Growth vs Stability: Pointers for South Africa from Argentina and Chile

There is broad consensus on the outlines of the economic strategy South Africa should adopt, but dissenting voices have been raised. Some argue for a less conventional, more dynamic approach to economic growth. Part of the problem for emerging markets like South Africa is that growth requires the simultaneous pursuit of a range of apparently contradictory strategies. The debate is a dispute over the role of the state, and it is helpful to consider the experiences of Chile and Argentina. Central to Chile’s success has been an extended time framework and strengthening of the public sector. The absence of this is evident in Argentina. The recent histories of these countries suggest that the foundation for sustainable growth must be laid over a number of years. Evidence points to the importance of getting the (fiscal) basics right and vindicates many neo-liberal economic prescriptions. Two key lessons emerge: there is a role for the state in the process, and the price of fiscal and monetary profligacy is a high one.