the World Bank and the International Monetary Fund advocated in the 1980s and ’90s. Some analysts have pointed to the fact that these institutions were not hostile to social spending but were merely counselling fiscal discipline. Nonetheless, under the Washington bodies’ guidance, many African and poor countries pursued such discipline by cutting spending on infrastructure, health and education. SA famously went on a "self-imposed" structural adjustment programme after 1994.

The message that the cost of adjustment should not be borne by the poor is not surprising in a "post-Washington consensus" world. Yet one of the important tenets of emerging orthodoxy is that government spending should attempt to be countercyclical. In tough times, governments should allow budget deficits to rise. Nene insists that to compare this course correction to European-style austerity measures is to exaggerate. But even if we’re still on the right side of austerity, the fact that belt-tightening has to occur in a weak economy is far from ideal.

One thing that remained unspoken in that august house is that the poor are already paying the price for our economic blues. Corruption, low productivity and institutional failures (including those in labour relations) have denied the unemployed and working poor opportunities for upward mobility.

Of course, the conditions that made fiscal expansion possible no longer prevail. Rising interest rates in advanced economies threaten the flow of foreign funds that filled SA’s persistent savings gap. With declining commodity prices and rising inflation, the government finds that it will become difficult to maintain debt levels in future. Weak domestic growth has left a hole in government revenues. Hence, pro-poor fiscal consolidation.

One thing that remained unspoken in that august house is that the poor are already paying the price for our economic blues. Corruption, low productivity and institutional failures (including those in labour relations) have denied the unemployed and working poor opportunities for upward mobility.

There is more to protecting the economically vulnerable than efforts to maintain social spending. The livelihoods of the poor are at risk in an environment of tight fiscal and monetary policy. As participants in the economy, if cuts are not well-targeted in practice, or if they put a brake on informal economic activity, the pain will be felt despite social grants.

A crucial shift that the medium-term budget sought to highlight is towards investment-led growth. The Treasury’s forecast 3% economic growth by 2017 depends on the expected effect of major infrastructure projects in energy and transport. We’ve had many false starts on the way to investment-led growth. This policy statement brings into focus, once again, the slowdown in private sector investment and the low level of domestic savings. If this administration can advance policies that can steer this economy onto a higher savings path, it would be a remarkable achievement.

Consumption-led growth did not deliver sustainable growth or development. There is also no guarantee that an investment-led growth path will be an inclusive one. That depends on matters such as the effectiveness of localisation initiatives and decisions about user fees. All eyes will be on easily observed metrics such as the debt burden and the budget deficit in the next three years. We should also remember to judge the success of this fiscal correction on how it affects the poor.

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