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The Decline of the South African Economy

Edited by Stuart Jones

South Africa’s leading economists adopt within this volume a sectoral approach in their analysis of the drastic changes that have occurred within the South African economy since 1970. The book illustrates how, despite its sophisticated infrastructure, the South African economy has shared in the economic decline – resulting from misguided economic policies – that has been the experience of Sub-Saharan Africa.
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Chapter 3: Macroeconomic policy, 1970-2000

P.D.F. Strydom


P.D.F. Strydom INTRODUCTION South African economic policy during the period under consideration was characterized by major changes. First, an explicit change from non-marketrelated controls towards market-orientated policies. Second, a major transformation from a siege economy during apartheid to an economic framework which had to support a democratic political framework after the election in 1994. Our analysis concentrates on macroeconomic policy, that is, monetary and fiscal policies with some emphasis on labour market reforms because of their effect on employment. Our exposition is concerned with the major objectives and policy instruments coupled with the effectiveness of these policies in achieving their goals. Finally, we assess the present policy framework of the South African government in terms of its Growth, Employment and Redistribution (GEAR) framework. 3.2 INTERNATIONAL SETTING The changing economic policies in South Africa from 1970 to 2000 have to be assessed within an international economic environment because the evolution of economic policy together with the changing institutional framework has to a large extent been influenced by global developments. Moreover, during the 1990s South Africa emerged from an era of trade and cultural isolation into a world that was rapidly integrating in terms of trade, technological innovation, globally driven production and distribution processes. Within this environment the country was taking its place as an emerging market which meant that its economic policies had to deal with the economic disruptions that were closely related to developments in these countries. In many instances the South African economy has more sophisticated financial institutions and...

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