Growth in a Time of Strife

Growth in a Time of Strife

You might think that at revolutionary moments like these all our clocks stop, all attention is absorbed by the revolution, and the economy grinds to a complete halt. Not quite, though.

Despite the many breathless media events, the economy instead grinds on, bringing home the bacon, despite lighthearted talk of taxing some of us right out of existence (the avowed intention of many local versions of wealth tax proposals).

The nation monitors its extensive social networks minute by minute, listens to radio during the day while on the move and still sometimes watches television at night, a by now quaint activity, but it does so while largely engaged in producing output, earning income & spending it, at least the 2-in-3 that are not designated unemployed or too discouraged to do anything.

And those forces remain dictated by our external realities & internal abilities. It turns out not all is lost on these many fronts.

Therefore, despite the many angry outpourings of multiple hashtags-must-fall, and our EFFs marching, making brave speeches & handing over bombastic petitions, the humdrum reality of making a living & generating wealth continues unabated.

Having to choose last week between a Minister of Higher Education wanting to tax away your wealth for his many good causes (rather than wondering how collectively to produce more of it, clearly way beyond his challenged remit); and the SARB wanting to focus anew on the horrible things awaiting us (perhaps) once the Fed countdown ends & its liftoff is finally a reality (with global capital supposedly receding from us, the Rand having more bouts of weakness, our inflation facing new surges & SARB vigilant throughout with its finger on the interest rate trigger, ready to fire at will), you wonder that any of us are still willing to bear up under these mental assaults & quietly carry on.

But we do, we do, if with a little help from our friends, largely unsung, if not quite written out of the script yet, overwhelmed by the many noises that are news.

So we find that our commodity export prices have quietly found a trading range, if at levels way below all-time peaks five years ago, but at least giving some inkling of stabilizing. Blame it on news out of China being less devastating to the downside of late, US data somewhat weaker and pushing the Fed to delay its liftoff some more (though the ball remains firmly data dependent, and therefore daily in its court) & the world consequently steadily progressing in its prolonged adjustment to by now distant financial crises & current Chinese repositioning.

This “stability” also shines through in stock markets at or near record highs, allegedly because of record low interest rates & still maximum central bank liquidity support globally even as devastating fiscal austerity drives ended some time ago.

Such very high equity price levels aren't only a reflection of low interest rate leverage, but also of underlying earnings streams. And though these earning streams are today regularly marred by spectacular company flameouts (a BP, a VW, a MTN), or any overseas bank or high-tech company you to care to name hit badly by huge penalties for conduct unbecoming an officer & gentleman, these accident-prone or regulatory-fined spectacles remain the exception while the great money-making franchises globally continue to grind out the money & keep creating value.

So despite much sideline handwringing, about EM growth imploding & hugely overvalued financial assets, the real world steadily marches on, using their newly reinforced techniques of sustaining monetary market systems, creating new knowledge & turning this into useful product streams improving global living standards.

Domestically, despite many forecasts to the contrary so far, the employment levels refuse to collapse, and our output, income & spending continue to be generated at a steady, if slowing, clip.

In government one understands its gargantuan taxing & borrowing power to be behind such momentum, the Finance Minister two weeks ago bravely resisting all siren calls to raise taxes or at least speculate about it (preventing yet another demoralizing set of downward spirals setting to work), instead maintaining his airily optimistic projection of a declining budget deficit trajectory, if again from a reset (higher) base.

And the generously higher civil servant remuneration increases, backdated to April, kicking in from August/September, supporting many retailing & supplier networks around you as we speak.

In private businesses, they haven't stopped working to watch, or even join, the revolution in the streets and on campuses, or to be put off for long by wild-eyed EcoMobility campaigns disrupting Sandton traffic in unprecedented ways. That's a luxury given to few.

Instead, this steady onwards grinding of the many noses, even if now and then quietly encouraged by some piece of good news largely lost in the daily news.

Such as that the Rand hasn't blown out (as its relentless weakening trend was suggesting only very recently), Brent oil keeps stabilizing just short of $50, and this week we will all be rewarded with yet another instalment of unforeseen petrol (22c/l) & diesel (10c/l) price falls, not exceptionally big this month, but still important purchasing power supports.

Instead of a runaway inflation momentum by now, long the fear this year of a SARB harping on about wage-price spiral potential, the inflation rate has kept on surprising to the downside, with headline CPI for now remaining 4.6% & core a mild 5.3%.

SARB & private forecasters love to trot out the expected dual inflation humps above 6% next year, but that is mostly a reflection of oil base effects 12 months earlier. Is it guiding our inflation expectations higher, being forward-looking, or do we look through it? Resignedly accepting that certain entities can demand 10% price increases with total impunity, and others barely able to change their prices because of competitive demand & supply keeping them in check?

The proof seems to be a more stable inflation reality in mid-single digit than what we give ourselves credit for, despite the monthly volatility. Our interest rates for that reason alone can remain supportive in real terms (near zero).

Despite lots of evidence of economising everywhere, at companies and in many households, the core of the economy continues to grind on, and is still steadily raising output, income & spending, if at the unedifying slow pace of 1%-1.5%.

We aren't in recession like Brazil, Russia, Nigeria or Canada, or in depression like Greece. We are not war-torn like large swaths of the Middle East, or on the road to Europe as walking, mentally distraught refugees. Instead, we may complain about heat & drought, student protests & misguided attempts to tax more rather than inspire confidence & getting us to belt-loosen a bit, take on some risk, put some more coals on the fire and illicit some more growth from our deepest bowels.

All is not well with the nation, as our moribund governance structures, failing infrastructure, high structural misery of the many poor among us & distrustful businesses migrating elsewhere tell us daily. But at least most of us bear up, and get on with the daily grind.

That's worth something. Think of that while doing what you like most, putting up your feet and letting the world go to blazes.