Governor Kganyago warns against the rise of populism and its threat to central banks

The South African Reserve Bank (Sarb) Governor Lesetja Kganyago has warned South Africans against the rise of populist leaders and how they pose a threat to central banks.

The governor made these comments while speaking at the Arbitration Foundation of Southern Africa (AFSA) event in Sandton, Johannesburg, on Thursday.

“Whether we are talking about rich countries or poorer ones, there is no denying that we are in an age of populism. We need to reflect on why populist ideas have this appeal and how we can respond,” Kganyago said. 

He noted that populism was only seen in developing countries, but we are now seeing populism in mature democracies like the US. 

Populism has risen in Western nations, “especially since 2016", he said, noting the surprise outcomes of the Brexit referendum that saw the UK exit from the European Union and the recent US election that brought Donald Trump back into the White House.

He then focused on institutions like central banks and said that populist countries have hostility towards these vital institutions. 

“But my focus today is on institutions. Populists have long been defined, in part, by their hostility towards institutions. The standard attack is that existing institutions are controlled by elites, who treat ordinary people with contempt and ignore their interests,” Kganyago explained. 

War against the central banks

“Populist leaders also typically promise to wage war on institutions, to clean out what they claim as the corrupt intermediaries so that they can take charge themselves. Unfortunately, when populists come into power, they usually fare badly,” he added.

The governor said that it is hard to run a modern country without help and technical expertise and it is hard to stay honest without the necessary checks and balances.

“This is precisely why institutions are established in the first place. Dismantling them typically results in chaos, incompetence and corruption. These adverse outcomes make it easy to condemn populism,” he added.

Kganyago called on world leaders and central bank governors to fight populism. 

“The duty we have as leaders of institutions is not only to push back against populist attacks but also to ensure our institutions are above these criticisms,” he added. 

Kganyago said that leaders also have a vital role in proactively addressing institutional decay. 

“Leaders need to feel the urgency about doing better, and they need to feel it well before the populists show up,” Kganyago advised. 

Lastly, he said that in this age of populism, institutions are not going to get the benefit of the doubt. 

“They have to perform, and they have to be transparent and communicate effectively.” 

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